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There's still no meaningful consensus on "what happened in the 70s" - and yet nailing down this cause is vital to understanding everything that follows.
Were the "Trente Glorieuses" doomed to end? Or were they ended by pressures (and resulting actions) that could have be turned to different outcomes?
(Shortfall of productive investment sounds like a very interesting starting point.)
As long as they were (re)building, there was investment opportunities excess of maintenance and whatever upgrades were offered by technological progress.
Once the empire reached its maximum extent, growth could only happen as a consequence of technical innovation. And so both the volume of investment opportunities fell, and the share of investment going into maintenance rather than new growth increased.
The game changed from being revenue creation to being revenue capture.
Politically, this happened to happen at the same time peak US continental oil shifted the Texas oil companies from the "full employment" camp to the "deregulation" camp.
And the rest is history.
- Jake Friends come and go. Enemies accumulate.
The bottom line problem is that we need to downsize the financial sector. The effect of its operations are to impose the private sector equivalent of a VAT, likely over 20%, on a huge range of activities - any thing it touches. "It is not necessary to have hope in order to persevere."
I think my questions are:
a) What's stopping investments outside the empire? (Lots of building still needed across the world.)
b) Your post implies that the whole set of economic theories basically only works while you have an expanding empire. After that the rate of growth limited by productivity isn't a zero-sum game, but very close to being so?
Your point b is something I have always believed... Club of Rome and all that... It's about time it became fashionable.
Indeed, it seems intuitively obvious that high rates of return on capital are only possible in a growing economy. So the risk-averse capital is not, in the aggregate, going to get a good rate of return. In the long term, perhaps investors will adjust their expectations to moderate, sustainable returns. In the meantime, with a huge amount of productive capacity idle, we've got a capital strike on our hands.
Government intervention seems the only rational possibility. But that would require rational government. It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
it seems intuitively obvious that high rates of return on capital are only possible in a growing economy
Which leads us to consider the prodigious rise of the financial sector. Which compensates for lack of growth by whipping up high rates of return based on the capture of future flows.
No growth now? Mine the future!
Where now for capital? To the moooon? It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
What's stopping investments outside the empire?
"Outside the empire" means "outside a legal framework which I can use to obtain recourse against people who default on our business dealings."
Because the ability to reliably obtain recourse against people who default on your business dealings is a pretty good working definition of the difference between "inside" and "outside" the empire.
(Lots of building still needed across the world.)
Just like, in the expanding empire, producers gain power from exploiting previously unclaimed (by stakeholders internal to the empire) economic niches, and then change the rules to favor producers, which opens up even more previously unclaimed niches to exploitation.
Your post implies that the whole set of economic theories basically only works while you have an expanding empire.
Growing empires attempt to explain their world, in order to better realize opportunities, since power resides with those who have a vested interest in opportunities being realized. NB: This is not necessarily (or even typically) the same group of people as the ones who do the actual work of realizing the opportunities.
Stagnant empires invent excuses for looting.
An economic theory which "works," in the sense of providing actionable explanations for what drives economic activity, is actively contrary to the interests of those who guide the direction of a stagnant empire.
After that the rate of growth limited by productivity isn't a zero-sum game, but very close to being so?
But relative to the expanding empire? Absolutely.
Only relative to the Jumbo-burger profits they are used to.
The world could hum along happily at 4% ROI, and say inflation at 2%, but once you've seen Pareee... (Once you've tried the hard stuff). 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
"History" features notably:
There is a mix of policies for governing international trade and tribute. And there is a number of technologies to mediate international trade and tribute.
But the policy mix governing international trade and tribute is not in any important way interdependent, nor dependent in any straightforward way on the technology involved.
"Financialization" is just a polysyllabic euphemism for "looting."
There's still no meaningful consensus on "what happened in the 70s"
OPEC realised it had global muscle beyond its hitherto wildest dreams?
Metatone:
Or were they ended by pressures (and resulting actions) that could have be turned to different outcomes?
See: Jimmy Carter, white house roof solar panels.
Pretty much every wrong energy choice there was to make was made, and it gets worse all the time, even if some things have improved notwithstanding.
That's when corporate power realised it had to utterly capture government, enter stage right, Ronnie 'seen-one-redwood, seen-'em-all' Raygun! 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
Solar and wind in that era was utterly inadequate technology - I hope this is not something anyone wishes to dispute?
Everyone else started shooting themselves in the foot, then reloading and shooting the other foot - The problem was real value flowing out of what had been a fairly closed system of labor of capital to new actors who provided no new product in return, but the response was to slam on the breaks on wages via unemployment. Which is utterly insane, and acted as a drag on even those nations responding initially sanely.
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