Stagnation and the Steady State

September 29th, 2009  |  Published in Political Economy, Politics, Socialism

Lots of interesting stuff in the most recent New Left Review. Last night I went through Gopal Balakrishnan’s latest, in which he argues that the capitalist world system is not in for a return to rapid growth any time soon, but is instead headed toward the stagnant “stationary state” that characterized pre-industrial civilizations:

Note that this is subtly different from the “catastrophist” predictions which leftists have historically made, and which have a terrible track record. Balakrishnan is not arguing that capitalism is on the verge of collapsing and giving way to something else, because there is no oppositional movement powerful enough to bring about this outcome. He opens his essay with a quote from Gramsci, speaking about the potential for a “crisis that lasts many decades”; the passage evokes a more famous remark Gramsci’s that “the old is dying, and the new cannot yet be born”.

Balakrishnan gives four reasons for his prognosis: “demographic disproportion, ecological deterioration, politico-ideological de-legitimation and geo-political maladaptation”. These refer to:

  • The aging of Western societies, leading to a situation in which there are fewer productive workers supporting the retirement benefits of a growing elderly population. The growing cost of health care and the weak prospects for productivity growth in the service sector will lead to serious fiscal pressure on the state.
  • The effects of climate change and other man-made disasters. While a transition to a “green capitalism” may theoretically be possible, at present it seems as though neither the bourgeoisie nor the political elite have the will to see this through.
  • Neoliberalism has been discredited by the crisis, but the Keynesianism of the postwar era seems equally incapable of restoring growth, and instead can only prop the system up with a series of desperate bailouts and fiscal stimulus measures. Meanwhile, there remains no credible ideological challenge from the left. The consequence is escalating depoliticization and cynicism across the world polity.
  • Finally, no clear successor to the American hegemon presents itself: China’s economy is still too weak to shoulder the burden, Europe lacks the unified state capacity to do it, and no ad-hoc alliance of world powers seems capable of truly restructuring the system and moving it to a new stage.

The piece is speculative, without much in the way of empirical evidence, but it’s nonetheless useful. As to these four explanations, some strike me as more plausible than others.

The ageing of Western societies is a real phenomenon, of course, but I am skeptical that it will have quite the impact that Balakrishnan suggests. For one thing, there is no reason to suppose that the current retirement age will remain fixed–indeed, we have already seen some efforts to push it up. Since fewer jobs today require intensive manual labor, it is feasible for people to remain at work longer. Of course, increasing the retirement age would be a reversal of one of the great gains made by the working class in the twentieth century, and it would have highly inequitable consequences for those who do still work in manual occupations. But we are speaking here only of possible resolutions of the crisis, not desirable ones.

Balakrishnan is also too quick to accept at face value the argument that health expenditures will continue to accelerate rapidly while the service sector will experience no productivity gains, based on what appears to be a variant of Baumol’s cost disease theory.  The argument about health care betrays some ignorance about health care economics. Much of the cost of care in the United States is driven by the perverse structure of the market for health services, and the comparison of modern welfare states shows that the state is quite capable of restraining cost growth. As for the rest of the service sector, the issue of slow productivity growth is a real one, but I would not discount the possibility of realizing substantial efficiency gains. Think of the growth in self-checkout machines at grocery stores, which could do to grocery employment what ATM’s did for bank tellers. Or, even more dramatic, consider the innovations in online education which could completely upend the existing system of higher learning. I suspect, in fact, that increased productivity in services has been held back by the appallingly low wages at the bottom of the American labor market, which have disincentivized employers from economizing on labor.

As for ecology, I am unfortunately afraid that Balakrishnan is right. The way the climate change debate has unfolded in the United States and elsewhere certainly suggests that the capitalist class is incapable of putting their long-term interests ahead of short-term profits and ideological antipathy to state solutions such as carbon taxes or even cap-and-trade. (Although the recent defections from the chamber of commerce are perhaps hopeful signs.) At the same time, it’s still difficult to imagine that China will really consent to restrain their emissions in a way that the earlier industrializers never had to, all in order to ameliorate a problem that they themselves did not create.

While the consequences of climate change for humanity will be terrible, however, I do wonder whether they will really be as bad as all that for capital accumulation. On the one hand, ecological chaos would lead to a widespread destruction and devaluation of capital, allowing a new round of accumulation to proceed. On the other hand, there’ s no reason in principle that adapting to and cleaning up after climate change-induced mayhem can’t be highly profitable, even if its human consequences are terrible. The relevant maxim here, it seems to me, is that the reason capitalism never collapses is that there always turns out to be a way of resolving the crisis at the expense of the working class.

The issue of ideological drift and delegitimization of political institutions is, to me, the strongest of the arguments Balakrishnan musters–though oddly, it is the one he gives in the least detail. The bankruptcy of neoliberalism and the insufficiency of mainstream Keynesian solutions are plain enough.  As is the depoliticization and demobilization of the demos, the supposed mass base of bourgeois democracy. But what is even more ominous is the way in which bourgeois political institutions seem increasingly incapable of competently managing capitalism, even from a narrowly capitalist standpoint. Years of tax revolts and racist pandering from the right have lead to a situation in which it is always possible to appropriate new funds for new programs (at least if they take the form of giveaways to business or the rich), but never possible to raise the tax revenue to pay for them.  The end state of this trajectory is California, where Proposition 13, a 2/3 majority requirement for legislative tax increases, and a fanatical Republican minority have rendered the state an ungovernable wreck.

This situation appears intolerable, yet there remains no ideology on the horizon that seems capable of challenging it–certainly not Barack Obama’s technocratic center-rightism, which appears to be interested only in the restoration of postmodern finance capitalism’s status quo. And as Fredric Jameson points out, “the mass of people . . . do not themselves have to believe in any hegemonic ideology of the system, but only to be convinced of its permanence”.

The final of the four arguments, about geo-politics, is the most difficult to assess. As to the present moment, it certainly seems correct. American power is already over-extended, and the fiscal dilemmas outlined above may, eventually and hopefully, actually make cuts in defense spending thinkable in this country. I’m less pessimistic than Balakrishnan about the future of a united Europe, but it certainly doesn’t seem like any rapid further consolidation is likely in the near term. As for China, it may yet rise to take its place in a Sinocentric world system, as Giovanni Arrighi and other World Systems theorists predicted long ago. But in the meantime, it does seem as though we are in for a period of uncertainty and chaos.

It is never wise to discount capitalism’s ability to reinvent itself. We may yet see the launch of a new regime of accumulation in the coming years. Or, we may see another speculative bubble, putting off the crisis for another decade before culminating in an even worse crash. But if Balakrishnan is right, and we’re in for a slow, grinding stagnation, then the political order of the day will be the Gramscian “war of position”, as the left struggles to reorganize itself and raise the banners of “a better world in birth”.

But what is that world, and what will be inscribed on our banners? That is, what are the principles that would underpin an alternative to capitalism today? That, alas, is a topic for another day.