Secular stagnation and technology

by John Q on December 1, 2015

One of the problems I have with the term “secular stagnation” is that it implies condition relevant to the very long term, say, the coming century. Such long run conditions presumably have to arise from fundamental causes in demography and technology. That’s the kind of argument that Piketty makes with his r > g theory of rising inequality. There are some good arguments for the view that the depressed state of the global economy, and particularly that of the more developed countries, can be explained in this way. But it shouldn’t be implied in the name of the problem. I’ve argued in the past that technology, specifically the Internet, doesn’t explain growing inequality,

The key quote from that New Left Project article, responding to Tyler Cowen’s The Great Stagnation

The global crisis stopped economic growth, not only in the US, but in countries far inside the technological frontier like Greece; while it had hardly any impact in, for example, Australia, which avoided the initial financial crises and used Keynesian fiscal stimulus to offset shocks flowing from the global economy.

A further reason for scepticism about technological stagnation is that this explanation has been advanced in recessions and depressions ever since the beginning of the capitalist business cycle in the nineteenth century. Such claims represent the flipside of the equally common claim, made during every period of sustained expansion, that the economy has entered a New Era of untrammelled growth. The most recent episode of this kind was the ‘irrational exuberance’ of the 1990s, fuelled by optimistic claims about the potential economic implications of the Internet, which was opened to commercial use by the US Congress in 1992, and by capitalist triumphalism exemplified by Fukuyama’s The End of History.The collapse of the ‘dotcom’ bubble was softened by the housing bubble that developed shortly afterwards (again, not at all a new phenomenon), but the result was only to worsen the inevitable crash in 2008. The similarity of these events to previous bubbles and busts is good reason to doubt that they represent, or that they have inaugurated, a new phase in the evolution of capitalism.



SamChevre 12.01.15 at 1:44 pm

A question–I really don’t know the answer here. How much of Australia’s good performance is related to its status as a commodity exporter during a serious commodity boom?


John Quiggin 12.01.15 at 2:01 pm

In the immediate aftermath of the crisis, commodity prices fell sharply. By 2010, fiscal stimulus in China kicked in to reinforce the effects of domestic stimulus. The boom ran pretty strongly until about 2012, but it’s well and truly over now. The impact on the broader economy hasn’t been as big as a lot of people think. Mining doesn’t employ many people (the construction phase employed a few more). Most of the capital is either imported or owned by handful of very wealthy people, so the drop in income doesn’t have such a big effect on the average household.


Brett 12.01.15 at 3:32 pm

I’m glad you pointed out that the tech stagnation folks come out of the woodwork every time there’s a bad recession (or even any recession) to peddle their wares. I still remember the version of it that happened before the late 1990s boom in the US, with Jeremy Rifkin’s The End of Work.

I was looking at this:

The primary thrust of any strategy under current circumstances must be an attack on the wealth and power of the financial sector and the 1 per cent (for practical purposes, these may be treated as one and the same). That means more progressive taxation, an increase in total levels of taxation and expenditure and a substantial tightening of regulation of the financial sector, with the aim of making that sector much smaller and less rewarding than it is at present.

The political economy of this doesn’t seem good – look at what happened with Hollande’s 75% millionaire’s tax. You either need another World War 2 level reshaping event or the rise of strong progressive governments across the developed world to coordinate their increases in tax policy and massive shrinking of financial sectors.


reason 12.01.15 at 3:52 pm

John Q
I happen to agree with you on this one. I think we have reached the limits of the strategy of increasing leverage and refloating the middle class via government spending in one form or another is the best answer.

But that doesn’t mean that I think there are not things to worry about in the future from automation – past performance is no guarantee of future returns – and from resource shortage or degradation. I’m not a techno-optimist, because technology follows its own interests, not those of ordinary people. We have to explicitly choose to build a sustainable and inclusive society, it won’t necessarily just happen.


MisterMr 12.01.15 at 4:01 pm

Previously commented as Random Lurker.

I have some problem with the concept of “secular stagnation”, but first this:

“The global crisis stopped economic growth, not only in the US, but in countries far inside the technological frontier like Greece”

How is Greece “far inside the technological frontier”? Do they not have iPhones in Greece? I think that there is a big difference between a country where high technology is not available (say, soviet countries) and a situation where most high tech production is made in some place (e.g. Germany) and in other places only low tech production happens. In the second situation we just have a core and a periphery, but the periphery is not “underdeveloped”, it is just a geographical distribution of industry.

Second, about “secular stagnation”, as far as I can understand the theory behind secular stagnation is this: in boom times, a capitalist economy is not static, but expands continuously building new factories etc.
Let’s say that the total product (NDP) of the economy is 100$; of this, 70$ goes to workers (who consume everything), and 30$ goes to owners. Owners consume only 20$ of the 30$ that they get, because they have an higher saving preference than workers, thus the economy is producing 100$ of stuff but consuming only 90$: underconsumption crisis!
But the owners actually reinvest the last 10$ by building new factories, hence the last 10$ become the wages of the workers who are building the additional factories, and the consumption crisis is avoided, however in the next iteration of the process more factories will be active, more workers will have to work, and more new factories will be added.

If for any reason new factories are not built, an underconsumption ensues, unless the 10$ that the owners are saving end up financing consumption, hence an increase of total debt can avoid an underconsumption crisis for a while.

The idea of secular stagnation is that, for technological reasons, no new factories are built, and thus there is either an underconsumption crisis or a continuous increase of debt.
But, what are these technological reasons? Some hypothesis that seem bunk to me:

1) Consumers are so satiated that they don’t want to buy new stuff (news to most inhabitants of the world);
2) New technologies create an economy that is less capital intensive in proportion to output (I don’t see this);
3) There are no new technologies so that old capital goods don’t become obsolete, thus no new factories are built (hard to prove this);
4) We are just too close to maximum production to create new factories (but this should happen always unless we assume that up to the 70s the economy was always below potential, that sounds a bit strange).

However, it seems to me that there is also a non technological reason that might cause an excess of savings relative to the new factories built, and it is:

5) If the wage share of the economy falls, the share of NDP that must be absorbed by new investment (or channeled into consumption by creating debt) rises, because this “warranted investment” part depends on the profit share.

Thus a low wage share can cause by itself the effect of a “secular stagnation”, without the need for weird hypothesis about technology (plus we know that the fall in the wage share is a real phenomenon).


reason 12.01.15 at 4:21 pm

what you wrote is pretty correct for a closed economy, but needs some adjustment for an open economy (i.e. the consumers of new production could be foreigners). And for government consumption/investment for that matter.


T 12.01.15 at 4:21 pm

The reference to secular stagnation and technology is more insidious under the current situation. That is because it’s not being used primarily as an explanation of lower growth, but as an excuse for increased in inequality.

That’s why I took such exception to dsquared’s defense of the finance industry as mere bystanders. It’s not only factually incorrect, it undermines corrective action. If, in fact, we live in a oligarchy dominated by finance (and many mainstream polysci types think we are) then gov’t policy is merely a reflection of the oligarch’s preferences. Blaming the gov’t is really blaming the oligarchs. And fixing the gov’t is really breaking up the oligarchy.

The whole project of those captured by finance is too make our troubles unrelated to policy: there’s nothing we could have done about the decline in growth or the rising inequality. There are other alternative exogenous explanations for our problems than technology, but typically the authors have the same goal — the situation is not of our making. Cowen is an extreme example of this type of troll and worth every penny the Koch’s pay him.


reason 12.01.15 at 4:26 pm

The situation not being of our making (it is cold today) does not imply that there is no policy solution (we can put warm clothes on).


MisterMr 12.01.15 at 4:37 pm

@reason 6

But the world as a whole is a closed economy, and the wage share is falling more or less everywhere (in China, for example, real wage rose because of rising productivity, but as a share of the economy, they fell).

@T 7
But why specifically financiers? How are financiers more guilty than, say, German or Chinese manufacturers that increase production without increasing wages?


T 12.01.15 at 4:43 pm

reason — If the secular stagnation argument goes to an exogenous decline in productivity, then it’s not so simple. As Krugman noted in a recent column, we don’t know a lot about productivity. We do know that the neoliberal agenda did not increase productivity in the US. We know that the decline in productivity was coincidental to increased inequality.


T 12.01.15 at 4:48 pm

I’d certainly argue the Chinese exports were an effect, not a cause. How did they become an export platform? How did they get into the WTO?


John Quiggin 12.01.15 at 5:04 pm

@5 They have iPhones in African countries where the majority of people live on $2/day or less. And even very poor people have phones. Being on the tech frontier needs a lot more than having access to markets for advanced tech.


Gary Othic 12.01.15 at 5:47 pm

Has anyone stumbled across someone making the argument that secular stagnation is in fact the final crisis of capitalism – that is Marx’s idea that eventually the system will run out of its productive potential? I haven’t found anyone making that argument, which I find strange, but I’d be interested to see one.


MisterMr 12.01.15 at 5:54 pm

@John Quiggin 12
I’ll qualify more my point on Greece.
In many countries there is a part of the country that is highly industrialized, and another that is more rural. for example in Italy the north is more industrialized than the south, while in the USA I think that the more industrial area is on the coasts.
If we take Europe as a whole, the industrialized area is the center.
It would be strange to say that rural America is less technologically develop than other parts of the USA, it is more common to say that there are technological hubs and a periphery.
I think Greece in Europe is in a similar situation of rural USA.


Waiting for Godot 12.01.15 at 6:10 pm

Brett @ 3 “You… need another World War 2 level reshaping event … AND the rise of strong progressive governments across the developed world to coordinate their increases in tax policy and massive shrinking of financial sectors.”

There I fixed it for you. It appears to me that we already have a world wide reshaping event in global climate change. And the call for the rise of strong progressive governments and a strategy for achieving them was made in 1848 in response to the reshaping event of the industrial revolution and the rise of capitalism. I guess the point for me is why are our best and brightest intellectuals and teachers, as represented here, not arguing about how to achieve the goal of strong progressive governments. Instead, we have stultifying bickering about historical minutia or almost “scholastic” arguments about how to tinker with existing political and economic structures in order to preserve what is already lost.

I read the postings on this site because I believe that intellectual discourse and those who spend their life’s energy trying to wring truth out of history can lead us to answers…I find however that there is no agreement on the questions.


Will G-R 12.01.15 at 7:16 pm

@15 In the age of neoliberalism, what does it mean to have a “strong progressive government” except as a way “to tinker with existing political and economic structures in order to preserve what is already lost”? Assuming that the strong progressive governments being referred to here are the sorts of Keynesian social-democratic welfare states that had their Golden Age in the West roughly from 1945 to 1973 and have been in decline ever since, how is striving for their resurrection (as e.g. Piketty does in calling for progressive global wealth taxes and the like) not striving to preserve what is already lost? It’s not enough just to posit that Keynesian welfare states are necessary in order for a stable capitalist economy to continue; if returning to Keynesian welfare states is politically impossible, the conclusion might just as well be to throw in with @13 and the like.


geo 12.01.15 at 7:20 pm

Gary @13: You might start with and with Elliott Eisenberg’s “Living with Crisis” Facebook page:


Petter Sjölund 12.01.15 at 7:53 pm

And of course Paul Mason’s Postcapitalism (Amazon UK link).


Spinoza is my Co-pilot 12.01.15 at 7:55 pm

Waiting for Godot. My thought also – the world wide reshaping event is (pretty obviously, I believe) global climate change.

However, I expect the exact opposite of a “rise of strong progressive governments” to occur. The dire effects of global climate change will instead, I believe, lead to the rise of fascist and extremely belligerent governments across the world, very much including the developed world (and right here in the good old USA, too).

In an alternate reality without global climate change I’m not sure I’d even give 50/50 odds of “a rise of strong progressive governments” in the near term primarily because the rightwing variety is far the easier path to take, not least due to the fact that rightwing governance is the preferred mode of most oligarchs/plutocrats. We’re only Hillary Clinton losing next November away from near-total rightwing political dominance here as it is.

In actual reality, where global climate change is happening? A very grim future, with police states and military actions to dwarf the 20th century’s becoming the norm as humanity fights massively within and across borders to secure dwindling resources, especially the basics of food and water. Wage inequality and a bloated, unproductive financial sector will pale by comparison.

Darkly dystopian, sure. But the world is not going to sufficiently cut back on fossil fuels until it’s far too late (I think it very well may be already) and I don’t see how we get through the coming decades without half destroying ourselves dealing with the deleterious effects of global climate change. What’s on the other side of that, say 50-75 years from now? I don’t know – A Canticle for Leibowitz, maybe? A rise of strong progressive governments? It would be pretty to think so, but…


Collin Street 12.01.15 at 7:57 pm

It would be strange to say that rural America is less technologically develop than other parts of the USA, it is more common to say that there are technological hubs and a periphery.
I think Greece in Europe is in a similar situation of rural USA.

Next time you think you might want to make a point, stop and ask yourself: “if my point is accepted, what difference will it make to how people handle the situation?”.

As a piece of general advice: the terminology applied to a situation, per se, by-definition has zero impact on what it is and thus on the appropriate response. Unless your change of terminology arises out of a reanalysis of the substance rather than the classification it’s an exercise in pointlessness, and you shouldn’t do it.

Putting that back in context, whether you describe it as “inside the technological frontier” or “on the technological periphery” makes not a damned bit of difference to the case in hand or to the conclusions therefrom. There is technology that is in use in australia that is not in use in greece: the conclusions stem from that, and not from the categorisation of the difference as “frontier” or “periphery”.

What you are doing is what’s called “quibbling”. It doesn’t make the world better, and you should stop.


dsquared 12.01.15 at 8:02 pm

I went through all the candidate explanations for a UK thinktank earlier this year. Unaccountably, the editor who had to go through removing two dozen references to “smurves” did not hunt me down and kill me. NESTA is a great think tank.


Gary Othic 12.01.15 at 8:34 pm

@Geo & Petter

Thanks for that – the links look interesting. I was aware of Mason’s book but didn’t realise he addressed it in those terms. Will need to put it down on my list of things to read.


Ronan(rf) 12.01.15 at 9:13 pm

Wolfgang Streeks new book ‘Buying Time’, which makes a similar argument (or at least comes from a similar perspective), might be worth looking at




Waiting for Godot 12.01.15 at 9:35 pm

Will G-R @ 16

“Assuming that the strong progressive governments being referred to here are the sorts of Keynesian social democratic welfare states that had their their Golden Age in the west roughly.. from 1945-1973…”

I make no such assumptions. Whatever evolves from these strong progressive governments will be the product of total participation in democratic processes whereby the experience of all inform the result.


Waiting for Godot 12.01.15 at 9:42 pm


“…the experiences of all inform the results.”


bob mcmanus 12.01.15 at 11:09 pm

13: From the Wolfgang Streeck linked at 22. I like Streeck’s books, incidentally.

While we cannot know when and how exactly capitalism will disappear and what will succeed it, what matters is that no force is on hand that could be expected to reverse the three downward trends in economic growth, social equality and financial stability and end their mutual reinforcement. In contrast to the 1930s, there is today no political-economic formula on the horizon, left or right, that might provide capitalist societies with a coherent new regime of regulation, or régulation. Social integration as well as system integration seem irreversibly damaged and set to deteriorate further.

The far Left has almost given up searching for The Revolutionary Subject.

For grins, I’ll post part of Alexander Galloway’s Splenglerish chart (sorry, not in chart form) from Protocol.

Era; Machine; Energy; Disciplinary mode; Control diagram; Virtue;Active threat(resistance); Passive threat (delinquency); Political mode; Stratagem; Personal crisis

Modern: Oil, steam,nuclear; Wage labor; Efficiency; Bureaucracy; Presence, centralization,efficiency; Sabotage, treason; Red tape, entropy; Disruption; Territory, deterrence; Pain, emptiness

Postmodern,Empire: Computers; Immaterial labor,information; Debugging; Protocol; Fidelity, pattern,algorithm; Mutation, terrorism; Randomness, noise; Disturbance; Security, containment; Terror

The future: Bioinformatics; Life; Therapy; Physics; Openness; Irrationality; Silence, nonexistence, irresponsiveness; Hypertrophy; Peace; Contagion, eruption

We define mechanism, not policy.
—tim berners-lee, Weaving the Web


MisterMr 12.02.15 at 12:08 am

@Collin Street 19
I don’t think this is just a problem of terminology.
In short, I think that there are two different situations:
1) some countries, like China for example, were out of the world capitalist economy until recently, they have a very outdated technology, and are currently playing catchup. From the point of view of secular stagnation, there is still growth to be expected there.
2) some other countries, like Europe taken as a whole, are already at the top of technology scale, hence we cannot expect catchup. In these countries however, for whatever reason industries are not evenly distributed on the territory, but tend to be clustered in some limited areas. For example if we take automakers, Europe as a whole produces already a lot of cars, but those automakers are clustered in central Europe. If Greece has to have a new automaker, this new automaker will not come as an addition to older ones, it can only grab market share from other European automakers, so there is not aggregate growth to be expected, which from the point of view of secular stagnation makes a lot of difference.
Hence from my point of view Greece is not behind of Germany on technology, it just happens that technology is already at the top in Europe as a whole but some areas of Europe get more advantages from technology than others.
Another example is Google, that in some sense is at the top of technology. But the scale of production of Google is so big that it makes no sense to expect every nation to develop its own Google. But as Google has a worldwide scale, it would be strange to say that the USA are more advanced than France or Greece because Google is located in the USA and not in France or Greece. This is not a problem of terminology, the point is that we don’t expect France or Greece to develop their own Google, and for the same reason we shouldn’t expect Greece to develop its own automakers, as automakers scale of production already surpassed the size of all European countries.


LFC 12.02.15 at 1:26 am

T @10
We know that the decline in productivity was coincidental to increased inequality.

In the U.S. context, inequality in income and wealth has been steadily increasing since c. 1979. (Fred Harris, who ran for president on an anti-inequality platform in 1976, was just a tad ahead of his time.) I doubt that U.S. productivity has steadily declined since 1979. Thus I’m not quite ready to sign on to your claim that “the decline in productivity was coincidental to increased inequality.” I also, as a non-economist, have had trouble understanding what exactly productivity measures in a service-based economy — how many papers, electronic or actual, an office-worker moves across his/her desk in an hour? — but that’s a separate issue.


LFC 12.02.15 at 1:39 am

Re the end-of-capitalism stuff:
Of course Wallerstein is another who thinks that this is a hinge or transition period to a new kind of system, though he doesn’t think it will nec. be better, nor does he, afaik, use the phrase “secular stagnation,” though aspects of the argument may incorporate it w/ different language.


T 12.02.15 at 2:05 am


Looking a two broad periods, both growth and productivity were higher in the post-war period of 1948-79 then from 1980-2014. Similarly, inequality rose post-1980. The labor productivity numbers are here:; the multifactor productivity data is linked here: Take a look at the historical tables where the percentage change table exist among many others. Same result — higher pre-1980. There is a Read Me tab in the table with embedded links to the BLS source data and methodologies.

There is a large academic literature on measuring productivity in services you can google. It would be helpful if someone could link to a survey piece. This is a difficult measurement issue. Maybe some one with special expertise can weigh in.

I hope this helps some.


LFC 12.02.15 at 3:47 am

Thanks, I’ll take a look at the links.


js. 12.02.15 at 4:39 am

In the unlikely event that someone on here hasn’t already seen this, this is possibly relevant.


Rakesh Bhandari 12.02.15 at 6:37 am

@31 Reich seems to be explaining inequality as the result of monopoly *rents*; Piketty argues that the return of *rentier society* is perfectly compatible with competitive markets especially if demographic growth slows over the next few decades.


reason 12.02.15 at 7:49 am

T @10
1. I think you mean productivity growth, not productivity.
2. I don’t understand your point. If something causing a problem is exogenous it strengthens the case for intervention (for instance via income support or training subsidies) not weakens it.


reason 12.02.15 at 9:02 am

I wonder if T is a prime example of the left suffering from “learned helplessness” by absorbing the naturalistic fallacy inherent in “Austrian” economics.


Bruce Wilder 12.02.15 at 9:25 am

RB: the return of *rentier society* is perfectly compatible with competitive markets

Putting aside whatever Piketty might be claiming in Piketty’s own terms, I don’t see how “competitive markets” however loosely defined can be meaningfully “compatible” with an increasing share of total income going to capital, if capital’s income consists primarily of economic rent.


TM 12.02.15 at 2:55 pm

20: “There is technology that is in use in australia that is not in use in greece”

Our of curioisty, what is that technology?

10, 28, 30: It is an annoying mistake to say something like “GDP is down” or “productivity is down” when what is meant is that the rate of incrase of GDP or productivity is down. Very misleading but very common.


reason 12.02.15 at 3:12 pm

T @30
regarding inequality and productivity growth – which way do you think the causation runs?


Rakesh Bhandari 12.02.15 at 3:35 pm

Piketty’s rent generalizes from the idea of a landed aristocracy’s passive receipt of income in virtue of its possession of land to the coupon-clipper of the fin de siécle to today’s rentier who passively enjoys income as profits, interest, royalties, etc. simply in virtue of his or her capital or wealth now in the form of real estate, stocks, bonds, patents. Piketty argues that the income from capital or wealth (terms that he uses interchangeably) will rise as a percentage of total income, that income especially in the top centile will increasingly be dominated by rent as he defines it (Balzac’s rentiers derived income from ownership of landed estates and government bonds; today’s rentiers have a more diversified portfolio), and that the wealth that generates these enormous incomes will increasingly be inherited. The rentier can ascend even if the market is competitive. Monopoly rents as Robert Reich are describing is not the long-term source of widening inequality.
An additional note: Piketty argues that today’s rentier is not necessarily as inflation-phobic as some have assumed.


Bruce Wilder 12.02.15 at 3:55 pm

reason @ 34, 35

I think you are badly misreading T. T @ 7 was saying that when someone like Tyler Cowen makes the argument for impersonal and naturalistic causality, he means to disable an effective political response.


TM 12.02.15 at 3:58 pm

I don’t see why there should be any causality between productivity growth and inequality. But curious to hear T’s explanation.

Incidentally I recently learned that Switzerland the last 40 years has had “weak” productivity growth (*) compared to OECD. Provided these statistics are reliable, maybe productivity growth isn’t such a desirable thing after all. I’m happy to take full employment and the world’s highest standard of living over productivity growth.

(*) The OECD report at is another example of the Washington consensus in action: here you have an economy performing extremely well by any standards, and what are the OECD going to recommend? You guessed it, privatization, deregulation, and austerity.


reason 12.02.15 at 4:04 pm

Bruce Wilder @40
That may be the case but we still should be able to see Tyler Cowen’s argument as blatantly fallacious. My real point was how irrational we have all become.


Rakesh Bhandari 12.02.15 at 4:07 pm

Piketty is not quite a theorist of secular stagnation. He needs for gg allows for rentiers to amass wealth faster than income is growing as a result of productivity and demographic growth, and as long as the marginal rate of substitution of capital for labor does not fall sharply–and here Piketty has been challenged– the share of income from capital will rise, giving rise to a more unequal functional distribution of income. Moreover, given that wealth is already concentrated, the top centile in particular will likely own a greater share of wealth and derive increasingly enormous incomes from ownership (even super-managers whose income presently comes from “labor” will find their capital growing and even their own incomes, much less their heirs, coming increasingly from their expanding wealth holdings).


Rakesh Bhandari 12.02.15 at 4:08 pm

don’t know how that got garbled:

He needs for g>r; this allows for rentiers to amass wealth faster than income is growing as a result of productivity and demographic growth


Rakesh Bhandari 12.02.15 at 4:09 pm

oops that was my mistake
…now running to work.


Metatone 12.02.15 at 4:13 pm

I’ve advanced this hobby horse a bit in the previous discussion, but it does seem relevant here. We know of technologies that could improve the lot of human beings if they were invested in more – renewable energy tech. However, money isn’t piling in to the extent you might expect. (i.e. compare the money in that industry with that in other parts of the energy industry.)

Why is this the case? I don’t see it fitting into Cowen’s thesis.

To me it appears to be that the benefits don’t monetize easy. Poor people in poor parts of the world would benefit a lot, but how does that help monetization? Rich people in rich parts of the world benefit too, but largely in an abstract “public goods” way. So where does the investment case go from there?

(TL; DR, this example suggests we’re suffering much more from income distribution problems and govt action problems which are hobbling demand, rather than some problem of supply.)


reason 12.02.15 at 4:14 pm

Bruce Wilder @40
I see Tyler Cowen as the economic blogosphere’s answer to David Brooks (i.e. a Spinnmeister). Every laughs at David Brooks now – why isn’t everybody laughing at Tyler Cowen making nonsense arguments.


Cian 12.02.15 at 4:19 pm

My basic problem with the ‘tech stagnation’ argument is that I don’t know how you’d even begin to measure that. Unless you were in a situation where technology was literally unchanging, it seems impossible to measure.

And even if you could measure it, how do you compare different technologies. Are extraordinary advances in computers (graphics cards say) more significant than the rise in robotic manufacturing? How do you compare consumer electronics (the iPhone) to infrastructure, manufacturing technologies, underlying technologies (plastics, nano materials, etc). Or advances in theoretical technologies (computer programming, mathematics).

It seems to focus on entirely the wrong thing and the kind of argument that only someone who profoundly misunderstands technology could make.


reason 12.02.15 at 4:19 pm

Metatone @46


Bruce Wilder 12.02.15 at 4:35 pm

RB @ 39

I am not going to take a brief for Reich specific views on “monopoly capitalism”. I will say that it is unaccountably naive to imagine rentier wealth is innocent of political aggression in making or expanding its claims on society’s income. Capital, at base, is Power and Wealth is not an innocent. Whether rentiers are the drones of a landed aristocracy enjoying rack rents as the fruits of a half-forgotten Conquest (or Dissolution of the Monasteries), or modern banksters pocketing the proceeds of fraud and usury, the rentier can most certainly not ascend except on the exercise of an essentially political power to disadvantage some other class in exchange.

A “competitive market” would imply a constraint of diminishing returns to capital — the accumulation of capital as a productive stock would defeat its own attempts to increase its claims to a larger share of income, as the abundance of capital drove down returns and drove up the margin productivity of other Factors, aka Labor, which would be empowered to make its own claims to a larger share. That is the neoclassical fairytale of “competitive markets” in operation.

Piketty identifies wealth with legal, financial claims on income and not a stock of productive “real” investment earning income by the magical action of some productivity-enhancing virtue. In doing so, he reminds us, without instructing us, that Wealth may be extracting its share, by means fair and foul. If its accumulation earns a constant rate in excess of growth, Wealth must eat us in the end. It will not be able to eat us in anything like a competitive market, and if we open our eyes, we will see that its appetite is being satisfied by what it kills.


Gary Othic 12.02.15 at 5:02 pm

@23 & 26

Thanks for that – I’ve not heard of Wolfgang Streeck before but his stuff looks interesting and is definitely in the area that I was looking for!

@LFC (29)

Yes, Wallerstein was one that I had in mind. Some of his passages in Historical Capitalism do come very close in discussing much of what the proponents of the secular stagnation hypothesis talk about, though he himself doesn’t use the term. Of course Wallerstein has been predicting the downfall of capitalism for a while now, but interestingly his thoughts on what will come after have swapped from being very optimistic (socialist world-system) to very pessimistic (some sort of quasi-feudal order) in recent years.


Rakesh Bhandari 12.02.15 at 5:28 pm

Piketty does not accept what you are describing as the fairy tale of neo-classical economics (functional distribution of income kept stable by operation of principle of diminishing marginal returns); he does not think the functional distribution of income is stable over time. He’s a critic of Pareto as well as the Cobb-Douglas production function.

It follows from Piketty’s argument that even if political power were used to break up cartels and weaken intellectual property rights–that is, the market were made more competitive– the rentier would still likely rise to ascendance against a backdrop not of secular stagnation per se but growth at around 1.5% (he also thinks the functional distribution of income will turn against labor and the personal distribution of income and wealth will increasingly favor the top centile).

Piketty does not think monopoly is as important long-term source of widening inequality as Krugman describes Robert Reich arguing. There is an important difference here.


Peter K. 12.02.15 at 5:39 pm

I have a vulgar Marxist or vulgar Keynesian view of “secular stagnation.” As Professor Quiggin says, it’s nothing that new. Things change but there are similar dynamics.

As Quiggin said, government macro policy worked in Australia. It can work but is being blocked by politics. Inequality is leading to bad politics and hence policy in a vicious circle.

After WWII, there was a virtuous circle as Keynesian policy led to rising incomes which led to sustainable growth without volatile debt cycles – more or less. Recessions were met with adequate macro policy to keep things going, unlike today.

Quiggin starts with the dotcom bubble which led to unsustainable growth and job creation mediated by the financial sector. Policies for the recovery morphed the dotcom bubble into the unsustainable housing bubble. After the bubble popped, macro policies weren’t enough to provide a quick recovery and return to trend. Instead we got hysteresis as bad politics forced austerity on the economy coupled with inadequate if massive monetary policy.

Inadequate macro (fiscal, monetary, trade) policy leads to slowing, growth. And somehow Piketty’s rentiers are able to keep their returns and profits high despite slowing growth and slowing producitvity. No doubt part of this is monopoly rents and political “interference” in the market, like patents. How much of it is financial sector parasitism?

Politics blocks adequate fiscal or monetary policy as trumped up fears of inflation and government debt restrain government investment and central banks.

I think the way around this scare-mongering is Corbyn’s People’s QE, “cold fusion,” or Adair Turner’s monetary financing.

Already the new speaker Paul Ryan and Democratic legislators are getting into the game:

Some of the money will come from the Federal Reserve. The bill cuts the Fed’s annual dividend payments to large commercial banks, redirecting that money to highway construction. It also drains money from the Fed’s rainy-day fund.

The banking industry opposed the dividend cut, but won only a partial victory. The Senate voted to replace the current 6 percent dividend with a 1.5 percent dividend. The final version instead ties the dividend to the interest rate on 10-year Treasury bonds, currently 2.2 percent, up to a maximum of 6 percent.

The bill also requires the Fed to fork over $19 billion from a rainy-day fund that has ballooned to $29 billion in recent years. The size of the rainy-day fund also would be limited to $10 billion.

A Fed spokesman declined to comment, but Fed officials have previously criticized both the dividend cut and the draining of the rainy-day fund, arguing Congress should not use Fed funds to bankroll specific programs.


LFC 12.02.15 at 9:37 pm

G. Othic @51
[re] Wallerstein … his thoughts on what will come after have swapped from being very optimistic (socialist world-system) to very pessimistic (some sort of quasi-feudal order) in recent years.

I haven’t followed his recent (last several years, say) work, but if you have a particular piece in mind I’d be interested in the cite. In Utopistics (1998, based on lectures delivered in 1997), he writes at the end that his “analysis is neither optimistic nor pessimistic, in the sense that I do not and cannot predict whether the outcome [i.e., the new system] will be better or worse.” (That was written a while ago, however, and I’m not sure whether his view here has changed.)


T 12.02.15 at 10:50 pm


“The situation not being of our making (it is cold today) does not imply that there is no policy solution (we can put warm clothes on).”

If it’s getting dangerously colder for man-made reasons, we know how to fix that. That’s different than putting on a coat.

And what it it with all this psychoanalyzing crap? Colin Street appears to think everyone he disagrees with is mentally ill with his repeated references to Asperger’s and you think people who disagree with you are suffering from “learned helplessness.”


T 12.02.15 at 11:00 pm

Bruce @40
Sorry I missed your post. Yes.


Gary Othic 12.02.15 at 11:36 pm

@LFC (54)

In an article entitled ‘Globalization or the Age of Transition?’ he says a similar thing, that the capitalist system is going to collapse and that there are two possibilities for what comes next, one leading to a more equal system and one leading to an entrenching of the current inequalities of the system, within countries and between them (North-South divide), and an exacerbation of them. IIRC he says he doesn’t know which one will come, but he leans towards the more pessimistic vision being more likely (he says something broadly similar in Capitalist Civilization).

The article can be found here:


bob mcmanus 12.03.15 at 12:01 am

54,57: Arrighi and Gunder Frank thought Wallerstein was too Eurocentric and binary. Combined and uneven development, and convergence (North going down) will continue to accelerate, with elites in the South and in the North becoming ever more globalized, international, cosmopolitan. And not only elites, but multiple classes in multiple ways, we all have cellphones and internet now. Combined and uneven is like fractal, occurring within countries, cities, counties, homes.


bob mcmanus 12.03.15 at 12:13 am

As far as the topic goes, Yomtov above (kowaii!) asked about the end of the hegemony, and I have been thinking on that all day. Fact is, HRC or any other Democrat is extremely unlikely to be able to guarantee abortion rights in rural Texas, or fix unions in Wisconsin or Indiana, or provide health insurances exchanges in Alabama. The impotence and irrelevancy of Democrats (I won’t speak for Republicans here) and their ideology on a local level is becoming glaringly obvious. Blaming Republicans doesn’t really seem to help, and no improvement is on offer. California, Mass, wherever may be nice Dem states, but they would likely be so in any case, and local conditions and local politics are what is important in implementing the national policies. Thus, hegemony fail and centrifugal politics.


LFC 12.03.15 at 1:18 am

@G Othic: thks


Matt 12.03.15 at 1:27 am

I’ve advanced this hobby horse a bit in the previous discussion, but it does seem relevant here. We know of technologies that could improve the lot of human beings if they were invested in more – renewable energy tech. However, money isn’t piling in to the extent you might expect. (i.e. compare the money in that industry with that in other parts of the energy industry.)

Why is this the case? I don’t see it fitting into Cowen’s thesis.

To me it appears to be that the benefits don’t monetize easy. Poor people in poor parts of the world would benefit a lot, but how does that help monetization? Rich people in rich parts of the world benefit too, but largely in an abstract “public goods” way. So where does the investment case go from there?

I think that rich nations and poor ones both benefit from moving away from fossil combustion. All nations share one planetary atmosphere.

I think that the benefits don’t monetize easily because of relatively low barriers to entry and robust competition. You can take a design for a new kind of solar module or wind turbine from laboratory to commercial product for much less than the cost to develop a single new deep offshore oil project or build one nuclear reactor prototype. Even the solar companies that still survive don’t realize very high margins. The ROI on making solar products is lower still when you include those manufacturers that went bankrupt. No company has been able to realize dramatic differences from its competitors on the basis of natural monopolies, patents, or even government lobbying. They’re all selling commodities, usually on the basis of a handful of metrics, with modest implementation differences.

The good news is that it’s hard to monopolize renewable energy or extract monopoly-sized profits from it. The public is getting cost savings passed on to it every year as renewable energy technology improves. The bad news is that investors will keep chasing higher-risk, higher-profit-potential schemes if “build more solar farms” or “build more solar hardware” can’t offer monopoly money. The good news (2) is that investors make can still be delusional and value renewable energy companies higher than reasonable, just as with other companies. So you might e.g. get people investing in SolarCity because of the Elon Musk mystique, even though AFAICT there is nothing special enough to justify its valuation.


LFC 12.03.15 at 2:21 am

P.s. re Wallerstein, having glanced at some more recent work:
I think his basic position on systemic dynamics and the roots of ‘structural crisis’ is pretty much the same as it has been: for a brief-ish summary, with references, from Monthly Review in 2011, see:

He also writes bi-monthly commentaries. See, e.g., this one from Oct. 1 on ‘the resurgence of the world left’, a somewhat misleading title since it’s about what he characterizes as (mere) swings of the electoral pendulum:

N.b. I don’t necessarily agree w. everything in the above, just fyi linkage.


reason 12.03.15 at 8:03 am

T @55
Again I don’t understand the point. It makes no difference if I can fix the cause or not, if I have a policy tool to fix the problem. And as for the divergence to global warming, seen from a longer term perspective we are entering approximately a period when we might expect (if we weren’t interfering with the climate) a new ice age. So it could be that one way or the other we need climate managing policy initiatives. I really do think you are suffering from an art of learned helplessness – policy initiatives are not tabu. It doesn’t matter in the least whether the problem is caused by us or not, we can do something about it. In fact, if the problem is exogenous, it strengthens the argument for doing something about it, because it means it is not a result of the systems optimal response (although optimal in what sense is an issue of course), so we will not be counteracting that.


reason 12.03.15 at 8:06 am

T @55
I suppose what I am saying is that you seem to be accepting Tyler Cowan’s framing (with the subliminal assumption that public choice issues don’t just mean that policy is less effective than it might be, but that policy is impossible), when I think his framing is nonsense.


reason 12.03.15 at 8:42 am

T @55
To use a more complex analogy, think of fever. Fever is the bodies optimal response to a microbial invasion, but has side effects that can endanger the body itself. Interfering with the symptom of a higher body temperature is not a good idea, but stopping the person from freezing (blanket), and maintaining body fluids (warm drinks) is however a useful response.

Yes, it is useful to identify the cause of the problem, but that doesn’t mean we shouldn’t act.

Personally, I’m a national dividend guy (basic income if you like), because I think the micro-economics and the level of security it provides are much better than alternative approaches, despite John Quiggin’s misgivings. And such a solution scales – it works regardless of what the source of the problem is, including technological change. The best approach to poverty (or even stagnation) is giving money to poor people.


T 12.03.15 at 9:54 pm

Reason — you can try to treat the cause or the symptoms. If the cause is untreatable, you’re left with just treating the symptoms. And if the cause is untreatable and the symptoms are really hard to treat, you’re left with grin and bear it. Various iterations of the Right have been arguing for the later. Or they argue that the problems are supply side in the making and need to be dealt with by, you guessed it, lowering taxes, cutting regulations, lowing business uncertainty, etc. (e.g. read Cochrane — former UofC now at Hoover on growth)

If, possibly on the other hand, you believe that there are useful policy prescriptions that are being blocked by special interests that have, er, an undue influence on gov’t policy, then the proximate cause of the policy failure is the group(s) with undue influence. It took the Great Depression to solve the Gilded Age + 1920’s problem last time around (despite a short Progressive interlude.) Was that 40+ years?

Cowen is arguing that the current state of affairs is the natural order. Diminished growth is a result of no more low-hanging fruit and that inequality is a consequence of the increasing size of enterprises, winner take all, and, well, anything else you can put forward to defend the status quo of his patrons. I’m w/JQ on this one.

btw–Krugman, the last I looked, took a very dim view of the increased inequality/declining growth position. He took the view that since this relationship is weak, that redistribution becomes less of a problem.

With respect to productivity and inequality, you might ask where the rich people are making their money, where the rich people are putting their money, and where the smart kids are spending their time. If it’s more and more in rent seeking activity, that might help explain things. Also, to the extent that productivity is related to gov’t investment in basic science, that might be worth looking at. (I haven’t.)

btw- dsquared supplies some context in his linked article. You gotta ask him why he chose to put it in Smurfland.

Finally, I think Steve Randy Waldman of interfluidity has an extremely interesting take on why the 0.01% and up are blocking needed policy. I think it can be extended to long-run motivations as well. Basically, they like the way things are now.


reason 12.04.15 at 8:18 am

T @66
Yes but this is all irrelevant to my point, which is that Tyler is talking nonsense and should be called on it, clearly and simply. (And forget the “supply side” nonsense – it has nothing at all to do with the supply side – infrastructure and education spending would do much more for the supply side than tax cuts, and that is clearly in the data).


reason 12.04.15 at 8:20 am

Besides which – to be honest – how important is Tyler Cowen? How many people (and more importantly how many voters and politicians) are influenced by him?


reason 12.04.15 at 8:52 am

“If the cause is untreatable, you’re left with just treating the symptoms. ”

Listen – I think has a value judgement that I simply can’t agree with. Treating the cause and treating symptoms have the same effect, improving the lives of the people affected. In the case of the economic system (which is an artificial human construct) the wellbeing of the people is the only reason for its existence. There is no other justification. So whether I’m treating the cause or the symptoms is not important, what is important is that people’s lives are improved. (By the why this holds just as well for a medical analogy). There is no “JUST” treating the symptoms, the symptoms are what matters, it is just that treating the cause is sometimes more effective.


T 12.06.15 at 12:06 am

@67-69 reason

Tyler is probably the the most public face of the Koch’s economic worldview that I’m aware of. He heads the Mercatus Center (funded by he Koch’s), is a prof in the GMU economics dept similarly funded, and now writes for the NYTs and other prominent publications. (He’s also linked to dsquared’s last two posts as Tyler has identified another lickspittle for the finance industry albeit with an otherwise very different worldview.) So, in grand scheme of things, how important is any single toady? Enough that a guy with a billion to spend in the next election decides to continuously fund him. These guys take the very long view. All about moving that Overton window. And you might have noticed its moved quite a bit.

I think the cause and symptom distinction matters a lot. One obvious example is the reversibility of treating the symptoms when the cause still persists. So, for example, pre-tax inequality can be “fixed” by redistribution through income taxation. However, that’s easily reversed by changing the tax law, leaving the cause in place. I’m sure you can think of many other examples.


Bruce Wilder 12.06.15 at 12:59 am

One obvious example is the reversibility of treating the symptoms when the cause still persists.

There’s also the whole “new normal” thing, where people who might oppose a change are distracted from the politics of reversing the policy to some kind of futile efforts at amelioration of the consequences. The futile efforts at amelioration may acquire lots of status satisfaction for those who engage their energies that way, which then tends to anchor the policy in conservatism, as the ameliorations and palliative care are valued for themselves.

The propaganda line that emphasizes “causes” that are “natural” and “inexorable”, such as amorphous technological trends, or the neoliberal line that there is no alternative to the policy of austerity, are setups for futile amelioration. People feel bad about a world of such cruelty, but they bolster their self-esteem by protesting that Black Lives Matter (no justice! no shopping!) or charity fundraising activity — we’re going to a benefit concert for [fill in the blank] — and so on. Disappointed in President Lesser Evil’s response to global warming? Buy an LED light bulb! Drive a Prius! (But, let’s get the model with a little better acceleration; who said socially conscious cannot be fun!).


reason 12.07.15 at 8:21 am

T @70 BW @71
Read 69 again, there I expressed what I wanted to say better. The whole problem is that we are dealing with things at too great a level of abstraction. We need to emphasize first principles again. The economic system is something that we decide on, and whose only reason to exist is to improve people’s lives. All the talk of something “being good for the economy” is complete nonsense. We need to change the framing and the approach of distinguishing between cause and effect is playing to a framing that I think is invalid.


reason 12.07.15 at 8:51 am

T @70
” However, that’s easily reversed by changing the tax law, leaving the cause in place. I’m sure you can think of many other examples.”

Yes and no. The economic system is more complex than that formulation takes it to be. There are positive feedback loops so that inequality feeds more inequality or vice versa. Reversing the symptoms will for a long time also change (at least some of) the causes.

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