What is Wrong with Economic Growth?

I read a report in Forbes Magazine on the sluggish character of the current recovery from the 2008 financial crash, which lamented its exceptionally weak economic growth. Apparently, we continue slogging along in the weakest recovery since 1949. Since the Great Recession technically ended in 2009, average GDP growth has averaged only 2.1%. In the September 13, 2016 issue, Forbes staff writer Rich Kalgaard reports that the current “expansion” is more constrained than any similar period since 1949. Why is this, and what is the meaning and importance of such a slow recovery?

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Kalgaard offers “three clues” as to why post-recession expansions have steadily gone downhill, if erratically, for over a half century. He blames the fact that “the rest of the world has caught up to the U.S.” He claims that the U.S. abandonment of the gold standard in 1971, is part of the problem. Finally, he offers that routine corporate allegation that “the explosion in federal regulation” has stifled economic growth. He is wrong on all three counts.

Such claims by any writer attached to Forbes should not surprise us. Explanations for economic woes from corporate utopian dreamers will always blame the federal government for poor performance of the economy. They will also project causes of slow growth onto some outside force – certainly never to corporate malfeasance or distortions of the “free markets” they worship. Never will the internal flawed logic of extractive capital or the phantom financialization of the economy come into question.

The Great Transformation

In 1944, Karl Polanyi exquisitely explained the origins and the utopian illusion of free market capitalism in his book The Great Transformation. That great transformation of human societies was what we call the industrial revolution. He also forecast the inevitable damage to society caused by the inherent flaws in the unregulated market system no longer embedded in society. The logic of its economic theory, which emerged as the intellectual justification for today’s global political economy, was deeply flawed.

Since the beginning of the industrial revolution, diverse societies have attempted to protect themselves from the damage done by market liberalism (the theory that if left to their own devices, markets will “self-regulate” and somehow produce the best result for society). The classical economists of the eighteenth century, such as Adam Smith, believed in two ideas that just never panned out in real economies.

First, they assumed that all human behavior is “rational.” That is, people will always act in economically rational ways, seeking their own best economic advantage in all their behavior. In fact, many exigencies and values in everyday life influence behavior. Economic advantage is just not the only important thing in life.

Second, the classical economists believed that markets would “regulate” themselves if allowed to do so, resulting in the best outcome for all. Adam Smith’s metaphor, the “invisible hand,” captured the essence of that belief.  Economic elites have both exploited and distorted it ever since. Due to the economic and political power of corporate and financial elites, the academic field of economics has retained those theories under the guise of pseudo-scientific analytics. All the while, “free-market” economies have failed to live up the theories of economists. Yet those theories continue to dominate economic thinking.

Utopian Dreams and Corporate Control

The theories that have controlled economics throughout the industrial era have held to these failed assumptions for centuries now, despite the overwhelming evidence against them. We now call such theories “neo-classical” economics, “neo-liberal” economics, or just plain “mainstream” economics. Despite their failings, the propaganda of the corporate media continues to glorify them as the scientific answer to all our economic problems. Corporations today routinely fight for regulations that favor their growing power, all the while claiming to seek less regulation of the markets they try to control. They never consider the social control of markets, for the benefit of society rather than for that of economic elites, as an option.

The consequences of the great transformation that subordinated society to its economic elites, as Polanyi predicted, continue to plague us today. Only this time the economic crisis converges with the climate crisis leading to global destabilization of access to resources, disrupted production and distribution of food, and escalating conflicts worldwide, all amplified by climate destabilization.

The utopian dream of endless economic growth may be the world’s greatest social illusion. However, it is also an imaginary vision that sustained itself in the centuries since the beginnings of the industrial revolution, despite repeatedly failing the test of time. Never have “free markets” operated without causing serious social damage. In each case, society has tried to protect itself from the excesses and destruction of speculative capital, with varying success.

Overcoming Illusion

In cases such as the poor laws in industrializing England or the New Deal responding to the economic and social collapse of the Great Depression, political responses protected the people from the damage caused by unregulated markets. In cases such as the communist revolutions in Russia and China, the abolishment of free markets led to their replacement by cumbersome command economies that ultimately resulted in a state capitalism unable to respond to the damage caused by its bureaucratic control of markets.

Corporatist attempts to explain the flaws of the market system, like Kalgaard’s, implicitly assume the success of a failure. Their blaming of government and outside forces disrupts any attempt to protect society from the failures of a market system in desperate need of overhaul. Promoters of the corporate economic status quo like Kalgaard demonize as “wasteful spending” or simply “socialism,” any political attempt to require the economy to serve human society rather than only itself. They are mere corollaries to the failed neo-liberal economic utopianism promoted by global power elites for their own shortsighted gain. Some serious re-thinking is in order.

Community: Some Fragments Remain

Little old airports near small towns have a story to tell. I have been flying since 1976. For most of that time, I flew mostly in the Southern California area, to and from small and medium sized airports surrounded near or in cities. In 2010, I flew from Santa Fe, New Mexico, to Oshkosh, Wisconsin, to the annual airshow and fly in put on by the Experimental Aircraft Association. It is one of the biggest air meets in the world. My wife and I had decided to camp right on the airfield, where airplane camping was available in designated areas.

I took the back seats out of the Glasair Sportsman II, which I had built in 2008, and loaded it with all our camping gear. We flew from Santa Fe to Oshkosh, Wisconsin – well, almost to Oshkosh – in two legs with a stopover in Council Bluffs, Iowa. As it turned out, many of the aircraft parking areas as well as the camping areas at Oshkosh were flooded. A year’s worth of rain fell in the four or five weeks before the air show. Only about fifty miles out, I picked up the information on the radio, that they had closed the camping areas. I diverted to the nearest small airport, Dodge County, where I found that many other small aircraft had landed, diverted from Oshkosh. There I learned that airplane camping was available at Fond du Lac airport, about twenty miles from Oshkosh. We took off immediately and landed at Fond du Lac, and got one of the last available camping spots at the edge of a taxiway. The air show organizers had arranged a shuttle bus to get campers to Oshkosh each day. That camping experience is a whole other story.

On the flights between New Mexico and Wisconsin, I did my flight planning in part based on my intention to stop at small airports for refueling. I was aware that fuel prices are lower at small rural airports where rents and other costs are cheaper. I had never flown an airplane in the Midwest. When I needed fuel, I landed at more remote airports. I knew that many such small airfields were scattered among the towns and fields of “the nation’s breadbasket.” The main users of these small airfields are farmers and crop-dusters. On the way home, a storm system chased me further southeast, over Missouri, so we stayed in Springfield the first night. On that trip across the rolling green fields of the Midwest at the end of July, I noticed some distinct differences from the urban and suburban airports where I had normally landed for thirty years in California.

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Major Samuel B Cornelius Field Airport, Spearman, Texas.

First, almost no security was evident at these little airports. Even when nobody was around, the little airport office would be open along with the restrooms. At small rural airports, a “courtesy car” is often available on the airport in case a pilot and passengers want to run into town for lunch or for any other reason. It doesn’t matter. The car key is hanging in an obvious spot in the office. An unwritten rule expects guests to top off the gas tank full for the next user. The key code for the gate is always a number that would be obvious to a pilot who had landed there.

Once, at a small airport at Spearman, Texas, to be exact, access to the fuel pumps required a local credit card unless the attendant was present. As I unsuccessfully attempted to use the pump, finally figuring out the problem, a man drove up in his pickup truck and offered the use of his card if the attendant did not return by the time we got back from our lunch in town. “Here’s my business card; just call me if you need it.” It was just the neighborly thing to do. He was a farm implements dealer.

Stepping out into the parking lot at the front door of the “Cowboy Grill,” we saw a massive black cloud formation, a virtual wall, moving in from the East. We did not want to have to stay at the only motel in town that night, a dingy cinder-block structure. So, we rushed back to the airport and took off in a very strong crosswind, heading west. We outran that storm and still had plenty of fuel to reach another town ahead.

We landed at the Dalhart, Texas airport. Dalhart is a larger farming community, and the airport has an FBO (fixed base operator) supplying fuel and aircraft services. Dusk was fast approaching, so we concluded that we had had enough flying for the day. A man came out of the office to greet us and offered us space in a hangar to shelter our aircraft from the approaching storm. We accepted. He then drove us and another couple of people to the motel he recommended in town, and picked us up the next morning when we said we’d be ready to take on the next leg of our flight. He owned the aviation service business on the airport, where we re-fueled for the final leg of our journey.

On our recent aborted camping trip to a small grass-and-gravel airstrip in the middle of the Gila National Forest, we diverted from our planned flight path near our remote destination because I was getting a wildly erratic fuel pressure reading. While I believed that the problem was due to a faulty sensor, we did not want to risk a fiery crash in the trees. We landed at Truth or Consequences, New Mexico, to try to resolve a fuel-pressure problem. “T or C”, as the locals refer to it, has one of those small airports where it is more about people and flying than about economics. When Steve, the gentleman in the airport office, learned of our problem, he offered us the use of the airport courtesy car. “Well, we don’t usually give it to people overnight, but since you’re stranded until you can get your plane fixed, go ahead, that’s what it’s for.”

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Truth or Consequences Airport, New Mexico.

We had the car free of charge, for five nights while we waited for a part to be delivered to the mechanic we had tracked down on the Friday of our arrival, another interesting character with his own story. Steve called me three days into our “inadvertent adventure” to see how we were doing. I expected him to demand the car back. He never mentioned it. I thanked him profusely for its use. He simply said, “that’s what it’s for,” without reference to when we might bring it back. We had to wait until Monday to order the fuel-pressure sensor, known as a “sender,” for overnight shipment.

Overnight took two days; we got to know the community, which had the same small-town America traits we appreciated in those rural airfields and towns in the Midwest. The loss of community is one of the important effects of the endless-growth corporate economy that is destroying all that is good (other than consumer goods, of course) in communities and ecologies around the world.