May 2013        

Reform or transform?
The confusion of growth economics

Part 1

Since the crisis of global capitalism burst violently onto the scene with the collapse of Lehman Brothers in September 2008 we have seen various alternative economic strategies proposed by unions and various groups close to the trade union movement, for example the ICTU’s “better, fairer way,” Dublin Trades Council’s “points for a manifesto,” TASC’s “stimulating recovery,” NERI’s “plan B,” Unite’s “seven reasons to march,” and most recently SIPTU’s “towards a new course”—not to mention the annual (sometimes bi-annual) pre-budget submissions.
     Usually in the form of a numbered list, some longer than others, the documents have various points in common, which can be summarised as:
• Put an end to pay cuts, tax increases on low-income workers, increased charges for social services, and reductions in budgets for the provision of essential services.
• Stimulate growth and the provision of jobs through large-scale infrastructural investment schemes.
• Use money from pension schemes, pension savings and what remains of the national pension reserve to finance these.
• Provide more jobs and protection of pay to boost local consumption and to protect local jobs.
• Sort out the banks in some way, through a renegotiation and separation of bank debt, coupled with their nationalisation, to provide a degree of planned investment.
• Reform the tax system on a more progressive direct model, taxing the richest most heavily and ending various tax loopholes and state subsidies to private capital.
• Introduce enhanced protection for the most vulnerable people in society to narrow the gap between the richest and the poorest.
     While all these are essentially progressive demands that would be welcomed as a vast improvement to the present state of society, they still don’t tackle the root cause of the problem: the system itself.
     Fundamental to all of them is a belief in “growth,” in a capitalist sense, and a refusal to deal with the system of capitalism itself. They generally see growth as possible, welcome, and the cure for the employment crisis, pay freezes and debt crisis that exist and present it as if it’s the magical cure to the problems the working class face.
     So, if it is the panacea for all our problems, the question has to be asked, Why is it not implemented?
     Growth, in a capitalist sense, is the re-creation of capital through commodity production realised in profits. This usually comes about through the production of goods or services or through inflation in asset prices, or other financial innovations.
     Profit, and consequently growth, can be increased in a number of ways, most often through the increased exploitation of labour—getting more for less—or the increased use of technology to produce more quickly, capturing a momentary advantage over competitors that will realise more profit for that particular firm.
     Under existing conditions, monopoly production, increased profits can also be achieved through the sale of products at a higher than normal market rate: price-fixing. However, given the collapse of consumer demand, companies are mostly resorting to the increased exploitation of labour or increased introduction of technology, displacing labour, to secure profits and growth.
     Growth is usually measured in gross domestic product (GDP) on a comparative annual basis, but in Ireland is often interpreted as gross national product (GNP), as this is seen as a more accurate reflection of actual wealth in the economy. But growth can come from various areas, not always positive, for example arms manufacture, gambling, pointless advertising, and environmental destruction.
     Thankfully, most of the proposed plans mentioned above look at investment and stimuli in such things as broadband, child care, and other more positive areas. Fundamentally, however, if this includes private capital, whether through state borrowing or direct private investment, it will mean that private capital will get more out of it than labour and consequently will exacerbate inequality in society and the relations of dependence between labour and capital that have been a pathetic hallmark of recent years.
     Capital can re-create itself, grow, only through exploitation: that is, not all the value created by labour going to labour, and capital maintaining for itself some of the value labour creates. Seeking growth in the system is essentially saying we want to further increase the exploitation of labour by capital.
     Even if this is acknowledged (and it isn’t, mind) by those drafting these ten-point plans, it still raises the question, Is growth in the system possible? Can capital continue to re-create itself, or are there limits to growth, structurally and environmentally?
     To suggest that capitalist growth is realistic as a means of providing jobs and a decent standard of living for working people is to go against decades of evidence of declining growth and stagnation. As the graph shows, growth has been struggling since the 1960s. Once the post-war reconstruction boom ended, stagnation set in, and low growth was the norm for the 70s. Then, despite all the privatisation and the wars, growth in the 80s and 90s was only between 0 and 4 per cent. Again, despite all the asset, equity and other bubbles during the 2000s, growth still was usually between 1 and 3 per cent.

     The trend is clear. The norm is sluggish growth, based on financial speculation and bubbles, increased expenditure on arms, wars over resources and market share, privatisation, and, growing expenditure on pointless advertising and media—all this while monopolies desperately increase their exploitation of labour by making the working week longer, introducing new technologies, replacing workers, and—most commonly—increasing the productivity of labour through a variety of stress-inducing management techniques.
     The weakness of these proposed plans is that they do not challenge, in the light of obvious evidence, whether growth in fact is possible, or even desirable. As the excellent editors of Monthly Review put it in the mid-90s,
             All this talk about growth as good, and faster growth as better, leaves out the truly important questions: do we need growth? If so, what kind of growth? And how about at least beginning to talk about an economy/society that rejects permanent growth as the oxymoron it obviously is and focuses on the really important issues of human and planetary existence?
     And the contradiction between capitalist growth and planetary existence is now a very serious reality. Some climatologists reckon that to avoid a catastrophic warming of global temperatures we need to avoid reaching 750 billion cumulative metric tons of carbon. Based on current rates we are likely to reach this in fifteen years’ time, in 2028. To avoid it we must begin to reduce the creation of carbon by an average of about 5 per cent per year; and to put this in perspective, we are still increasing it—by 6 per cent in 2010—and it has been estimated that even an annual reduction of 1 per cent would be catastrophic for the capitalist economy.
     We must also keep in mind that carbon emission and climate change are only one part of a global environmental catastrophe. We must also acknowledge the realities of the acidification of the seas, destruction of the ozone layer, the extinction of species, the disruption of the nitrogen and phosphorus cycles, growing shortages of fresh water, changes in land cover, and chemical pollution.
     Those who advocate growth as a solution are advocating the further destruction of the environmental system and threaten the existence of the human species, as well as going against all the evidence of stagnation that exists, which capital will desperately try to avoid through even more suicidal environmental tendencies. They are placing the re-creation of capital as a priority over the re-creation of humanity. It is that perverse.

■ Part 2 of this article will look at the difference between the reformist plans described above—which do not present an alternative to capitalist growth economics and reproduce exploitation and the crisis-ridden system that exists today—and what a transformative programme looks like, and why it challenges the system.

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