Symptoms of stagnation

This morning, I got a call about my recent road accident, which of course I never had. Which highlights an important fact – that capitalist stagnation is not merely about arid aggregate data on flatlining productivity, real wages and business investment but about everyday life.

If the cold calls aren’t about non-existent accidents, they’re about my computer viruses, unpaid tax, my pension, or the impending disconnection of my broadband. Fraud and mis-selling are on the rise.

Why? Because in a world of secular stagnation there are fewer legitimate business opportunities – which diverts some entrepreneurs towards crime. Of course, some people are wrong’uns who’ll be fraudsters anyway, and some are moral paragons who never will be. At the margin, however, costs and benefits determine behaviour and so stagnation promotes fraud.

This is by no means the only manifestation of stagnation. We see another in financial markets.

Historically, high asset prices have been a sign of optimism and of confidence in economic growth: investors piled into railways stocks in the 1840s or internet shares in the 1990s because they wanted part of a bright new future. The bubble of the 1920s, wrote J.K. Galbraith, was fuelled by “boundless hope and optimism”. High prices today, by contrast, are a sign of pessimism. The valuations of US big tech betoken a belief that monopoly power – that enemy of economic growth – is here to stay. And the (now-deflating) boom in crypto-currencies was (is) founded in part on the view that people would lose faith in fiat money – something only likely in a severe economic and political crisis.

The housing crisis is another pessimism-driven boom. The lack of alternative profit opportunities is diverting activity to property speculation, and the low interest rates caused by stagnation are the main reason for soaring prices. This leads to a vicious circle. Because housing is so expensive, youngsters have less to spend on other things, which further entrenches stagnation. And not just economic stagnation, but cultural stagnation too. Musicians and artists used to be able to live rent-free and so had the leisure to cultivate their craft. Now, they can’t. As I’ve said:  

Cheap housing gave us Blondie and Philip Glass. Expensive housing gives us Mumford and Sons.

Which isn’t the only way in which stagnation breeds a turn away from meritocracy. When industries expand rapidly, they create opportunities for people from humble backgrounds. The post-Big Bang boom in finance meant that an oik like me could get a decent job. Similarly, the growth in journalism in the 50s and 60s sucked in working class people, as did the booming tech sector in the 90s. When industries stagnate, however, opportunities are fewer so employers can be fussier about whom they hire – and that means excluding bright people from poor backgrounds. The careers of Dido Harding, George Osborne and Gavin Williamson are the tip of an anti-meritocratic iceberg.

Stagnation of course also has political effects. If the overall economy is stagnating, then for every area that’s improving, others are declining. Justin Webb (1’32” in) says towns like Batley and Hartlepool are “hankering after past glories.” Which echoes Will Davies’ point that voters are on an “unhappy, angry quest for something that had been mislaid.” Hence the disillusionment with mainstream politicians. One of Webb’s interviewees says:

Mill towns are all dying…there’s no real industry here…you could spend billions here and there’d still be no jobs…Politicians talk a good game but deliver nowt.

Traditionally, this has been fertile ground for the far-right. Markus Brueckner and Hans Peter Gruener conclude that, across Europe, “lower [economic] growth rates are associated with a significant increase in right-wing extremism.” Which of course vindicates Ben Friedman’s finding:

The history of each of the large Western democracies – America, Britain, France and Germany – is replete with instances in which [a] turn away from openness and tolerance, and often the weakening of democratic political institutions, followed in the wake of economic stagnation that diminished people’s confidence in a better future. (The Moral Consequences of Economic Growth, p8-9)

The symptoms of this aren’t all as innocuous as Churchill-worship and flag-waving. They include the manufactured attacks upon “wokesters” and support for a government which is attacking basic rights to protest and even vote. And of course Brexit. As Thiemo Fetzer has written:

Leave supporting areas (and leave voters) clearly stand out by being more deprived, having lower levels of income and life satisfaction, less access to high status-jobs, and living in areas with overall weaker economic structure…the critical mass of voters that tipped the referendum in favour of Leave did not do so out of an ideological opposition to the UK’s EU membership, but as a protest against the status quo.

All of which vindicates our old friend:

The mode of production of material life conditions the general process of social, political and intellectual life. 

Which is why I can’t support the de-growth movement. Shifting from (say) 2% to zero trend growth isn’t merely a small difference in degree. It has all manner of cultural and political effects, many of them unpleasant. And of course, there is a constituency which supports this – not just financial and political grifters, but social conservatives, (some) home-owners and parts of financial capital which profit from the ultra-low interest rates caused by stagnation.

What we need is an alternative to this – one which sees that the cause of many of our social and political problems is capitalist stagnation, and which offers an alternative to this. This need not be a very leftist programme: it should reprise Blairite themes of modernity, hope and optimism. Such a project, however, requires an opposition – which we do not have.

Comments

[Boyo]

Great piece. Chris, could you write about how the moral imperative for growth can be reconciled to the need for reduced consumption for the sake of the environment (future wellbeing).

[Blissex]

«turn away from meritocracy. When industries expand rapidly, they create opportunities for people from humble backgrounds»

That wishing for meritocracy and for trickle-down from rapidly expanding industries to "people from humble backgrounds" looks like a warm endorsement of the rethoric of neoliberalism.

«need not be a very leftist programme: it should reprise Blairite themes of modernity, hope and optimism»

But those themes were prevarication, because actually-existing mandelsonianism was all about pandering to the interests of “financial and political grifters, but social conservatives, (some) home-owners and parts of financial capital”, from PPI to ASBOs to "light touch" regulation to cheap mortages etc. etc. etc.

Also "modernity, hope and optimism”, if extracted from mandelsonianism, is not quite a new aim, it was the slogan of the Edwardian era "Efficiency movement":

https://en.wikipedia.org/wiki/Efficiency_movement#Britain
“National Efficiency was an attempt to discredit the old-fashioned habits, customs and institutions that put the British at a handicap in competition with the world, especially with Germany, which was seen as the epitome of efficiency. In the early 20th century, "National Efficiency" became a powerful demand — a movement supported by prominent figures across the political spectrum who disparaged sentimental humanitarianism and identified waste as a mistake that could no longer be tolerated.”

Not much has changed in over a century in England: the english bourgeois elites in the late victorian era were absorbed into the nobility and the gentry, and thus prioritized status over enterprise, rentierism over industry, as had happened to Italy after the "renaissance" and to the dutch in the 18th century.

I doubt that they will change direction anytime soon.

[RCJ]

Good piece - thanks for the links. This seems correct. Matches what I observed at the firm level. Growing businesses have more tolerance for others, and for amusing (even slightly deranged) behavior. Businesses without growth spiral in, most demand that we all "work harder", attack those inside that are not "focused" or part of the "team". Difficult syndrome to break. We shall see how the world does but the signs are not great.

[Blissex]

More generally our blogger in his ode to growth for trickle down meritocracy seems to omit consideration of some important factors:

* The english upper and upper-middle classes and some part of the middle classes have enjoyed rapid growth of "their" GDI for 40 years. Talk of stagnation simple does not register with them, their experience is that “modernity, hope and optimism” are already abundant for themselves.

* Thatcherism helpeed reduce the rate of per-person growth by half, and important achievement as it contributed much to a buyer's labor market that has greatly reduced "inflation" (also thanks to offshoring and immigration), contributed to the cutting down to size of labour unions and contributed to that massive growth in the GDI of the upper-middle and upper classes.

* The upper-middle and upper classes have managed to keep down the servant classes for 800-900 years before the Industrial Revolution, and are quite confident that they can keep doing it, so why worry?

https://dilbert.com/strip/2021-05-09

There is another detail: it is always possible to increase GDP growth, it is a lot harder to increase GDP-per-person growth, as that largely depends on technology (in particular cheap fuels) and the endowment of natural resources. How can “modernity, hope and optimism” significantly increase the power of technology and the endowment of natural resources?

[ltr]

Great essay; tells me that the path of important and equitable growth, and clean growth, that China is now on is the right path. I begin the day reading about a high-speed electric train that has begun crossing through Tibet, and know what that will mean for growth in the province.

[Scurra]

Just say it: we're massively overdue for a big conflict that would both exploit the burgeoning nationalism and undermine the multinationals.

The problem being that we are also all equipped with weapons that make such a big conflict almost entirely unthinkable compared to the circumstances of a century ago. (Consider how Putin and Xi are approaching their territorial expansion efforts.)

But this means that we're now seeing what happens when capitalist stagnation actually properly kicks in, and it's really not a good look.

[rsm]

Isn't Ben Friedman's just-so story at odds with the Easterlin Paradox?

[rsm]

"a high-speed electric train that has begun crossing through Tibet,"

All the better to prosecute Tibetan Buddhists with? Isn't Chinese growth just accompanied by greater and greater abuses of human rights?

[aragon]

This is at least forty years out of date, at least for anyone living North of a line between the Seven and the Humber. (sans Scotland).

We weren't doing well before Thatcher destroyed literally millions of jobs.

Asians were imported from rural Pakistan to provide cheap labour for mills in mill towns about three generations ago, needless to say it didn't work.

Globalizers like Thatcher and Blair accelerated deindustrialisation.

As for the Big Bang it was not even a small whimper in the North. Loads of money and champagne was a London only event as the city sold out to the Americans.

For everyone else their jobs were transferred to Poland (Coal), South Korea (Shipbuilding), India (Computer Programming) Japan (Cars) and China (Steel and the rest e.g Textiles). Textiles are now a big deal for Bangladesh. We never had an electronics industry like South Asia.

Neoliberalism although discredited, marches on like the undead, as it still appeals to the rich (short term greedy). Where they still exist in the Home counties.

Blair and Mandelson have nothing to offer, the people who's lives they destroyed.

The British Economy RIP (1973).

Not even North Sea Oil could revive it.

When burning down the house some will welcome the opportunity to keep warm.

An optimist thinks we live in the best of all possible worlds. The pessimist fears he is right!

[ltr]

Isn't Chinese growth just accompanied by greater and greater abuses of human rights?

[ Rubbish.

Chinese growth has bettered the well-being of 1.4 billion people of all ethnicities, even to the extent of the ending of severe poverty. British colonial complaining about human rights is mere Rudyard Kipling nonsense.

As for Tibet, try remembering that Tibet was a feudal society, truly feudal, and China freed the serfs in the later 1950s and gave the freed serfs land and animals and homes and education....

Actual Tibetans are flourishing and joyful. ]

[ltr]

Economically, China could be of immense help to Britain in spurring growth. The Chinese market is bigger than the European or American markets. So work with China now and lose the ethnic stereotyping that will otherwise limit British development.

[rsm]

Didn't we find the Tankie (tankies take the side of the tanks in Tiananmen Square)?

[Nanikore]

"Leave supporting areas (and leave voters) clearly stand out by being more deprived, having lower levels of income and life satisfaction"

This is not entirely correct (the part in brackets anyway). The latest findings on who actually voted Brexit show that they were mainly home-owners. They were in relatively deprived areas, but not the relatively deprived people in those areas.

The reasons they voted for Brexit were more nuanced than a lot of people gave them credit for. (From memory the reasons were not actually xenophobic or nationalistic but over concern such as rising crime in their areas.) The study was widely reported in the Guardian and other newspapers, I will post the link if I find them.

Deprived people and non-house areas in deprived areas may have supported Brexit, but it seems they didn't vote.

[Nanikore]

"Actual Tibetans are flourishing and joyful."

Would the Tibet people be allowed a referendum on independence, like hopefully the Scots will be?

Is it possible they don't want to be ruled by The Party?

Is there any danger ethnic Tibetans could become a minority in their province (like non-Papuans in West New Guinea)?

Of course you could point to Western hypocrisy and refer to native Indians in the United States, or Aboriginals in Australia but two wrongs don't make a right.

Anyway, I don't pretend to be an expert on Tibet, but I am curious.

[ltr]

Tibet has been and will continue to be part of China. China experienced division and colonization already, and there will be no further such experience. The years of wars to sell the Chinese opium and the marauding of the Japanese military will never come again.

Tibetans are secure and flourishing and proudly Chinese citizens. Again, remember this was a feudal land in the 1950s, but never again.

[ltr]

Would the Tibet people be allowed a referendum on independence, like hopefully the Scots will be?

[ Understand just how poor, how undeveloped Tibet was in the 1950s. Lifespans were on the order of 35 years. This was not Shangri-La but a geographically difficult land, a people, desperately needing development. China developed the province of Tibet.

http://www.xinhuanet.com/english/2021-05/21/c_139959978.htm

May 21, 2021

Tibet Since 1951: Liberation, Development and Prosperity ]

[rsm]

So no freedom of speech for Hong Kong or Tibet or Beijing or Xinjiang because growth is just better? Wasn't Hong Kong even growing on its own just fine? Can you even believe Chinese government figures? Isn't the CCP different from Chinese individuals, so being anti-CCP is not racist because you can be pro-Chinese at the same time?

Isn't growth frightfully ergodic, as even Blissex notes above?

[ltr]

I too am frightfully ergodic, so I know all the points of nutty prejudice directed against the people of China. Why be self-destructively prejudiced? Learning can really be rewarding. Please try.

Little matter though, China is faring splendidly.

https://fred.stlouisfed.org/graph/?g=Brfm

August 4, 2014

Real per capita Gross Domestic Product for China and United Kingdom, 1977-2019

(Percent change)

https://fred.stlouisfed.org/graph/?g=Brfr

August 4, 2014

Real per capita Gross Domestic Product for China and United Kingdom, 1977-2019

(Indexed to 1977)

[ltr]

Just as allowing false anti-Semitism accusations to severely harm Jeremy Corbyn, was harmful all through British politics, allowing false accusations against China will severely limit the British economy.

China should and could be a wonderful partner for Britain. Please, please dismiss the falseness of prejudice.

[ltr]

China is a thoroughly benign country that has been of enormous development benefit to other countries and will be more so from here. The Germans may grumble about relations now and then, but they always understand how important trade with China is. There are literally German towns in China, having grown in the midst of trade between the countries.

Britain could do so well in supporting trade relations with China, and allowing political frauds to vilify China is simply self-defeating for Britain.

[Jim]

Labour can oppose - but only in a ya-boo-sucks sort of way. Labour does not really have any more idea than the Tories. The real question is how to get out of stagnation - and sniping about the Chinese is no use either.

The hard miles are in rebuilding some sort of industrial plan - but the usual approach - bearded professors at the DTI is probably as useless as it has been for the last 60 years. The usual 'design here - make there' idea is nice but only a short-lived plan. It scarcely takes any time for 'there' to do their own designing. Worse, the world stock of useable marketable and profitable ideas is seldom very big.

If not bearded professors then who - Elon Musk bangs a big drum and electric cars maybe make for big employment. Personally I feel that game is headed for trouble but hybrid cars do combine a useful degree of hypocrisy with a useful hedge against technological change. Then a deliberately restricted mode of transport may be a useful way out of environmental problems - but don't tell the public.

Which leaves us with being the world's meta-designers, the ultra well educated, ultra skilled and ultra financed who provide hoi polloi with all the ideas needed to keep them going. Think tensor calculus and Tolkeinist Linguistics for 12 year olds. So yes, we might start with a universal income, for most that will be the only option. ASFAICS we are in a tight corner and I don't see any pleasant way out.

[Blissex]

«For everyone else their jobs were transferred to [...] We never had an electronics industry like South Asia.»

That is inaccurate: there was a robust electronics industry, including several computer manufacturers competing with IBM etc.; but the successful ones were transferred to the USA, mostly because of a much larger national market, once England lost the Empire and the european Single Market did not develop fast enough.

»Neoliberalism although discredited, marches on like the undead, as it still appeals to the rich (short term greedy). Where they still exist in the Home counties. Blair and Mandelson have nothing to offer, the people who's lives they destroyed.»

But Blair and Mandelson tripled property prices in the Home Counties and London, and the prosperity of tory voters has been booming since 1980, and they cannot relate to taklkk of "decline", which in their view has been amply deserved by the "scroungers" of "the north" and the celtic fringe".

[rsm]

Will this blog even be accessible to mainland Chinese, because I mentioned Tiananmen? Just what is so great about growth, if it systematically limits my ability to self-express? Aren't suicides rising? Why are you lot so shallow, and crass? Shouldn't we basically stop listening to economists when making public policy?

[Gregory Bott]

You do realize the "UK" which the "far right" felates is dying as well. It will eventually disband. Capitalism is a debt system driven by technocratic progress+population growth. Well, you got the problem boys. All you got now is the debt based around the US$$#$$ which doesn't stop structural decay. Even industry won't save anything. Its too consolidated. Bring it back. Won't matter. Other jobs will be lost.

Its over. Either force women too have more children which will suck up even more resources and water down the gene pool , find a new invention that will reinvent the market or simply liquidate and let it die. It will be a new dark ages. But sometimes the Kali cannot be stopped.

Ignorance breeds ignorance. Many of the posters on this site are a sign of it. Capitalism simply does not work, much like globalized commericalism doesn't work.

[Nanikore]

I wonder if we will ever find out the truth behind the origin of Covid 19.

If the cause was the same as the SARS1 virus, which was connected to the live animal trade and wet markets (correct me if I am wrong) the Chinese government has some serious questions to answer (and I would imagine would be politically explosive for the Chinese people themselves; after the SARS1 experience I am sure they would not like to hear that the same thing was allowed to happen - again). Is corruption a problem? Is the live animal trade and the wet markets (for example the proprietors of the market space) connected to corrupt businessmen with connections to regional government officials? Can China put these suspicions to rest? The Party can ignore foreign criticism - and actually thrives on it; but can it ignore a big drop in its credibility at home if this is traced to a failure to implement or enforce laws?

The lab theory I totally discount, although I am not an expert. I think it has been a major, and very silly distraction by Trump.

[ltr]

Just as with the ceaseless prejudiced attacks on Jeremy Corbyn, the British attacks on China are a prejudiced sham. British prejudice against China, only harms Britain.

Try getting over British prejudice after all these years. Try. The "empire" is no more and will never come again and Britain really, really could be helped by China.

What the heck, though...

[ltr]

http://www.xinhuanet.com/english/2021-07/01/c_1310038478.htm

July 1, 2021

Over 1.24 bln doses of COVID-19 vaccines administered in China

BEIJING -- More than 1.24 billion doses of COVID-19 vaccines had been administered in China as of Wednesday, the National Health Commission said on Thursday.

[ Chinese vaccines are being administered at a rate of 20 millions doses daily domestically. More than 450 million doses of Chinese vaccines have been distributed internationally. ]

[aragon]

@Blissex
What computer companies?
ICL sold Fujitsu IBM mainframe clones. (now Fujitsu) Or are we talking about Sinclair/Timex ZX81 or the cheap Amstrad IBM PC clones? Or maybe Plessey (Now Seimens) Or Acorn/ARM now been sold to Nvidia? Or BT the monoplistic, rent seeking, front for Huawei?

Tripled, all Ponzi schemes look good until, they don't (even Government ones). What fundamentals support the high prices. Not wages, and interest rates are near zero.

They won't get any sympathy from up North, if they end up (deep) under water. Should interest rates rise or the froth comes off the housing market producing a crash.

Pork Barrel Politics might not be able to sustain current prices or resist a correction forever!

It no way to run an economy. Selling the silver to live high on the hog.

[ltr]

Oh, I understand:

https://twitter.com/R_Mc_Lean/status/1410588470540648450

R Mclean @R_Mc_Lean

‘The chancellor was downbeat on the prospects for a new regulatory deal with the EU, but insisted the City of London was well placed to serve a fast growing Chinese “financial services market with total assets worth £40tn”.’

https://www.ft.com/content/a571fcea-a4eb-484a-9227-cae47c5368ef

Sunak insists UK must bolster China ties as access to EU markets declines

Chancellor says City is well placed to serve Beijing’s financial services as hopes of regulatory deal with Brussels fade

9:17 AM · Jul 1, 2021

[Nanikore]

"Try. The "empire" is no more and will never come again and Britain really, really could be helped by China."

There are legitimate concerns about Tibet, the Uighurs and the Part.

But I agree there is a lot the West can learn from China and the East. I think many answers to the problems in Western Capitalism can be found there.

And yes, Starmer could learn something, for example, about the relationship between the centre in the regions in decentralised systems. If they studied Chinese history properly, everything neo-classical economics teaches would be turned upside down. If he is looking for a new vision to replace New Labour and Corbynism, he could do worse than look here.

It is up to China to play its cards right and offer a positive vision for the world.

[ltr]

No, there are no legitimate concerns about "Tibet," unless you want go return to feudalism, a 35 year life span, impossible infant mortality, illiteracy... Serfs living in abject poverty is not the making of Shangri-La.

The people of Tibet are free and already prosperous and working on building a better Tibet and China.

Similarly for the people of Xinjiang...

Actually look what Chinese has accomplished.

"It is up to China to play its cards right and offer a positive vision for the world."

China offers a positive vision for the world each day, for those capable of seeing. As for "playing cards right," the development of China has been miraculous, simply miraculous, and China is a thoroughly benign member of the international community.

[ltr]

http://www.xinhuanet.com/english/2021-05/21/c_139959978.htm

May 21, 2021

Tibet Since 1951: Liberation, Development and Prosperity
From State Council Information Office of the People’s Republic of China

http://www.xinhuanet.com/english/2021-06/24/c_1310024904.htm

June 24, 2021

The Communist Party of China and Human Rights Protection — A 100-Year Quest
From State Council Information Office of the People’s Republic of China

http://www.xinhuanet.com/english/2021-06/26/c_1310029167.htm

June 26, 2021

Why Western political theories can’t explain success of century-old CPC
By Gui Tao, Jiang Jiang, Wang Zichen and Li Zhihui

[ltr]

Nanikore:

Starmer could learn something, for example, about the relationship between the centre in the regions in decentralised systems...

[ A terrific comment, surely so. ]

[ltr]

Just these last days, a massive hydro-project has begun operation, a highway from Beijing through Xinjiang has opened, an electric high-speed rail line for Tibet has opened, a Chinese space station has been permanently manned...

Severe poverty was ended for a country of 1.4 billion in 2020. The terrible epidemic in China was controlled April 2020. There have been only 2 coronavirus deaths in China since the middle of April 2020. Malaria has just been declared ended in China by the WHO.

I can go on and on.

[Paulc156]

...and "the Uighurs" ...Nanikore mentioned? You only spoke of Tibet.

[ltr]

At the UN Human Rights Council meetings last week, the ambassadors of 90 countries wrote or spoke on behalf of and in praise of the human rights record of China. Every predominantly Muslim country in attendance supported the human rights record of China, with Egypt and Pakistan, representing about 330 million predominantly Muslim citizens, drawing special attention.

Kazakhstan, bordering Xinjiang, is supportive of China, Indonesia, a country of more than 275 million, Malaysia, and on and on.

What is actually happening in Xinjiang is a marvel of development that promises to continue indefinitely.

[ltr]

What has been happening in Xinjiang extends from the ending of severe poverty and continual improving of well-being, to the formation of infrastructure making a geographically challenging province increasingly livable but ecologically sound.

Over and over, the gains in well-being in Xinjiang have been recorded no matter the false contrary rumors repeatedly spread.

Kazakhstan, a large predominantly Muslim country, borders on Xinjiang with a large and growing number of daily interchanges but no recorded human rights problem reported. Quite the opposite, gains in well being are repeatedly reported.

[ltr]

Ever since it was realized in the United States that history really did not end in 1989, there has been a gathering effort to ruin China, to ruin Chinese development. Congress in 2011 prevented the Chinese from working on space exploration with NASA and the "International" Space Station program. However in 2021, there is a manned Chinese Space Station which will be open to explorers from other countries.

China has developed stunningly, and Britain could be part of this if Britain can shake the American falseness designed to isolate and even ruin China. China will continue to be dramatically successful in developing, Britain could participate.

[rsm]

Why can't the CCP let individuals speak freely? Why prosecute Tibetan Buddhists? Don't we have quite the Wolf Warrior here defending the CCP? Why did the CCP have to send tanks into Tiananmen Square in 1989? (I was there and saw no violence in the democracy protestors.) Is freedom of speech actually incompatible with growth?

[ltr]

Why prosecute Tibetan Buddhists? Don't we have quite the Wolf Warrior here defending the CCP?

[ This is nonsense. This is absurd. You do realize how absurd, don't you?

There is, of course, no prosecution or persecution of Tibetans of any religion. What is the point of making up stuff or repeating what is absurdly false?

Try to understand, the British empire is no more and will never be again, and adapt. Try to learn to respect 1.4 billion non-British people.
This would be colonialism, this prejudice, is simply self-defeating. ]