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
