Saturday, July 12, 2014

Capitalism Jumps the Shark

The headline of this grim forecast reported in The Guardian pretty much says it all - The best of capitalism is over for rich countries – and for the poor ones it will be over by 2060. This looks an awful lot like the Neofeudal future we've been discussing recently.
[G]rowth will slow to around two-thirds its current rate; that inequality will increase massively; and that there is a big risk that climate change will make things worse. Despite all this, says the OECD, the world will be four times richer, more productive, more globalised and more highly educated. If you are struggling to rationalise the two halves of that prediction then don't worry – so are some of the best-qualified economists on earth.

World growth will slow to 2.7%, says the Paris-based thinktank, because the catch-up effects boosting growth in the developing world – population growth, education, urbanisation – will peter out. Even before that happens, near-stagnation in advanced economies means a long-term global average over the next 50 years of just 3% growth, which is low. The growth of high-skilled jobs and the automation of medium-skilled jobs means, on the central projection, that inequality will rise by 30%. By 2060 countries such as Sweden will have levels of inequality currently seen in the USA: think Gary, Indiana, in the suburbs of Stockholm.

Now imagine the world of the central scenario: Los Angeles and Detroit look like Manila – abject slums alongside guarded skyscrapers; the UK workforce is a mixture of old white people and newly arrived young migrants; the middle-income job has all but disappeared. If born in 2014, then by 2060 you are either a 45-year-old barrister or a 45-year-old barista. There will be not much in-between. Capitalism will be in its fourth decade of stagnation and then – if we've done nothing about carbon emissions – the really serious impacts of climate change are starting to kick in.

The OECD has a clear message for the world: for the rich countries, the best of capitalism is over. For the poor ones – now experiencing the glitter and haze of industrialisation – it will be over by 2060. If you want higher growth, says the OECD, you must accept higher inequality. And vice versa. Even to achieve a meagre average global growth rate of 3% we have to make labour "more flexible", the economy more globalised. Those migrants scrambling over the fences at the Spanish city of Melilla, next to Morocco, we have to welcome, en masse, to the tune of maybe two or three million a year into the developed world, for the next 50 years. And we have to achieve this without the global order fragmenting.

Oh and there's the tax problem. The report points out that, with the polarisation between high and low incomes, we will have to move – as Thomas Piketty suggests – to taxes on wealth. The problem here, the OECD points out, is that assets – whether they be a star racehorse, a secret bank account or the copyright on a brand's logo – tend to be intangible and therefore held in jurisdictions dedicated to avoiding wealth taxes.

The OECD's prescription – more globalisation, more privatisation, more austerity, more migration and a wealth tax if you can pull it off – will carry weight. But not with everybody. The ultimate lesson from the report is that, sooner or later, an alternative programme to "more of the same" will emerge. Because populations armed with smartphones, and an increased sense of their human rights, will not accept a future of high inequality and low growth.
So capitalism has already delivered the best it has to offer for the the average person in Western industrial countries, and all they can look forward to is a future of more inequality, more stress, more pollution, and a declining quality of life and health. And for the so-called “developing” countries, as long as they have catchup growth and relatively low wages, they will continue to get wealthier – although what will that mean for their quality of life? Up until 2060, that is, when wealth and poverty will be spread around until we all have the standard of living of either a Bangladeshi garment worker or a Russian oligarch. I wonder if they take into account the Limits to Growth model, which predicts the economy to fall apart around 2030 due to pollution/resource scarcity.

Whenever I hear about how optimistic the Chinese are about the future, I want to put them on a plane to Detroit or Gary or Youngstown and remind them that the people who lived here were once just as optimistic as they were. They were once the factory workers of the world and had better and better lives, until the capitalists found someone cheaper and broke them. That is what always happens. This is the endgame, I would tell them, and it will happen to you someday as surely as it happened to us. Such is the nature of this system. You are not immune. Then I’d put them on a plaene back home. Perhaps then the twenty-lane highways, shopping malls, toxic air and hundred-plus story skyscrapers would no look so spectacular. "Enjoy it while it lasts..."

This is what the capitalists themselves tell us is going to happen. And they accept it as inevitable – there is nothing we can do about it. In other words, we have nothing to look forward to but worse living conditions in perpetuity. This doesn't speak well for the defenders of this current system.

See also: Don't be fooled: America is still headed for an aristocratic dystopia (The Week)

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