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.

Romancing the End Game: Do We Want to Gamble Our Lives?

Opinions vary. We don’t really know exactly how little time is left before humanity must mount a massive campaign to reconfigure our relationship to the planet before it’s too late. But I would be willing to bet that we have next to none.

Examples of such human folly abound. The historical/archeological record shows that a number of human groups have collapsed by failing to recognize their peril. They defiled their local ecology to the point where they could no longer survive as a group within their environment. It is interesting to note that in many cases, the elites engaged in excessive programs of self-aggrandizement, monument building, and lavish privileged religious rituals and festivals. They finally crossed the point of no return and were essentially doomed by their failure to act in a way that would lead to their survival.*  Take away the cultural garb and our own elites look the same.

Yet, as an industrialized people, we don’t seem to believe it can happen to us, no less to all of humanity. Wall Street, Pentagon, and media corporate elites seem to be mimicking in their actions those historical failed elites. They have far more power, but can hardly be excused for ignorance. The world’s political “leaders” have diddled and dodged for decades since the first clear indicators of impending climate disruption became widely known. World “leaders,” after all, follow the dictates of their corporate benefactors.

Failure to Respond

We don’t know exactly even if enough time remains to avoid collapse. What we do know is that the little time left is rapidly shortening and the task ahead is increasingly monumental. Yet, we face several very serious psycho-social and political-economic barriers to major movement down the right path.

We need neither romanticize nor demonize any former or currant culture to realize that each has its strengths and weaknesses — in various proportions. Jared Diamond and others have demonstrated the folly of very different groups that have ignored the requirements of the relationship they had with their micro-environment. In some cases they could have continued to sustain themselves if they had not ignored the problem. In some cases, such as the Vikings in Greenland, invaders failed to take lessons from the indigenous people and simply died off. The self-absorbed character of today’s industrial-consumerist culture is a study in not taking lessons from the real world in which our economy operates. Our economy is, as they say, unsustainable.

With today’s industrial-consumer culture, we are so estranged from the natural world that we have become extremely vulnerable to large scale system failure. The cult of “science will save us” as we continue down the same consumerist path, will only distract from the hard facts of the massive changes already clearly necessary. Today, it is no mere micro-environment that we are contaminating; we have already seriously disrupted the homeostasis of most major earth systems.

Inconvenient Science

Much of Western science has been corrupted by its subordination to the corporate growth machine. That machine perpetuates the myth that all we need to do is come up with some new [profitable] “technological breakthrough” and all will be fine. Only independent scientific research and analysis will have a chance of pointing to the specific material changes that are necessary to stop the lemming-rush to societal collapse.

Climate science has been relatively untainted by corporate corruption, since its subject matter was of little political importance until recently. Its findings were either generally practical or merely academic. Farmers, airline pilots, and many others benefit from weather information and understanding of climate processes. Academics pondered the nature of earth systems. But now, the facts of climate change have major political implications for many economic policies and practices. The most powerful institutions and people will be profoundly affected. Climate science has been supported by governments around the world for decades because the knowledge gained is of general economic benefit. But now, that knowledge is poised to change the course of history.

Whatever his shortcomings may be, Al Gore certainly picked an appropriate title for his film on climate change: “An Inconvenient Truth.” The realities of climate disruption could not be any more inconvenient for the political-economic elites that operate the corporate state. The continuation of the growth economy is of prime importance to them – it is the source of their ability to continue extracting wealth from the rest of us. The elites who run the largest institutions are not unaware of the impending crisis of climate and economy. Yet the financial/corporate elites remain addicted to their various money-power trips no matter how much they understand. Their expansionist extractivist industrialist ideology maintains them on their fiscal drug habit until the next quarterly report and their next obscene ‘bonus’. Death is inconvenient, but it happens anyway. The extinction of a species is far more tragic.

Ending Illusions

In this light, the unabated accelerating consumerism and productivism we see today are much like a gambling addiction. Facts, timing, and probabilities are easily distorted just to get that next fix. But the marker will be called in. It has been said that the greatest satisfaction in buying a new [fill in the blank] is at the point of purchase, not in its ultimate use. It’s the addict’s brief rush. That is because so much of what is produced and consumed is not useful. It is only an image of some form of satisfaction, but is fundamentally waste. Many things can be both useful and beautiful. But most of them do not emerge from the marketing of industrially produced “consumer products.”

Only by re-establishing a collective awareness of the roots of human existence will we be able to find a balance in our relationship to the earth systems that have sustained us, until now.


*  The best known documentation of ecologically failed societies is Jared Diamond, Collapse: How Societies Choose to Fail or Succeed. New York: Penguin Books, 2006.