Fri Jun 12th, 2009 at 03:52:21 AM EST
The first part of this diary is a slightly edited copy of this comment.
When labour productivity goes up, some combination of the following must happen:
- The length of "the full work week" drops.
- Unemployment rises.
- Consumption rises (through private or state spending).1
- Is considered ideologically unacceptable by the powers that be.
- Is considered tactically unacceptable by the powers that be (the bread must flow and the circuses kept running).
This means that, in order for the political system to continue to function as advertised, 3) must happen
Increased consumption can happen either through2
A) Tax-financed fiscal and industrial policy (which usually ends up being redistributive),
B) Increased real median incomes, or
C) Loan-financed spending (public or private).
A) Is prohibited by The WestTM's official religion (unless it takes the form of feeding a Mil-Ind complex...).
B) Is considered ideologically unacceptable by the powers that be.
This leaves only C) which is precisely what created the current financial meltdown.
promoted by whataboutbob
Viewed in these terms, it is quite obvious how the progressive agenda is superior to the conventional wisdom:
- Having the "full time work week" drop is entirely acceptable to a progressive platform.
- Unemployment remains verboten, albeit for political rather than tactical reasons.
- Effective industrial policy (as opposed to spending on shiny toys designed to kill and maim people) goes back on the table.
- Increased real median incomes is not prohibited as a matter of policy.
This means that progressives have three
levers to manipulate the political economy, which are not available to liberals. Furthermore, the progressive platform contains an explicit political parameter that can be used to accommodate flat (or even moderately declining) industrial production without throwing large numbers of people into serious deprivation: Reducing the work week.
I'll repeat that, because it's extremely important: A political economy run according to progressive policies does not have to be able to grow indefinitely, but a political economy run according to neoliberal principles does.
And as anybody who has even the most cursory acquaintance with the laws of physics will know, indefinite growth is physically impossible. Full stop. This is not a debatable point. Nature does not engage in political negotiation, nor is it amenable to economic arguments. So any economic theory that presupposes interminable and uninterrupted growth in the total industrial production will eventually crash catastrophically. And, because it presupposes interminable growth, such a political economy will in all probability fail to plan for the crash.
Now, it is far from certain that a progressive political program - even if implemented yesterday - would be sufficient to prevent such a catastrophic collapse. But no other economic doctrine out there has even so much as a theoretical chance, nevermind one that I'd be willing to bet our planet on.
1In the original comment thread, santiago objects that investment can also increase demand. But for the purpose of short-term macroeconomics (which is what we're looking at here), investment and consumption are the same side of the same coin. If anything, the investment component fails to help, because it is more cyclical than consumption.
2In a response to the original comment, santiago objects that there is actually an option D) Taking other people's stuff. This can be subdivided into (at least) two kinds of plunder: The "debt reset" option, in which those who have lived above their means default on their debts, and the "go to war" option, where people who live above their means shoot other people and take their stuff.
But the debt reset option is merely another name for "the current financial meltdown," so that is already contained in bullet C).
Wars, on the other hand, are a form of industrial policy, and so belong in bullet A). In point of fact, it is the only form of industrial policy that the official religion in our part of the world is willing to countenance. It just happens to be an incredibly ineffective (not to mention morally dubious and ideologically unacceptable to a progressive platform) industrial policy. It is also not an industrial policy that a hypothetical global government could employ, because the global government would have nobody to go to war against.