December 2016        

The status quo can’t last . . .

Nicola Lawlor

The research team at Deutsche Bank published a report in September under the catchy title “Long-term asset return study: An ever-changing world,” looking at the likely prospects for capitalism over the next thirty-five years.
     The report argues that the last economic cycle lasted approximately thirty-five years, and was shaped by China’s emergence into the global economy, the collapse of the USSR and socialist countries, the free movement of labour in Europe, and the liberalisation of India by the International Monetary Fund. This added about 1 billion workers to the global economy, in addition to the growth in population that boosted the global work force, “creating a perfect storm and an abundance of workers.”
     “The status quo can’t last in a democracy without compensating policies: eventually you’ll have a reaction.” That reaction to the establishment has been seen in the Trump election and in the Brexit vote. It is seen in Greece and Spain and in the rise of Islamic fundamentalism. It is all anger at injustice and inequality: it is just captured or expressed in different ways, some progressive and some, unfortunately, deeply reactionary and even fascistic.
     Economic activity became far more integrated, and protectionism was swept away, creating massive downward pressure on wages in the developed countries, where for many workers there has been no real wage growth. This wage stagnation was masked by debt and increases in house prices, which created a money illusion. The report also identifies the single currency as accentuating these problems in Europe.
     The European Union is worried. It is worried about the reaction in France and Germany—the alliance of capital that has been the bedrock of the EU. And so they are already beginning to change their tune slightly and encouraging more stimulus and less austerity, and would seem to agree that compensating policies—compensating for the fundamental inequality and injustice of capitalism—to stave off further reaction might be needed.
     The next thirty-five years, according to this research, will have to deal with low growth and high, and increasing, debt. The report suggest two possible paths: either a compensatory move towards one European sovereign state or, as the report calls it, a major political accident in Europe. The latter is appearing more likely, but the EU is clearly moving towards the former. And of course the more it moves towards the former the more likely the latter will become. But that’s dialectics!
     So what does the report suggest as common themes for the next thirty-five years?
• Lower growth (remember that real growth has been very low)
• Higher wages but with higher inflation
• Lower profits
• Higher taxes on corporations
• Less trade
• Higher taxes on the rich
     This seems more aspirational than real: for what corporation is going to allow this to happen? What corporation is going to accept increased wages, increased taxes, and reduced profits?
     This in some ways seeks a return to a contemporary version of social democracy. Yet that contradicts the necessity of capital to grow and reproduce itself, and the current conditions of accumulation, which are based on a global economy, a global use of cheap labour, and a continued race to the bottom in corporate taxes.
     Given the uneven development of political and class consciousness as well as the imperialist structures of the division of states, if a state pursues such a course as described it will be isolated by international capital and its institutions and will face the question of retreating back into line with imperialism—as SYRIZA did in Greece—or advancing further towards socialism, deepening social ownership and control at the expense of capital and its corporate power.

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