Meanwhile back at the economy

After his brave attack on the eighteen orthodox Marxists left in the world today–transformation problem! also there are still some petit-bourgeoisie in the world today; also don’t forget the chavs won’t ever turn off the internet porn to revolt–perhaps Professor Quiggin would take some time explain the utter inability of his dear social democracy to hold on to political power and its accommodation to rather than modification of the market when it does achieve political power.

bq. it’s attracted too many people
Proportionally, I mean. In absolute terms, attraction rates are way down, as you concede.

This is all very depressing. Making it worse, there are millions of other Americans who support the Republican politicians and their destructive policy choices and millions of others who vote for them without paying much attention. The opposing viewpoints, the ones that will actually work, seem to have no effective advocate inside or outside of politics.

hartal – robust social democracy held on for about 35-40 years.

The track record for Marxist parties in non-dictatorships?

Die Linke is about 50/50 social democratic and democratic Marxist. They flat-lined from 1990-2002, but have improved considerably since. At the same time, my money would be on the Greens overtaking them.

PCF’s performance in elections dropped like a stone since 1981, and has seen no improvement since the recession began. Italian Marxist parties wish they were as strong as the French.

Etc. and etc.

William Timberman – social democracy transformed Western Europe fundamentally in ways that have yet to be undone even still. Marxist political parties – how well has their legacy stood up?

As for the constituency argument that “social democracy can exist only on sufferance—it has no constituency of its own apart from the well-meaning” is without evidence. Social democracy has a constituency, albeit one that has been in decline. Marxist political parties can’t even claim that.

* although I will grant the Latin American case of the last ten years. Even then, the policies in question aren’t purely Marxist even when the parties are.

Oh, and by the way: contrary to your footnote 1, the Treasury General Counsel George Madison has examined the legal issues involved and he has concluded that the U.S. Treasury is constitutionally unable to issue debt if the House of Representatives does not authorize it. See this fact check.

StevenAttewell @ 10

Even still…. True enough, but the century is young. I’m on your side, and JQ’s, as far as hopes and aspirations go, but I’m far less sanguine about the permanence of what’s been achieved. Marx saw something social democrats still refuse to see, I think, and that is the dynamics of power concentration in an increasingly technological civilization. Maybe mclaren is right, and we’ll wake up one morning to find that we’ve all become butterflies overnight, but I say go have a look at an NSA or Apple data center and the amount of juice needed to keep the dreamers in the dream. Cui bono is as nasty a question today as ever it was, in my opinion, even though I’d be more than happy to be proven wrong.

we will still have achieved far more good, and done far less harm, than have the inheritors of Marxism, and particularly Leninism

This is beneath you, JQ. As Alasdair MacIntyre, no Marxist, wrote in After Virtue: “the barbarous despotism of the collective Tsardom which reigns in Moscow [Beijing, Hanoi, etc.] can be taken to be as irrelevant to the question of the moral substance of Marxism as the life of the Borgia pope was to that of the moral substance of Christianity.” Marx was a democrat and a humanist; Lenin was not. Marx’s historical materialism (yay!) and the labor theory of value (boo!) is one thing (well, two things); Party dictatorship is something else, wholly unrelated.

William Timberman remarks that “Everything is sort of free and no one has a job is a consummation devoutly to be wished….

Really? This could go any number of possible ways, most of them unpleasant. The most likely such future involves turning most of America into a bunch of hi-tech favelas. Housing is free because you’re living in a squat under an underpass. You queue up for free government cheese and use your laptop to surf Wikipedia. That’s not much of a life.

As for Timberman’s claim that “there’s an awful lot of hand-waving and mumbo jumbo involved in claims like [mine],” on the contrary: look at the hard numbers.

Take a look at this graph showing job growth by decade in America from the 1940s to the 2000s. Do you see a pattern there? Do you think we’re going to a middle class left in the near future? Do you think this pattern is socially and politically sustainable in a market capitalist system?

Take a look at this historical chart showing American manufacturing capacity after each recession from the 1940s to 2007. Do you see a pattern here? Do you think there’s going to be any non-military U.S. manufacturing base left after another 3 or 4 recessions? Do you think that’s socially and politically sustainable under conventional market capitalism?

Or take a look at this chart showing what’s happening to U.S. military manufacturing vs. the manufacture of durable consumer goods. Military manufacturing is going through the roof, durable goods manufacture is plummeting. You think you can sustain market capitalism with a trend like this?

And here’s a chart showing college tuition over the last 30 years comparing to the explosion in housing prices. Notice that college tuition is increasing much faster than the price of houses did during the recent housing bubble. Modern market capitalism depends on educated workers — how are we going to continue to educate workers in America with this unsustainable trend in place? Do you really think market capitalism can handle this kind of radically unsustainable trend?

And here’s a chart showing the median duration of unemployment over the last 50 years. Notice that interesting spike — it’s completely unprecedented. There’s nothing like it, unless you go back to the Great Depression…and since they didn’t keep the kinds of economic records back then we do now, we don’t even have any hard data to compare this bizarrely unprecedented trend with. Looking at this chart, a blind person could see what’s going on — jobs are getting outsourced at such a rate that once someone in America loses a job, they can’t get another one.

But I’m just doing “hand-waving” here, right?

Wrong. Economist Tim Duy is saying the same thing I am:

“…U.S. firms have no intention of adding net new capacity, planning instead to source any excess demand from overseas. This implies that the manufacturing recovery will not be a net positive to US growth. It also implies that the trade deficit will widen further and that the challenge of global imbalances will remain unresolved. The rise of Dollar assets abroad will with either force a fall in the US dollar which would then create more incentive for export and import-competing industries or, more likely, encourage the accumulation of reserve assets among foreign central banks.

“In short, I continue to worry that policymakers are ignoring the possibility that increasing reliance on external production to satisfy U.S. demand has contributed significantly to the jobless recoveries we have seen this decade. Something is very different this decade.”

Source: Tim Duy, “Anomalous Capacity Shrinkage,” FedWatch blog, 30 July 2010.

Newsweek International Edition is also saying the same thing I am:

“In the years ahead, sizable numbers of skilled, reasonably well-educated middle-income workers in service-sector jobs long considered safe from foreign trade—accounting, law, financial and risk management, health care and information technology, to name a few—could be facing layoffs or serious wage pressure as developing nations perform increasingly sophisticated offshore work.”

Source: Newsweek international edition article “Europe: The Big Squeeze,” 30 May 2010.

Explain to me how market capitalism remains viable when the median unemployment duration in America rises to 10 years. Explain to me how market capitalism remains viable when the cost of college tuition rises to $200,000 per year in 2011 dollars. Explain to me how market capitalism remains viable when computers & software & robots do all the jobs formerly taken by the 73% of non-college-educated Americans, while outsourcing and databases + expert systems (like IBM’s Watson system) do 90% of the jobs formerly taken by the 27% of college-educated Americans.

All these graphs, all these charts, all this hard economic data is “hand waving” and “mumbo jumbo”? Really?

Mclaren, I think we must have passed each other in the fog. No, I don’t think that market capitalism, even gussied up with social democracy (which, as I’ve tried to explain, seems to me to be politically unsustainable in the short run, and very possibly in the long run as well) is leading, if not to a dead end, then to a massive rethink, and that under the awful pressure of the factors you cite, and others as well — global warming, Mike Davis’s automated warfare in the Planet of Slums, and so forth and so on.

I seem to have mistaken you for a New Age optimist — standing with your thumb out somewhere between Gunnar Myrdal and Jaron Lanier. My bad…and my apologies accordingly.

Much of this is overblown. The most recent recession, having been caused by a massive financial crisis, and the high percentage of consumers invested – in one way or another – in the asset bubble that burst, make this different. We’ll have sluggish growth while wealth is restored and debt paid down. And then things will return to normal. Small businesses will be able to borrow and invest normally. Larger businesses will ramp up.

At the moment businesses are still very concerned with sheltering against future risk, and consumers are behaving similarly. That’s unfortunate, but it’s not a sign of a structural problem with the economy.

Once the US fully emerges, the dynamic enterprise and churn of the American economy will return, and unemployment will drop back to its low rates and duration.

It’s true that marxism failed to deliver the transition to a new classless socioeconomic system; that part remains utopian. However, I agree with Geo that historical materialism has survived just fine. And it offers a good explanation of the politics of ‘social democracy’, and why it’s not a panacea.

@John Quiggin 22 and also @others with similar arguments:

I think that your opposition between “marxism” on one hand and “social democracy” on the other is quite wrong, at least here in Italy: here, the PCI (italian communist pary, quite marxist and pro-soviet for a while) has been in pratice the driver of social democracy, and had an important and lasting effect on italyan politics (italian constitution has been written taking in account many commie points, for example).
For example, G. Napolitano, current president of Italy, has been in the communist party for a lot of time, but he is still liked by most voters, bot in the left and in the right.

JQ, from where I sit, social democracy does now appear to be largely an epiphenomenon, the runt of capitalism’s litter, if you like. And when for any reason the she-capitalist’s dugs start to dry up, the he-capitalist begins eyeing the runt of the litter and licking his chops, and the runt’s more robust siblings affect a profound lack of interest in what happens to the little guy, whether it’s the Brits and Polish carpenters, the Germans and Greek profligates, the French and Turks-in-general, or citizens of the U.S. and those pesky Messican campesinos.

I realize that CT, being under the stewardship of some pretty sharp academics, would prefer fewer of the cheesy metaphors, and a much larger helping of statistical evidence along the lines of The Predator State or The Shock Doctrine, but then I’m just a commenter, after all. Maybe the whole bad dream will all simply evaporate with the dawn, as Andrew F. asserts. The Chinese are still assuring us that the East is Red Sun Rises in the East. Perhaps they’ll turn out to be right after all.

Andrew F. ,

The problem with that argument is that this crisis was caused by a bubble, which was created to deal with the pop of a previous bubble, and so on. We haven’t really been at “normal” since the 70s, when the link between productivity growth and wages was broken in the US and public policy was redirected to funnel money to the very top of the income / wealth scale. This in turn contributed to weakened countervailing power, and both of these developments (along with the implicit guarantee of bailouts for those at the top) led to an economy driven by speculation. There are no market mechanisms to overcome that. What is more likely, absent some significant increase in political mobilization from the left, is another bubble to paper over these problems and provide speculative profits again, temporarily. To me, the bigger barrier to changing things is figuring out how to create such a mobilization rather than what you’d do if you achieved it.

mclaren at 20 – and how does that show that everything will be free?

Random Lurker at 30 – I don’t think your counter-example actually counters our thesis. The PCI went full-blown meliorist, denounced the Red Brigades, and tried to form the Historic Compromise – at this point, can we still describe this as a revolutionary Marxist party?

christian_h – given that social democratic parties were largely out of power when the recession began, how is their failure any different from the failure of revolutionary Marxist parties?

@geo
Although I also don’t see many relevant differences between Marxist historical materialism and, for example, the way Charles Taylor treats culture in the first chapters of Sources of the Self. It’s not that I don’t know modern philosophers think there are important differences between idealism and materialism, for their own purposes, it simply seems to me that what is important and new (at least, to me) in what he says applies at least as well to Marxist thought as to Hegelian. And to me it is neither convincing nor (as it seems to a significant number of people, from very different backgrounds) obvious.

Historical materialism seems obvious in some important way to MacIntyre, regardless of whom he blames for it. I don’t see why it should be presumed to be important to me or to anyone other than a small set of philosophy professors, and doesn’t this suggest that it will soon disappear?

@31: The people wanted to leave Eastern Europe is not an emotional argument. It’s a powerful argument against any social system that those whom it supposedly benefits would rather go elsewhere. The lies of the Southern plantocracy that the slaves were well treated are shown to be lies by every single escapee. That said, the transition into capital was felt by thousands of French peasants to be an assault on the natural order of things, hence the Vendee. The failure of communism was not that it collapsed, but that no one saw anything in it worth defending in 1989. The underpinnings of its legitimacy had vanished. Conversely, capitalism’s legitimation has constantly eroded, and indeed the First World War delegitimized it to the Russian people. How long will it be before at some point the legitimacy of a system where 19% of the people are locked out of an ability to legitimate their existence vanishes?

@Watson Ladd 40
It is not an emotional argument, but it is an argument that has a stronger emotional power than other arguments: for example, one could rationally argue that social democratic policies have nothing to do with the failures of the soviet system, but still the collapse of the soviet system was so spectacular that also social democratic policies had a strong setback from this.

A personal example: my younger sister is very leftish but she would never vote for a “commie” party, because she thinks that “communism” is an old ideology that is today in the dustbin of history. I, on tho opposite, always voted for parties with the hammer and sickle in the logo. A few years ago, we both tried a test found in a newspaper that confronted our opinion with opinion expressed by various italian politicians.
She happened to have a very strong coincidence of opinions (90%+) with the boss of “Rifondazione Comunista”, much higer than my score (somewere around 80%).
However, even if her opinions were very similar to those of the commies, she didn’t vote for them, because she took for granted that they were extremist nutheads.

@StevenAttewell

IMHO, this big split is the consequence of the cold war for first, and of the fall of the USSR later:
During the cold war, in many countries, most of all in the USA, communism/marxism was the ideology of the external enemy. As a consequence I think many leftish people took great pain to show that they were not part of the enemies, and that there was a big difference between meliorist left and the revolutionary left.
After the fall of the USSR, leftish people in many countries took great pain to show that they were not like Stalin, and to do this, they actually endorsed rather “pro-market” positions. Thus the idea of a “non-revolutionary” marxism today seems like an oximoron, while in reality many meliorist parties in the west actually had marxist roots.
Also, related to this but also to the original post, the big problem of “meliorist” leftish parties is that they bought in “keynesianism” as an economic theory. I believe that the reason leftish people like keynesianism is that it gives them an excuse to ramp on state expenditures. But really keynesianism is just another form of trickle down, so that at some point rightish guys learn the trick and ask for tax breaks as a form of stimulus.

G Moschonas In The Name of Social Democracy
Ashley Lavelle The Death of Social Democracy.

Haven’t read the latter; from what I remember of the former, it charts SD policy–

a weakening of the central structure of collective bargaining, abandoning the objective of full employment secured through fiscal policy, giving up a commitment to equality for the mere attempt to moderate the rate at which inequality has been increasing, and losing sight of the most disadvantaged in society.

I don’t remember Moschonas taking up the question of social democratic party policies in regards to global trade, but that is something I would be interested in learning more about.

At any rate, we probably could learn a lot by comparing those two books to Berman’s,

I think that the supply-and-demand anomalies of healthcare, and the coming demographic bulge that will be consuming it, no matter what the costs, pose a long-term (50 year?) challenge to the ideas about proper government size in the predominant neoliberal ideology. (And that will look like a flaw in capitalism, though I think capitalism will fail in another 100 years for completely different reasons.) At the current time, U.S. Republicans are very happy to scare people about the size of government to try to gain an advantage in the next elections, although, except for a few wingnuts, they have no real intention of hurting Grandma. Here is what the politicians are looking at: right now the U.S. public polls 70% or more in favor of the following responses: don’t like gov’t debt; don’t touch Social Security; don’t touch Medicare; more taxes on the rich. It could be that Obama and Boehner are both so sick of the Washington, D.C. dance that they have decided to strike a bargain that alienates their respective wings and much of the rest of the public, all at the same time. They both know, of course, that Pelosi’s side of the House will not capitulate on Social Security and Medicare (nor should they: it is economically unnecessary, it is immoral and it is political suicide), yet without them Boehner doesn’t have the votes because the Tea Party won’t capitulate on higher taxes. So this whole thing has the odor of Obama throwing Boehner a lifeline that both know won’t work, and allows Obama to look like a conciliator (very important with the Independents) and to come out to imply that it isn’t John’s fault, but the rest of the Republicans are completely nuts. The wedge being driven into the Republicans between the moderates and the Tea Party is nearly complete, and Boehner might secretly think it is just as well. Either that, or else everybody in Congress goes along with the deal, promising to take no political advantages against each other — highly unlikely although most of them know that the deal is economically meaningless, because future Presidents and Congresses can do whatever they want (unless they are bound by a new Constitutional amendment).

geo, there is a book titled “Alasdair MacIntyre’s Early Marxist Writings, 1953-1974,” so I’m having to guess what you mean when you refer to the MacIntyre who is the author of a book published in 1978 as “no Marxist.” The passage I referred to in my earlier comment is not atypical of what might have been said by any anti-Stalinist Marxist in 1978 or, say, any time in the succeeding 10 or 12 years.

It’s important that MacIntyre was a Marxist for the first several decades of his career because he presents himself, not least in After Virtue, as someone who’s been steeped in Marxism; who at first thought it would be possible to oppose Stalinism from within Marxism; but who has concluded, using Marxism’s own arguments, that Marxism is invalid. But he concludes the book by condemning Marxism as a whole because Communist governments in Europe fell back on non-Marxist ways of thought: ways of thought Marxism, properly considered, condemns. Anti-Marxists do not praise “the moral substance of Marxism” or condemn Communist governments for ignoring Marx’s strictures against utilitarianism (not unless they themselves already live under Communism, and I thought Western leftists did not believe Kolakowski should be considered an anti-communist at that time).

You seem to have a confusing assumption that people brought up in the anti-communist West are going to have some kind of strong identification with Marxist and even Communist thought, which may be causing some of the problems I’m having understanding you.

bianca — sorry if I’ve confused matters, but I fear pursuing the discussion here might get too far off-topic. If you’d care to email me, my address is on my website.

Barry @ 20 remarked: “As has been pointed out, education is not free – both in the actual education aspects and the credentialing aspects. Housing is not free, health care is not free. Transportation is not free, and given the actions of state and local governments, will be getting more expensive in many ways. Food is not free.”

As for education, check out Kahn Academy, MIT’s Open CourseWare, etc. Because of the unsustainable rate of increase in college tuition, this is increasingly the wave of the future. Credentialing is, alas, very much not free. But if credentialing is the goal, then we’re not talking about education, but instead a disguised form of class sieve,
not so?

As for free housing, in Europe they’ve got squats, while in South America they’ve got a squelettes: half-finished skyscrapers abandoned when the money from the global housing bubble evaporated, now repurposed as living space.

“Squatting is becoming more prevalent and apparent around the world, especially as cities deal with the compounding crisis of economic downturn, stalled construction, and housing shortage. One of the most spectacular examples has to be the Tower of David on Caracas, Venezuela, an incomplete 45 story skyscraper, missing walls, railings, elevators, and provided utilities, that currently has a population of over 2,500 squatters.”

Source: “Tower of David: 45
Floors of Favela Chic,” 2 march 2011, D-Build Blog.

“Health care is not free.” If you’re homeless, even in America, it is. Hospital ERs are legally obligated to treat you. Meanwhile, in Europe, health care is most definitely free even if you lose your job and have to go on the dole. In fact, free health care
for everyone remains such a distinguishing feature of European societies that you have to wonder how Barry could say something as bizarre as “health care is not free.” Incidentally, Obama’s ACA includes billions for a huge expansion of free clinics to provide medical care to the working poor (you guessed) for free.

Barry tells us transportation is not free. Has he never heard of bikes? In the town where I live, by the way, the city council just abolished all bus fares. Yes, taking the bus is now 100% free. For longer trips, there’s online rideshare websites. Similar websites also let people crash at folks’ homse and apartments overnight for
free while they’re traveling.

As for the claim that food isn’t free: freegans. Also, food banks. Depending on your income, food is very much free.

While these examples are somewhat facetious, the basic point isn’t: alternative non-market non-capitalist modes living are increasing exponentially, courtesy of the internet + smartphones + rapid replicators (3D printers) etc.

On the other hand, if Barry’s rebuttal rests on the underlying larger claim that “all these things like health care and housing and food require a medium of exchange in a functioning capital-based economy,” then Barry’s point is a vacuous tautology and must be dismissed out of hand. For, after all, that amounts to saying nothing more than “in a market-based economy using capital as a medium of exchange, goods and services require a market and capital as a medium of exchange.” In short, under our current economic arrangement, we have set things up to use our current economic arrangement. Very impressive, and 2=2. That tells us nothing. The plain fact of the matter is that economic arrangements remain a social rule-set, and, as such, they can easily be changed. Indeed, in other societies and other eras, the social rule-sets governing the economy have differed radically from what we know as “market capitalism.” In the middle ages, for instance, it was a sin to charge interest for money, so for the most part it wasn’t done. Medieval cathedrals were built by volunteer labor. Hunter-gatherer societies have little sense of a market and no interest in capital. Commons areas like open fields where everyone could graze their sheep or community wells from which everyone could draw water lasted from the middle ages into the 18th century, and had nothing to do with market capitalism. Moreover, throughout economic history, goods and services which had once required intensive capital often became free: books were fabulously expensive during the middle ages and are now essentially free (google “[name of book] epub torrent,” or, if you prefer to abide by the law, visit your local library).

So Barry’s essential claim that the goods and services our society generates allegedly require capital and markets to exist simply doesn’t wash, since there exist many possible social arrangements for generating goods and services in a society. Market capitalism is only one of them.

To add to David Kaib’s rebuttal of Andrew F’s arguments, on a macro sense what seems to have happened sometime in the 1970s is that the elites of the developed world unwisely concluded that their economic future lay in a form of mrcantilism 2.0, best summed up in Alvin Toffler’s 1970s book The Third Wave. Toffler’s basic thesis was that the global economy had moved from agrarian economics to
industrial economies and was now shifting to knowledge economies. Britain had practiced mercantilism 1.0 during the 18th and 19th centuries by using its armies & navies & colonial administrations to force third world nations to sell the Brits raw materials below market cost which Britain then turned into overpriced manufactured goods which it sold back to its colonies above the prevailing market cost (this was the cause of the American revolution: essentially, Britain forced Americans to buy wildly
overpriced British tea while making it illegal for American colonists to make their own). In the 1970s, America seems to have decided to practice mercantilism 2.0 by using its armies & economic leverage to force third world countries to export knowledge work dirt-cheap which Americans would then turn into overpriced finished goods (Adobe PhotoShop, Microsoft Windows 7, U.S. movies on DVD, etc., etc.) which the U.S. would then sell back to the rest of world far above the
prevailing market price in their countries.

Alas, the American elites reckoned without the advance of technology. The internet + big hard drives + cheap recordable DVD-Rs made it easy for people in the third world to download and burn to disc any intellectual property they wanted. Despite increasingly frantic efforts in the U.S. to make downloading illegal, as Cory Doctorow points out, the internet keeps getting faster and disc storage keeps getting cheaper. So there is, practically speaking, no way to make mercantilism 2.0 work. Thus America’s current economic dilemma.

Another even more important factor wrecking market capitalism, however, involves limits on planetary growth.

Scientists now predict that all sea life will be fished out of the oceans within 40 years. Peak Oil is going to end globalized free trade, because it will soon become far too expensive to ship finished goods or raw materials around the world when oil rises to $500 a barrel. With global warming and planetary resource depletion (copper, rare earths, fresh water, you name it), the 21st century will be an era in which recycling everything will become much more important than profits.

I contend that market capitalism cannot work in a global economy where it’s far more important to recycle than to expand your economy, because if you don’t recycle, you die. When making a profit becomes a much less important consideration to a corporation than avoiding roasting ourselves with global warming by burning coal/oil/natural gas, profit-based market economies will disappear. By definition, if profits are insignificant compared to other issues (such as making buildings out of 100% recycled materials, or generating electricity by producing 0% greenhouse emissions), then profits will stop being important in the economy. If that happens, market capitalism as we know it will transform itself into something else — we know not what, something we don’t have a name for yet. Not communism, not socialism, not fascism.

As for the various assertions that the current economic disruptions represent mere blips in the curve of ever-expanding market capitalism…that’s Larry Summers’ argument, and like, Larry Summers, it’s deeply stupid. Summers dismissed criticisms of market capitalism in a recent interview with the blithe remark that “every time the global economy runs into a rough patch, people who don’t like capitalism claim that capitalism as a whole is breaking down. But this has never happened.” Summers typically fails to realize that he is parroting the exact same failed and futile defense deployed by Soviet apparatchiks in the waning days of the Soviet Union. Communism was the best system ever invented, the apparatchiks claimed, and communism could never fail: it could only be failed by imperfect implementation.

This Larry-Summers-style argument that current upheavals are just a momentary glitch in the ever-onward ever-upward progress of market capitalism is a deeply stupid argument because it falls into one of the oldest logical fallacies — namely, it is unfalsifiable. The Soviet apparatchiks could never be proven wrong in their assertion that communism could not fail but could only be failed, for any example of the USSR economy failing could neatly be explained away by blaming the implementation rather than the underlying failure of communism as an economic system. Because this argument contained no failure condition, it was unrebuttable and thus entirely vacuous and devoid of content. Like the claims of dowsers and astrologers which never contain any testable failure condition by which we can once and for all falsify the hypothesis, the claim that the current global economic turmoil is just a transient glitch in an essentially stable workable system lacks any testable failure condition by which we can once and for all falsify the hypothesis that market capitalism is a stable viable economic system.

So let’s ask: under what conditions would an objective observer be forced to conclude that market capitalism as a whole represents an unworkable system that must be junked?

Hint: if your answer is “under no conditions,” then your advocacy of market capitalism is based on fanatical ideology rather than logic and facts, and we need not take you seriously. Every hypothesis must have some failure condition by which we can test it, if the hypothesis is to mean anything. Otherwise it’s just astrology or dowsing under another name (“you didn’t believe strongly enough in the dowsing rod, that’s why it didn’t work!”).

Market capitalism seems to me to have a number of failure conditions which we are rapidly approaching. The first failure condition involves situations like fishing all the sea life out of the oceans. You cannot keep growing the economy forever because there are global limits. If you fish all the sea life out of the oceans, the fishing industry disappears: that’s the end of market capitalism for the fishing industry, period. Market capitalism no longer works under those conditions of endless growth.

Another failure condition for market capitalism involves finite resources like high-grade copper and iron ore or rare earths or fresh water or petroleum. The entire world supply of indium, for example, would not suffice to produce enough solar cells to power the United States. That’s a failure condition. It means recycling will soon become much more important than expanding the economy. Market capitalism no longer grows endlessly under those conditions, so things must change radically in our economic setup.

A third failure condition for market capitalism involves pollution, including greenhouse gasses. When profit becomes much less important than avoiding roasting yourself because download Los Angeles has hit 135 degrees Fahrenheit and you have to bike 20 miles to work because gasoline now costs $75 a gallon, that’s a failure condition for market capitalism. Letting the market “work it out” isn’t an option under those condition, because the market will work it out by letting vast numbers of Los Angeles residents die of heat prostration.

A fourth failure condition of market capitalism involves the human carrying capacity of the planet. We’re already beyond that carrying capacity. It will soon become much more important to control population than to endlessly grow the economy, particularly when growing the economy means drying up the snow pack in the Himalayas that feeds two of the greatest rivers in the world, the Yangtze and the Ganges, and when those two rivers start to dry up, two billion peasants will starve and die. At that point, conventional market capitalism no longer works. It’s time for something different.

@26 Andrew. I’m going to argue that the case that economies can return to trend (normal), with some of the same arguments as McClaren @56. For the past roughly two hundred years we have been able to grow the world economy through several very general means. First is the accumulation of built capital. Secondly we had the accumulation of knowledge as a form of capital. But, there was a third leg to this stool, we could expand the economy by simply digging up more stuff (or fishing just a little further from shore). Now the third leg of the stool is rapidly breaking. Perhaps we can still make forward progress via the first two legs of the stool? But, its clearly going to be much more challenging then we’ve grow accustomed to (at a minimum). And we had a further advantage, a historically very unusally stable climate, along with nearly stable sealevel. Now, that is shot as well, so we will have yat another climate/weather headwind to add to the resource depletion one.

The really key thing, IMNSHO, is to figure out how to transition the present economic/social/governmental paradigm into something that will work in this new harsher reality. And this must be accomplished against formidable reactionary forces. We see for example oil price spikes being blamed on peak-oil theorists/popularizers. [See no shortage, and the price can remain comfortably low].

In a physical sense, I’m not as pessimistic as McClaren. Downtown LA won’t reach 135F, even if the globe sufers say 7C of warming. Personal transport won’t reach the equivelent level of $75/gallon (i.e. the combination of electric transport, plus slower speed, and perhaps lower safety standards can get transport affordable. Indium shortages won’t stop PV short, but may cost some efficiency in future products as inferior materials will be substituted. Global trade won’t grind to a halt, because of expensive fuel, it can travel slower, and begin using wind power. So it may become more expensive, and slower, but it won’t vanish. The real dangers/challenges are political. Overcoming the temptation to scapecoat rather than implment actual solutions. And beggar thee neighbor via for example stealing his resources approaches, instead of learning to get by with less. Our kids are certainly going to be living in interesting times.

The plain fact of the matter is that economic arrangements remain a social rule-set, and, as such, they can easily be changed.

Easily?

I want to make a point here about the economy. Some people think we’re losing jobs because we’re entering a new age lacking scarcity. This is pretty silly since as little as a few years ago there were no problems with unemployment. Others have mentioned that employers are determined to only hire internationally now. This is also wrong. There are plenty of employers hiring domestically right now. We’re talking about macroeconomics here. You can’t use the will of a few actors to describe the kind of phenomenon you’re trying to.

I have a different explanation: Keynes requires an update along the lines of what MMT is arguing. We don’t need permanent stimulus, but we need massive government debt to fund the desire globally to backstop central banks with federal dollars. The dollar is regarded being treated like gold and the only way for the balance sheets to work out is for government’s like China’s to get the dollars from the US government or from US savers. This problem could be held off for a while with a credit fueled housing bubble, since it drove up the appearance of personal savings in housing value and kept domestic consumer demand strong, but people will also generally need decent savings accounts to support asset prices in real estate or the stock market.

Unfortunately, our government is being run by economic ignoramus. They literally don’t understand anything. That high unemployment calls for more deficit. That low inflation and low bond rates indicate that the deficit isn’t starving the economy of anything or impacting market confidence. That the exogenous fact of China’s preference to hold a trillion dollars has to be acknowledged in policy.

@StevenAttewell 63
Touchè

Well, those of you who are socialists, it sounds kind of defeatist when you’re saying that capitalism is doomed because there isn’t enough fish left in the oceans. So, what if there was enough fish and oil, then what?

That’s Madison’s position, but it’s not determinative. The basic issue is this, Congress has required that the Executive spend $X

Required or authorized?

Okay, Boehner has not accepted Obama’s grandiose offer, because it contains tax increases. Right now, the comments to the U.S. newspapers are going 3 to 1 against the Republicans, with that last 25% saying “No more taxes, shut it down” (i.e. the Norquist Tea Party). However, the Tea Party predominates in the Neanderthalish comments to the Wall Street Journal, perhaps because the whole operation has entered the Murdoch-Fox universe and anybody with a brain pretty much ignores the paper — an astonishingly quick turnaround in U.S. opinion upon a newspaper that was once revered, except for the op-ed pages which had been obvious trash for decades, and which your less-than-humble reporter predicted two years ago in these very comments, https://crookedtimber.org/2009/05/07/murdoch-wants-to-charge-people-to-read-what-the-pr-industry-spews-out/#comment-275011).

I am also sticking with my other theory that both sides in the debt talks had foreseen Boehner’s step, since they have been banging on this for months now with no headway, and anybody else would, too. The only logical conclusion is that the mainstream Republicans realized some time ago that the Tea Party has become an out-of-control Frankenstein monster. The next step, after Obama finishes today’s 6 pm EST debt talks, is for the President to come out and say, “Okay, we offered everything, and they won’t deal — we are going to have to shut it down, and that means Social Security checks and military pay, too.” Putting it squarely on the Tea Party Republicans, whom we can all then pitchfork into the sea. And Boehner will have secretly shrugged his shoulders.

On global warming, someone wrote above that the world could withstand a 7-degree increase. No.
This is terribly wrong. Even if that is Fahrenheit. It would be ecological death, due to insufficient ecological (and evolutionary) time to adjust to it. But I think the biggest danger at the moment is the possibility of an unexplained spike in temperatures for one or two years, that shuts down most of world agriculture — and with it, shuts down human civilization. People will still be arguing about the causes afterward, and the sources of natural variation — that is, if anyone has two years of canned goods and survives the bloody mayhem. Scientists and economists have responded this scenario by saying that itcannot happen, though they cannot say why. I am afraid that is not very reassuring, considering that the temperature records before a thousand years ago are very gross and spotty indeed, yet evidence of astonishing, frightening temperature swings have been accidentally found. And considering their batting averages on other complex systems events, so far.

It is important to distinguish the problems of the economic system now, with its eventual change over much longer periods. Right now, we don’t know whether technological change and resource substitution can continue to stay ahead of resource depletion and population growth — there is no scientific law that says it must go one way or the other, and although technological change in energy systems seems to be happening much faster than most people realize, the observations of logarithmic growth’s disastrous effects in other complex systems should make everyone very, very concerned. Right now, globalization is dislocating labor in the developed countries more quickly than ever, while technological change is making people more obsolete and their educational requirements are rising — leading to more volatile careers, more developed inequality, and possibly more structural unemployment. Right now, the financial industry is in the saddle, directing government policy and taking most of the income growth, although much of their gambling does not lead to commensurate real physical capital investment, and their use of money as a commodity is crossed over with the use of money as a medium of exchange that is stored in their banks, so we have to keep bailing them out, large or small, once every few years it appears.

However, the reasons why capitalism will be transcended within a hundred years are medical and biological. We are quickly heading into life extension and cognitive enhancement. People are going to live a very long time if not forever, and they are all going to be equally smart. Life extension eliminates the only truly scarce resource, which is human time. That changes a fundamental premise of neoclassical economics. Beachfront property is also scarce, but we will manage. Secondly, cognitive and intellectual enhancement will virtually eliminate differences among people that are presumed now to justify economic distinction — and it will also eliminate greed, which is a mental disease, no matter how long humans have suffered from it. We are already half the way cured, on that one. The elimination of greed-disease changes another fundamental premise. We are not headed into a steady-state, but an even keel.

Wow. what a loooooooooooooooong post.

Let’s start with education – yes, there are far more resources available than when I was young, but they are of most use to those who already have an education, they are for limited items (try getting a good ME degree online, or a good bio degree). Credentialling is part of education, for better or for worse (IMHO, mostly for worse). The reasons are obvious, and I haven’t heard too many people talking about entry-level ‘grads’ being hired to start in a field who were not formally credentialled.
Strike 1.

Transportation – I live in a city which has a walkable and bikeable downtown; one could function for a loooooooooong period of time by bike, foot and the odd busride. This few square miles of non-care-needing haven is, of course, not representative of the region, let alone the state, let alone the parts of the US where 75% or more of the people live. Strike 2.

Medical care – the fact that ER’s do not have to offer medical care, but only stabilization under limited circumstances is rather well know. Strike 3.

Just to hammer in the point, I’ll continue to shelter – squats?!? That’s what you’ve got to offer for shelter? Squat for a year with a child, in a climate which can be brutally hot and/or cold for parts of the year (i.e., most of the USA), with the police rousting you every so often, and come back to me.

Lee @70. I didn’t say +7C wouldn’t have dire consequences, just that 135F in downtown LA wouldn’t be one of them. Clearly we have the potential any year now, for global food supply to come up far short of need. Thats far different however from the near universal starvation scenario you posit. In fact we could say that even then its primarily a distributional problem, i.e. if the calories consumed by rich world cattle were redistributed to poor humans, we could avoid mass starvation. But, our distributional paradigm is capitalist food chasing money, not food chasing need, and short of a strong one world government, no one knows how to change it.

Aulus Gellius@23

Interestingly enough, you were not off topic. The accusation of sacred prostitution and lending money at interest was mud slung at the adherents of Isis by, you guessed it, third and fourth century Christians. As a long term student (admittedly amateur) of early Christian politics and the rise of the concept of heresy, the modern American right fills me with decidedly unholy glee. Sort of like discovering that intellectual coelacanths still, surprisingly exist. The tactics are surprisingly similar, and the Platonic framework almost totally unacknowledged. Bart Ehrman is very accessible, but for my money John Julius Norwich’s Byzantium provides the most witty and lucid account.

http://www.declineoftheempire.com/2011/07/this-time-really-is-different.html

It also seems that the Tea Party and the likes of Paul Ryan and John Cochrane are being bankrolled by multi billionaire hedge fund managers who want to make sure that Obama is stymied at every step and thus fails so that he won’t have legitimacy to carry out some minor reforms of the financial industry. There was a crazy piece in Talking Points Memo about the UChi economist, the bat shit crazy Congressman and a hedge fund manager sharing some expensive wine at some some swank Beltway restaurant.

As for the claim that gasoline won’t reach $75 per gallon, what facts and logic do you base that on? We’re headed for peak oil. The world’s available petroleum reserves are finite. What new developments are going to reduce the price of petroleum in the near future? Please lay them out for us so we can all understand why the price of gasoline won’t continue to increase without limit as global petroleum reserves draw down.

Well before $75 per gallon, it would be cheaper to drive a Nissan Leaf, even without tax credits, even charged up only on photovoltaic electricity. Taking the Leaf at MSRP $32,780, it transports you 5 kilometers per kilowatt hour, and PV energy runs as much as 40 cents per kilowatt hour*, for a fuel cost per kilometer of $0.08.

By comparison, at $75 per gallon of gasoline a Ford Fiesta, 40 MPG, at MSRP $13,200 has a fuel cost per kilometer of $1.17. After 18000 kilometers driven the Leaf has made up its higher sticker price in lower fuel costs alone. Its battery pack is warrantied for 8 years/161000 kilometers. I’ve read repeatedly — though I don’t know if real world testing bears this out yet — that pure electric vehicles should also have lower maintenance costs because they are mechanically simpler.

ICE vehicles may try to close the gap with lower sticker prices and/or improved fuel economy, but electric vehicles aren’t standing still either. The price decline of renewable electricity and batteries has been slower than I like, but still impressive over the past decade with signs that PV electricity in particular still has plenty of cost reductions in sight. According to the National Renewable Energy Laboratory, PV generation capacity deployed on existing rooftops alone — no additional land or long-distance transmission needed — could provide as much energy as all the USA’s nuclear reactors combined, about 22% of 2006 US electrical consumption. Their numbers are based on relatively low conversion efficiency (13.5%). Commercial silicon PV can already do over 20%, and unlike thin-film technologies there’s no conceivable shortage of silicon.

In the end I don’t really expect gasoline to stabilize at $75 per gallon or more, mostly because it will eventually be less expensive to manufacture methanol (from water, CO2, and electricity if necessary) and burn that directly or convert it to gasoline than it will be to get the last dregs of natural crude oil out of the ground and refine it. But even if the $75 per gallon price were real it’s not quite the crisis you would imagine by looking at last month’s gasoline spending and multiplying by 20, because people are going to start economizing and substituting well before gasoline consumes 90% of household budgets.

As for transient high prices as a result of wars, natural disasters, sudden revelations about fudged oil reserve figures, etc. I don’t know if gasoline prices may hit $75 (in constant 2011 dollars). My only prediction is that prices so high will not last, one way or another.

*This is at the high end of estimates for costs in small-scale systems. The low end for small systems is $0.25 per kilowatt hour.

mclaren: “The evidence seems clear: prior to the advent of the modern university, isolated researchers like Cavendish did work at PhD-equivalent levels without the need for a modern credentialing program.”

There is a difference between the odd incident and mass supply.

More seriously, mclaren is missing the fact that all these non-market ideas she loves are essentially parasitic on a market-based economy, and – far from her forecasts of exponential growth – this will limit them to serving only a small number of people.