"... the idea of creative destruction or annihilation (German: Vernichtung) implies not only that capitalism destroys and reconfigures previous economic orders, but also that it must ceaselessly devalue existing wealth (whether through war, dereliction, or regular and periodic economic crises) in order to clear the ground for the creation of new wealth...."
Almost all industries including farming, fishing, even the fixed link have followed a familiar path: capital (in the form of new technology, hard assets like bridges, combines, and forest harvesters) replaces labour, with the promise of more efficiency and cheaper consumer goods. The current obsession of economists and business writers here is Canada's lagging productivity. That's a fancy way of saying it takes too many people to produce Canada's goods and services, and somehow we'd all be better off if businesspeople use the high Canadian dollar to import the technology and machines (usually from Germany or the United States) needed to produce more with less (people that is).
The problem of course is that it's the producer of things that takes on the debt to finance these advancements, but the benefits (cheaper whatevers) always seems to flow up the marketing chain to the to retailer/consumer. Ironically the only exception to this are companies using cheap overseas labour.
There's no question that farmers have taken a big bite of the productivity apple, believing that making investments (taking on debt really) in new technology is necessary, but then finding they don't have the economic clout to capture the benefits. Half of Canadians farmed in the 1950's, now it's about 2%. Here on PEI farm debt loads since 2000 have risen from about 200 million dollars, and are now approaching 700 million, and it's a similar story throughout Eastern Canada. The boom in grains and oilseeds (pushed by ethanol production, and yes big machinery) in the western prairies of North America have helped farmers there make some money.
Here's the thing. every Canadian province has its wealth producing sectors, in the West and the East linked to whatever natural resources it has (forests, farmland, minerals, oil, etc.) On PEI its the land, water, now wind, and transfer payments. The economy continues to benefit from these sectors even if they're losing money (primary producers simply take on more debt to finance the fishing season or the crop). The risk is that can't go on forever, the banks won't allow it. The continuing problem is how do primary producers get a fairer share of the consumer dollar. If that can't be fixed then the rest of us are in trouble too. And maybe that's what we're seeing with all the "creative destruction- the re-configuring of an old economic order" going on in the rest of the economy. It's just that farmers and fishermen felt it first.
My hope is that it gets better for everyone, and quickly. Henry Ford, Karl Marx, and now economists like the New York Time's Paul Krugman, recognize the economic imperative, the dignity even, of people working, and that there won't be any sustained recovery until more people have a job. And I know anti-poverty groups in the Maritimes would add, jobs with a reasonable wage. All of this is a long way from the Jetsons, and an age of leisure.
A couple of pieces this week on the difficult times we live in:
Capitalism's New Era
by: Shamus Cooke, Truthout | News Analysis
"Karl Marx got it right, at some point capitalism can destroy itself," said Mr. Roubini, in an interview with The Wall Street Journal. "We thought markets worked. They're not working."
The world economy is in shambles and about to get worse, according to even mainstream economists. How bad is anybody's guess. Some things, however, are certain: the recovery that politicians have been promising for years existed only in their heads. The reality of the situation is now apparent to millions of people across the globe, who, before, clung to the empty promises of economic recovery. This newfound consciousness will inevitably find expression in the political realm and, more importantly, the streets.
A key aspect of this sudden mass awareness is in response to high unemployment and the deeply unpopular measures that politicians are forcing upon working people, both byproducts of the Great Recession. Politicians are blaming "the markets" for demanding austerity measures, but "markets" are simply places where wealthy people invest their money. To guarantee a profitable return on their money these investors demand that labor laws be squashed and social programs be eliminated, all over the world.
Spain, for example, is one of many countries having austerity measures forced down their throats. Reuters reports:
"Analysts see the shaking up of the country's inflexible labor laws [laws that protect workers] and the easing of hiring and firing [so older, activist, or slower workers can be fired] as vital to restoring the country's competitiveness. The labor reforms are crucial. They will help to restore growth [profits] in the long term. Growth is the only way out of these adverse fiscal trends,' said Luigi Speranza, analyst at BNP Paribas." [May 27, 2010]
To summarize, creating new laws that enable Spanish corporations to work their workers harder will be better for profits.
Greece faces a similar austerity plan, according to The Guardian UK:
"Tax increases, spending cuts and wage reductions and a sweeping privatisation programme have led to violent protests in Greece, with many arguing that the International Monetary Fund and European Union have demanded too high a price for their financial support." [August 2, 2011]
In the United States, these policies find expression in the attack against public-sector unions and the targeting of Social Security, Medicare and Medicaid for cuts, while mass unemployment is allowed to act as a very efficient way to lower wages for all workers.
Politicians have made it clear that economic growth, especially corporate profits, will increase in response to these anti-worker policies. They are only partially right. Corporate profits in fact have been on the rise, but the austerity measures have been responsible for the depressed economies throughout Europe and the US. When workers' wages are lowered and social programs are decimated, working people and the poor are left with little money for any purchases other than the bare necessities. Without consumer demand for their products, corporations curtail operations even more. This global dynamic has been decades in the making, with the recession having finally forced the issue into the forefront.
The Reagan and Thatcher administrations were the first Western representatives during the post-World War II era of this now dominant trend, which aimed at pushing back the social programs and wages won by the labor movements. Their policies were in response to the lower corporate growth rates that began in the 1970s and continue to this day. Now, all of Europe is suffering because banks and corporations demand a more profit-friendly business environment: universal health care and education programs are in jeopardy, plus wages and other benefits are under attack.
For the wealthy and corporations this is a life-and-death struggle. The Great Recession has already bankrupted the banks and corporations who were not fit enough to survive under a crumbling market economy. The existing companies are thus forced to squeeze more work for less pay out of their workers, since labor is the most flexible cost of any business. Pushing labor costs down - and by extension cutting social programs - is thus the priority of the corporations and their paid-for politicians across the globe, since the global economy is tightly connected and they all play by the vicious rules of the market. In fact, the intensity with which the corporate elite is pursuing these policies is a reflection of their negative outlook for the global economy.
This constitutes a new era in global capitalism, one that mimics the market economy of past generations. The 2008 recession was not a temporary phenomenon, but the ushering in of a new period in which the corporate elite attempt to restructure social relations, meaning that past assumptions regarding wages and social programs must be destroyed, as a new, more profitable equilibrium is sought between the corporate elite and working people.
Implied in this nation-by-nation restructuring is a restriction of democracy, since these anti-worker policies negatively affect the vast majority of the population. The riots in London are an expression of this, as are the mass demonstrations throughout Europe as well as the Middle East. In the United States, democracy is circumvented via the so-called Super Congress, whose duty it is to cut Medicare, Medicaid and Social Security. Austerity programs throughout Europe are being implemented against the wishes of the general working populations.
Also included in this attack on working people is the corporate elite's doubled efforts to divert the working-class anger toward fake populist movements - like the Tea Party in the US - or against minorities, such as Muslims and immigrants in the US.
This will require that working people stay focused on who exactly is attacking them, while focusing on measures that can serve as alternatives to what the corporate elite are forcefully implementing.
The most immediate and important demand of working people must be taxing the rich and corporations, since social programs need to be funded and expanded and a massive jobs program with a strong green component is desperately overdue. It's not by coincidence that taxing the rich is rarely used in austerity plans; and when, on rare occasions, the rich are taxed, it's at low levels with high publicity, so the angry public will think the illusion of "shared sacrifice" is a reality.
For example, in the US, President Obama is again calling to end the Bush tax cuts for the rich (after allowing them to continue less than a year ago). It is doubtful that the Bush tax cuts will be ended, but if they were, it would be insufficient. Working people must demand that taxes on the rich be raised to at least pre-Reagan levels (70 percent), while President Eisenhower levels would be best (90 percent). Over the decades, the tax burden has shifted dramatically, causing wealth to accumulate into the bank accounts of the top 1 percent of the population, the same people who are now demanding that social programs be destroyed so that their investments are secured and their corporate profits remain high.
Since illusions of an economic recovery have now been shattered, it's up to working people to demand that their labor unions and community groups unite to tax the rich and corporations in order to finance a massive jobs program. Fortunately, the AFL-CIO is organizing actions for the first week of October to demand jobs and oppose cuts to Social Security, Medicare and Medicaid. Many within the labor movement are calling for massive demonstrations across the country for October 1. It will take these types of actions to unite working people to fight for a positive solution to the economic crisis.
Even when times are supposedly good, neither society nor the environment can take the strain of an ever-expanding economy
o George Monbiot
o guardian.co.uk, Monday 22 August 2011 22.00 BST
How much of this is real? How much of the economic growth of the past 60 years? Of the wealth and comfort, the salaries and pensions that older people accept as normal, even necessary? How much of it is an illusion, created by levels of borrowing – financial and ecological – that cannot be sustained? Go to Ireland and you'll see that even bricks and mortar are a mirage: the marvels of the new economy, built on debt, stand empty and worthless.
To sustain the illusion, we have inflicted more damage since 1950 to the planet's living systems than we achieved in the preceding 100,000 years. The damage will last for centuries; the benefits might not see out the year. Ireland, again, points a withered finger at the future. Among other iniquities, the government forced a motorway through the Gabhra Valley, part of a site – the Hill of Tara complex – comparable in its importance to Stonehenge. It was both an act of wilful vandalism and a notice of intent: no consideration would impede the economic miracle. The road hadn't opened before the miracle collapsed.
Once our needs had been met, continued economic growth did most people few favours. During the second half of the growth frenzy, unemployment rose, inequality rose, social mobility declined, the poor lost amenities (such as housing) while the rich enhanced theirs. In 2004, at the height of the longest boom the UK has ever experienced, the Nuffield Foundation published this extraordinary finding: "Rises in mental health problems seem to be associated with improvements in economic conditions."
Now, bar the shouting, it's over. Last week the Wall Street consultant Nouriel Roubini, one of the few who predicted the financial crash, spelt out the fix we're in. Governments cannot afford to bail out the banks again. Quantitative easing can no longer help, nor can currency depreciation. Italy and Spain will be forced, in effect, to default, and Germany won't pay out any more. The successful capitalist reached this striking conclusion: "Karl Marx, it seems, was partly right in arguing that globalisation, financial intermediation run amok, and redistribution of income and wealth from labour to capital could lead capitalism to self-destruct."
Nor can the current economic system address the environmental crisis. Its advocates promised that economic growth and environmental damage could be decoupled: better technology and efficiency would allow us to use fewer resources even while increasing economic output. Nothing remotely like it has happened. In some cases there has been a decline in resource intensity, which means a lower use of materials per dollar of economic output but higher overall consumption. In some cases – such as iron ore, bauxite and cement – even this hasn't happened: resource use per dollar has risen.
So far governments have responded to the renewed crisis of capitalism by frantically seeking to invoke the old magic again, to start the engine of creative destruction once more. The means to do so no longer exist. Even if they did, they would only delay and enlarge the underlying problems.
But now, in the wake of the English riots and faced with possible collapse, we are at last beginning to talk about the issues ignored while the illusion persisted: equality, exclusion, the feral rich and the discarded poor and, in WH Auden's words, about "what the god had wrought / To please her son, the strong / Iron-hearted man-slaying Achilles / Who would not live long."
The most hopeful sign that politicians might now be prepared to ask the big questions was the presence, in Ed Miliband's pile of holiday reading, of Prof Tim Jackson's book Prosperity Without Growth. It's a revolutionary text, now two years old, whose time has come.
It points out that the financial crisis was caused not by isolated malpractice but by the systematic deregulation of the banks by governments, in order to stimulate economic growth by issuing more debt. Growth and the need to encourage it is the problem, and in the rich world it no longer bears any relationship to prosperity.
Jackson accepts that material wellbeing is a crucial component of prosperity, and that growth is essential to the wellbeing of the poorest nations. But in countries such as the UK, continued growth and the policies which promote it undermine prosperity, which he defines as freedom from adversity or affliction. This means, among other blessings, health, happiness, good relationships, strong communities, confidence about the future, a sense of meaning and purpose.
But how do you escape from growth without tanking the economy – and our prosperity? Under the current system, you can't: when growth stops, it collapses. So Jackson has begun developing a macroeconomic model which would allow economic output to be stabilised. He experiments with raising the ratio of investment to consumption, changing the nature and conditions of investment and shifting the balance from private to public spending, while staying within tight constraints on the use of resources. He finds that the redistribution of both income and employment (through shorter working hours) is essential to the project. So is re-regulation of the banks, enhanced taxation of resources and pollution and measures to discourage manic consumption, such as tighter restrictions on advertising.
His system is not wholly different to today's: people will still spend and save, companies will still produce goods and services, governments will still raise taxes and spend money. It requires more government intervention than we're used to; but so does every option we face from now on, especially if we try to sustain the growth illusion. The results, though, are radically different: a stable, growthless economy which avoids both financial and ecological collapse.
From now on, as the old dream dies, nothing is straightforward. But at least we have the beginning of a plan.