Secular Stagnation or Spiritual Growth?

One of the techniques that economists use to control the global economy and corner its value is to create concepts that constrain our thinking about what is possible and how much change we may be able to achieve. Think about the way the word 'stagflation' was used to influence the politics of the 1970s. The economic hypothesis that it was impossible to have high unemployment and high inflation simultaneously was proved to be nonsense. Rather than admitting their theories were wrong economists simply created the concept of stagflation and blamed the power of labour for the 'failure' of the economy to grow.

It seems that following the success of their bullying concept of austerity economists have now moved on to the idea of 'secular stagnation' to explain or constrain what is happening in the global economy. See, for example, an article published in the FT by Larry Summers last month which includes the phrase 'the implication of these thoughts is that the presumption that normal economic and policy conditions will return at some point cannot be maintained.'

My interpretation of this article is that following the crisis of 2008 capitalism-as-usual can no longer be maintained. Capitalism is evolving into a new form and Summers is trying to influence the form the new economy will take. Of course the priority for global elites is to maintain a system that enables their excessive wealth and power to continue. Austerity has done this very effectively in the short term but in the longer term levels of discontent will rise and Summers appears to be proposing an alternative characterisation of future trajectory of our economy, for which he is using the phrase 'secular stagnation'.

I have to say that I agree with Summers that the rules of the game have changed: 30 years of politically unconstrained economic activity ruled by market forces have resulted in a vast build-up of debt and widespread ecological destruction, to say nothing of the huge and increasing levels of inequality. Debt appears to have been the only viable stimulus outside the USA which, because of the particular and illegitimate power of the dollar, can simply create enough money to keep the economy growing.

Japan was the first country to move beyond economic growth and is used by Summers as an example of secular stagnation in practice. The response in the Japanese case was Abenomics, a concept created by journalists to describe the policies of Japan's prime minister Shinzo Abe over the past year that have been focused on stimulating demand to end Japan's 'stagnant' decades. The policy menu has included dramatic increases in monetary stimulus at home, combined with attempts at competitive devaluation of the Yen to encourage exports. To address the lowering of domestic demand employers are encouraged to increase wage rates and workers are encouraged to stay in the labour-market longer; immigration by young productive workers is also encouraged.

Perhaps I should have pointed out earlier that to economists the word 'secular' has nothing to do with religion but means a trend that persists beyond the short and medium terms. So we might explain the phrase 'secular stagnation' by saying that economists have concluded that the lack of growth is now a defining characteristic of the global economy rather than a temporary phenomenon. This is perhaps the most pernicious implication of the phrase: its inherent suggestion that growth is good and that a stable economy is stagnating. It is typical of the frenetic, perhaps adolescent, character of capitalism that it must consider stability to be equivalent to stagnation.

Given my work with the Green House think-tank and our Post-Growth Project it is interesting and important to me to consider the political power of countering the phrase 'secular stagnation'. We are in the process of thinking through what the post-growth economy might imply in terms of political engagement, the funding of public services, and the manipulation or otherwise of consumer demand. But the most important first step we must all take is to challenge the hegemonic nature of growth amongst economic commentators, of which the concept of secular stagnation is merely the latest emanation. Summers' suggestion that 'stagnation might prove to be the new normal' is designed to be greeted with horror by orthodox economists; but the earth and her defenders would greet it with a sigh of relief.

.

 
Tweet

Living off Our Children

On Wednesday next week, 20th November, students across the country will unite under the banner of the Student Assembly Against Austerity to protest the planned privatisation of the Student Loan Company. The outrage of pushing young people into debt before they even understand the implications lay at the heart of the protests against the increase in student fees two years ago. But the sell-off of the Student Loan Company to fill a hole in the public finances pushes students not just into debt but into the clutches of private finance companies.

The students have a Facebook page to publicise events.It shows that across the country from Aberystwyth to Essex students will be demonstrating against their use as a cash cow for cash-strapped government. In Liverpool students will be running a ‘student debt obstacle course’ and collecting signatures on a petition to send to local MPs. In York they will be having a more traditional rally with speakers. We need to lend them our support wherever and whenever we can to resist what is a mechanism to allow us to feed off their future earnings.

The reason that the student loans are attractive to finance companies is that they are prime material for securitisation - the process of financial alchemy that turns an illiquid asset into something that can be bought and sold and used for speculation. It was exactly this process, with sub-prime mortgages, that lay behind the financial bubble and then bust back in 2007/8. The original asset, the loan to a student, generates a slow although dependable income as repayments are made. But once bundled together and turned into a security these debts can be bought and sold in secondary markets where much greater speculative earnings can be made. This explains the appeal of the Student Loan Company to financial sharks.

My report for the Green House identified the problems generated by a university financing model based on debt. It demonstrated that this is a political choice, in my view based as much on the desire to create docile citizens and willing workers as to save pressure on the public finances. I argued that the privatisation of student debt as part of the plan from the start:

'This determination to sell student debt was partially confirmed in the 2010 Budget in which the government said it would in the next 12 months 'announce its decision on selling part of the student loan portfolio, including looking at the options for early repayment for individuals, in light ofLord Browne’s review of higher education finance. (Budget 2010, pg 44)'

The report quotes data from a study by Grant Thornton that demonstrates how the debt system of finance will exacerbate inequality between students and work against social mobility. The research calculates that those who will lose most are those on high but not excessively high incomes. In their comparison of three representative workers, all of whom graduate with a debt of £40,000, the journalist who never achieves a high income has the vast majority of her interest written off because she does not earn enough to repay it. The barrister (a representative high earner) repays his loan together with £28,000 of interest. The loser is the civil servant who, although he makes rapid career progression, does not earn enough to pay off his loan rapidly, and so incurs interest of £58,000 as well as his loan of £40,000. These are staggering sums of money, and indicate that the students of the future will be funding those financial companies to whom the government will sell on student debt handsomely. 

I end the report by suggesting radical egalitarian models for funding higher education arising from an open debate about the ownership and division of the product of academic labour, which in other sectors i sometimes addressed by the creation of a mutual structure. Under the supervision of Professor Rebecca Boden we have a student exploring options for a co-operative university at Roehampton. The discussion will also be taken forward at a meeting called Time for a Co-operative University? at the Institute of Education, Thursday 12 December 2013, 5.30-7.30pm, Room 804
.


Tweet

Green House Launches Post Growth Project

The growth figures released yesterday were shocking. They demonstrate clearly that Osborne is mistaken in his view of how an economy works, a point I have been repeating in somewhat tedious fashion over the past couple of years. The clear pattern of economic growth following the election and the massive cuts in capital expenditure make it clear to anybody who is not an utter ideologue that there is plain choice between a Keynesian or Hayekian response to this latest, and biggest, capitalist crisis. The Hayekian response smashes up the public sector and enhances the power of capital; the Keynesian response, if skilfully executed, might return us to over-stimulated growth.

Of course amongst green economists there is a totally different way of looking at this. Economic growth has ended: fact. Attempts to restimulate it via pressure on consumers, monetary injections, and so on will be chaotic and unpredictable, but more importantly will only add to the ecological pressure caused by an economy growing out of control. The alternative? Accept that the growth has ended, even welcome it, and begin to plan for a stabilised, post-growth economy.

To explore the implications of such a worldview the Green House thinktank has launched its Post-Growth Project. The aim of the Green House Post-Growth project is to challenge the common sense that assumes that it is ‘bad news’ when the economy doesn’t grow and to anatomise what it is about the structure of our economic system that means growth must always be prioritised. We plan to set out an attractive, attainable vision of what one country would look like, once we deliberately gave up growth-mania – and of how to get there. And we intend to find ways of communicating this to people that make sense, and that motivate change.

Over the next year we will be publishing a series of reports addressing various aspects of the transition to a post-growth economy. What will this mean for our politics, and how can we ensure that a post-growth society is characterised by social justice and democratic decision-making? What would the macroeconomics of post-growth look like, and how can we pay for excellent public services in such a scenario? How can we ensure that, this time around, we don't just return to the mistaken idea that we must stimulate further aggregate demand, whatever the planetary cost?

Please join this debate: read our papers, feel free to offer ideas of your own, and join us as we set up events and activities to spread the message. Together we can build a better world: the end of economic growth is an opportunity, not a tragedy.
. Tweet

Green Welfare

Why should we look after each other? Why should we have a concern for each other's welfare? Today we launched Green House, an environmentally focused think-tank and one of our initial papers was on the theme of welfare. What we found is that welfare systems have a range of different motivations.

In Britain we have never had a welfare system that was motivated by our commitment to care for each other; rather our system is focused on the labour-market. Pensions reward people for service to the economy; sickness and unemployment payments support people while they are temporarily unable to work; and more recently child tax credits support women with children also being part of the labour market. Our welfare system is designed to support a growing economy rather than a happy society.

In the paper we re-imagine a welfare system designed to ensure real social security, while recognising that we have an ageing population and that our economy has to stop growing. This takes us to several controversial conclusions:

- the close historical connection between welfare and the labour-market should be broken;
- the idea of an official ‘retirement age’ should be abandoned, to be replaced with a more flexible approach to social contribution and dependence through the life-course;
- we should re-open the discussion about the usefulness of a relative definition of poverty in the context of a limited planet.

This is not a prescription for a nanny state: quite the reverse. We suggest that citizens should be given the skills and assets they need to provide better for their own security, either individually or within local communities. A green economy would be based on strong local economies and sustainable livelihoods and we argue that such an economy would, in many respects, reduce the need for a costly social support network.

Finally we welcome Iain Duncan Smith's suggestion of the need for a universal approach to welfare, but we take this suggestion more seriously than he dares to by proposing the introduction of a universal payment—a Citizens Income - paid to all citizens of the UK as a right and without work-based qualifications.

The debate about welfare is dishonest and divisive: commentators focus on the tiny number of so-called welfare scroungers when the overwhelming majority of welfare spending goes to the increasing number of pensioners. Most importantly, from a green perspective, we ignore the way that defining poverty assumes, as well as requiring, continuing economic growth which cannot be maintained within the fixed limits of the planet.
. Tweet

Green House Gas

If knowledge is power then Tim Jackson's book Prosperity without Growth should have moved the political debate. By now our politicians should have been making plans to shift our central economic objective from growth to sustainability. The book, and the report for the Sustainable Development Commission on which it was based, provided the evidence: where is the policy that should duly follow?

Instead, the government abolished the Sustainable Development Commission during its 'bonfire of the quangos' just three months after its election, giving the lie to the mantra about evidence-based policy-making, as well as its claim to be the greenest government ever. The evidence that the late capitalist paradigm is suicidal is all around us: what we need is to turn that knowledge into meaningful change.

To take a step forward towards that end a group of green-minded academics and politicians are launching a new thinktank: Green House. Its commitment is to a politics of hope and to a greater confidence in the new paradigm in social and economic life that has been built up since the environmental movement arose in the late 1960s. The strategy is one of 'reframing', so that policies which seem disconnected and extreme come to be the common sense of tomorrow.

Caroline Lucas MP will launch the Green House thinktank in central London on 21st July. The launch will begin at 9.30 am and will be held at the Westminster Friends Meeting House at 8 Hop Gardens, off St. Martin's Lane, WC2N 4EH.
. Tweet