Secular stagnation – a highly local view
from Peter Radford
I lead a local discussion group here in Vermont. The group is small, about 16 members, most retired, 30% women, a good mix of ex-business managers and owners, and all highly interested in politics. Yesterday’s discussion managed to blur two topics. One was secular stagnation. The other was Bernie Sanders win in the New Hampshire primary and what that may mean for the political future.
I have seen other commentators and writers reacting to Robert Gordon’s book about the relative lack of economic growth going forward. I am not sure I agree with Gordon, but his argument is, to say the least, interesting. The general idea being that all the truly “big” innovations are in the past and because of that the great waves of increased prosperity that came from the middle years of the Industrial era will not be matched going forward. We are, according to Gordon, in for much more normal and much slower growth rates in future.
So what did my group make of this? None are economists. None are political scientists.
First: there was a general wariness of the argument. It is very hard for people whose entire lives have been lived in the era of relatively high growth to embrace its end. Skepticism abounds about Gordon’s argument. This is even true when there is an acceptance of the notion that there are no “big” innovations in the works.
Second: people dispute the assertion of a lack of “big” innovations. They look at biotechnology and so on as a new wave that has great promise. They assume, and it is an assumption not an analysis, that somewhere in the current frenzy of what Silicon valley calls innovation there are the seeds of future growth.
Third: the fact of growth being a “good thing” is rarely challenged. However there is some notion that it has to be balanced with quality of life and sustainability issues. There is a general optimism that such a balance can be achieved. No one, of course, knows how that balance will become reality, but they are open to and embrace the need for such a balance. For the record: every single person in the room, on both sides of the political aisle, agree that climate change is a pressing and vital topic to be resolved.
Fourth: when the hypothesis of slower growth is accepted, and when then asked about the consequences, the group swerves into Bernie Sanders territory. It becomes clear that the current socio-economic structure is untenable and that inequality and the provision of social services in the face of tighter economic conditions become much more valued.
Let me leave the reporting at that.
What I find interesting is that people seem able, quite quickly, to be convinced that the social, political, and economic arrangements of the high growth era are not sustainable in a slower growth era. I infer that they accept the premiss of the arrangements providing high growth as long as they produce that high growth, but once the growth slows those arrangements suddenly become less attractive. Something else, some other arrangement, becomes admissible and open for support.
Others, at this point, would happily advocate some variant of Marx. I would not. Capitalism is not going to disappear because of its tight association with a more liberal concept of the individual. Marxism has to overcome that concept by eliminating politics and assuming, heroically, that the social and individual aspirations we all have conveniently coincide in a post-capitalist world. Nowhere has such a coincidence been in evidence. Not in the capitalist era, and not prior to it. It is a device of value only to enable a theoretical closure to the Marxist historical progression. It is not an aspect of reality.
I have an aversion to utopian theories that make heroic assumptions which is why I reject neoclassical economics and Marxism with an equal degree of distaste. We have to deal with people inner economic theories, whether we like to or not.
But, clearly, a slower growth future reduces our social agrees of freedom and enforces a restriction on our choices. Pure capitalism then comes into a more open confrontation with democracy. That tension has always existed, but it becomes greater when growth alone is not available to vent the conflict away.
Which gets us back to Bernie Sanders.
His popularity rests, I suspect, on the ability and willingness of voters to understand that the balance between capitalism and democracy has to change – particularly when resources are more scarce. Capitalists cannot keep scarfing up egregious percentages of our collective gain in prosperity when that leaves an ever decreasing portion for everyone else. And if the future is more constrained than the immediate past then the urgency to re-adjust the balance between capitalism and democracy becomes more urgent.
As we all know recent decades have been characterized by massively rising inequality, which, apparently, was tolerable by the majority of voters as long as there was the prospect of growth. Such circumstances may no longer pertain. And, in any case, inequality has now reached an intolerable level. Combine those twin pressures and Sanders suddenly becomes, not an outsider, but a representative of a new mainstream. A mainstream that leads to a more democratic distribution of wealth and income, but not, necessarily to the elimination of capitalism.
Call it what you will, but I think that’s where we are headed.