The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory may be at least partially true, it only seems to explain, at most, one-third of the trend of secular stagnation.  Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

Capitalism Must Die. The Only Question Is How and When.

With all of the latest articles about how climate change is likely worse than we thought, and how our fragile biosphere that we all depend on is in increasingly grave danger, it is becoming increasingly clear just how unsustainable our current system really is.  We are bumping up against the limits to growth, and only a fool or an economist (same difference) could believe that infinite growth on a finite world is possible.  And make no mistake, capitalism cannot exist without growth, so capitalism must die--or the whole planet dies including us.   Either the virus kills the host or the host kills the virus, but either way, the virus dies.  That's right--there can logically be no such thing as "green capitalism", for the same reason that rain is not dry.

So which choice will we make?  The TSAP has already outlined several means of solving the world's vast and interconnected problems in our party platform as well as in our annual State of the Planet Address.  Most notably, we need to phase out the use of fossil fuels as quickly as possible before we irreversibly burn up our precious planet, and we need to end our addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host.  But the prospects are looking increasingly bleak that our recommendations will actually be put into practice given the current leadership in Washington who continue to blithely fiddle while the Earth burns.  In fact, with climate-denier Donald Trump as POTUS, and thus the Trump-Putin-Exxon Axis of Evil effectively ruling the world now, it is even worse than we initially thought.

We know that any serious attempt at sufficiently rapid degrowth measures (read: ecological austerity) is 1) political suicide for anyone who proposes it, and 2) even if implemented is likely to backfire since such measures simply cannot kill the hungry beast of capitalism, which will only rebound after being weakened a bit and the costs will inevitably fall on those least able to bear them.  And if the root of the crisis (capitalism) cannot be struck in like fashion, hacking away at the branches in a piecemeal fashion would be inherently fruitless.  So what can be done instead?

Enter this seemingly crazy idea.  While it may seem like a sop to the fossil fool industry at first glance, it will actually be giving them the rope for them to hang themselves with.  And not only will it kill Big Oil and Dirty Coal, but it will also humanely euthanize capitalism in general via the one thing that capitalism simply cannot survive--ABUNDANCE.  That's right, capitalism needs scarcity to function, and it has done a marvelous job of creating artificial scarcity for the past 500 years or so.  But uncontrolled abundance, whether of resources, energy, or capital, is basically a fatal overdose for the system of capitalism.  And thanks to the current exponential growth of renewable energy and related technologies, such abundance is very possible in the near future.  And it will be decentralized, so the system can't readily control or stop it once it gets going.  All of this dovetails rather nicely with Buckminster Fuller's vision of a pragmatic utopian future.

If we go that route, it actually would be possible to simultaneously implement the carbon tax-and-dividend idea in Steve Stoft's Carbonomics, provided that 100% of the revenue is refunded to We the People, and that the tax rate starts out low so as not to front-load it too quickly.  The timing is very important.  But any other type of carbon tax scheme would be out of the question, as would most other future restrictions on fossil fuels (especially oil) until the cost of solar and wind energy drops below that of such fossil fuels.  Not like the Trump-Putin-Exxon Axis of Evil would allow that anyway.

Another idea that the TSAP had once laughed at can also be given a chance as well:  the Capital Homestead Act.  While it may seem like a pro-capitalist sop to Big Business on the surface, it will actually kill capitalism in the long run as well due to an overabundance of capital and the fact that the workers and owners would essentially become one and the same.  Combine it with the Universal Exchange Tax and a Universal Basic Income Guarantee, and the overall impact will be maximized and accelerated.

Additionally, in our transition towards a steady-state economy, we would also need to abolish usury and debt-based currency (without growth there can be no interest payments) and have debt jubilees every so often as well.  And once capitalism is relegated to the dustbin of history, it will in fact be a piece of cake to do so.  Though there is no reason not to pass the NEED Act in the meantime to get the ball rolling.

Of course, capitalism is not the only problem.  The 7000 year old War on Women, often known by its euphemistic name "patriarchy", is every bit as much a cause of our world's problems, and the two are basically joined at the hip.  While patriarchy can exist without capitalism, capitalism cannot exist without patriarchy.  And both evil systems are killing this planet and need to end, yesterday.  Let's face it, it ain't gonna be us fellas who will save the world, that's for sure. Fortunately, women have been making huge strides (while men are becoming increasingly redundant), and if current trends continue it seems likely that women will become the new leaders of the free world in the not-too-distant future, as Buckminster Fuller himself once predicted. In fact, that is one of the few things about which the futurists are virtually unanimous.

At least we hope that will be the case.  But timing is everything, and we have a very narrow window of opportunity to act.  So what are we waiting for?

How to Humanely Euthanize Capitalism for Good

With all of the latest articles about how climate change is likely worse than we thought, and how our fragile biosphere that we all depend on is in increasingly grave danger, it is becoming increasingly clear how unsustainable our current system really is.  We are bumping up against the limits to growth, and only a fool or an economist (same difference) could believe that infinite growth on a finite world is possible.  And make no mistake, capitalism cannot exist without growth, so capitalism must die--or the whole planet dies including us.  So which choice will we make?  The TSAP has already outlined several means of solving the world's vast and interconnected problems in our party platform as well as in our annual State of the Planet Address.  Most notably, we need to phase out the use of fossil fuels as quickly as possible before we irreversibly burn up planet, and we need to end our addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host.  But the prospects are looking increasingly bleak that our recommendations will actually be put into practice given the current leadership in Washington who continue to blithely fiddle while the Earth burns.  So what can be done instead?

Enter this seemingly crazy idea.  While it may seem like a sop to the fossil fool industry at first glance, it will actually be giving them the rope for them to hang themselves with.  And not only will it kill Big Oil and Dirty Coal, but it will also humanely euthanize capitalism in general via the one thing that capitalism simply cannot survive--ABUNDANCE.  That's right, capitalism needs scarcity to function, and it has done a marvelous job of creating artificial scarcity for the past 500 years or so.  But uncontrolled abundance, whether of resources, energy, or capital, is basically a fatal overdose for the system of capitalism.  And thanks to the current exponential growth of renewable energy and related technologies, such abundance is very possible in the near future.  And it will be decentralized, so the system can't readily control or stop it once it gets going.  All of this dovetails rather nicely with Buckminster Fuller's vision of a pragmatic utopian future.

If we go that route, it actually would be possible to simultaneously implement the carbon tax-and-dividend idea in Steve Stoft's Carbonomics, provided that 100% of the revenue is refunded to We the People, and that the tax rate starts out low so as not to front-load it too quickly.  The timing is very important.  But any other type of carbon tax scheme would be out of the question, as would most other future restrictions on fossil fuels (especially oil) until the cost solar and wind energy drops below that of such fossil fuels.

Another idea that the TSAP had once laughed at can also be given a chance as well:  the Capital Homestead Act.  While it may seem like a pro-capitalist sop to Big Business on the surface, it will actually kill capitalism in the long run as well due to an overabundance of capital and the fact that the workers and owners would essentially become one and the same.  Combine it with the Universal Exchange Tax and a Universal Basic Income Guarantee, and the overall impact will be maximized and accelerated. 

Of course, capitalism is not the only problem.  The 7000 year old War on Women, often known by its euphemistic name "patriarchy", is every bit as much a cause of our world's problems, and the two are basically joined at the hip.  While patriarchy can exist without capitalism, capitalism cannot exist without patriarchy.  And both evil systems are killing this planet and need to end, yesterday.  Let's face it, it ain't gonna be us fellas who will save the world, that's for sure. Fortunately, women have been making huge strides (while men are becoming increasingly redundant), and if current trends continue it seems likely that women will become the new leaders of the free world in the not-too-distant future, as Buckminster Fuller himself once predicted. In fact, that is one of the few things that the futurists are virtually unanimous about.

At least we hope that will be the case.  But timing is everything, and we have a very narrow window of opportunity.  So what are we waiting for?