Q. You and some other Marxists like Istvan Meszaros have argued capitalism never really recovered from the crisis of the 1970s. This contrasts to New Labour, for example, who say we have just been through unprecedented “economic growth”, even an “end to boom and bust”. If it was not an upturn what was it?
A: I don’t see how it can be denied that capitalism has failed fully to recover from the crisis of the 1970s, in the sense that there hasn’t been a new boom such as the one that followed the Great Depression and World War II. From the early 1950s through 1973, worldwide gross domestic product per person increased by right around 3% per year on average. That growth rate was basically stable throughout the whole period. But from 1974 through 2003-the latest year in the data set I looked at, the authoritative data set compiled by Angus Maddison- worldwide gross domestic product per person increased by only slightly more than half that rate, and only slightly more than one-third that rate if you exclude China. Again, there’s no trend here, just a long-term cut in per capita growth to about one-half or one-third of the growth rate that we had during the post-World War II boom.
I recently put the decade-by-decade computations on my website, http://akliman.squarespace.com/crisis-intervention, since the long-term slump in GDP growth isn’t all that well known. It certainly deserves to be better known.
During the period since 1974, there have of course been some shorter cyclical upturns. Some of these have been called booms, such as the “Clinton boom” of the 1990s in the US. But that’s another name for the “dot-com” boom, which was a bubble that burst. None of these cyclical upturns have reversed the long-term decline in GDP growth. That’s quite clear from the figures I just cited. They haven’t led to an era of stronger growth that’s sustainable over the long haul. Yes, it’s always possible to live well on borrowed money-but only for a time, until the day of reckoning arrives. And it always arrives. In the end, growth under capitalism is determined and limited by the growth of new value from production. Ultimately, it cannot be greater than that.
...'intrinsic value' isn't the reason why most people (at least those I've talked to who weren't also 9/11-truthers or UFO believers) who support a gold standard think it's a good idea.
...a financial system would be forward-looking. A financial system would be interested in the world, rather than fascinated by the patterns that formed behind its own mathematical eyelids. A financial system would hunger for information. It would leave no human preference overlooked and no technological possibility unconsidered. A financial system would embrace us all, would want to learn from us all. It would not be something external, something outsourced to specialists in London or Manhattan. It would want "savers" to express what they plan to do, how they hope to live, rather than offering generic claims on money along a disembodied spectrum of "risk". It would thirst for proposals, ideas, business plans designed to meet the preferences thus expressed, or to achieve possibilities not widely considered. A financial system would be creative. No stock exchange could contain the vast and multifarious tapestry of investable ideas a financial system would educe. A financial system would offer us opportunities to invest not in distant opportunities where we are disadvantaged, but in projects that are informationally, if not physically, near to us. A financial system would be ruthless. It would allow us to have a voice in the most important decision we collectively make, but would force us each to bear the costs of our errors...
The benefits for the United States were manifold. Asian imports kept down U.S. inflation. Asian labor kept down U.S. wage costs.
"To put it bluntly, the Nobel Prize winners knew plenty of mathematics but not enough history. One might assume that, after the catastrophic failure of L.T.C.M., quantitative hedge funds would have vanished from the financial scene, and derivatives such as options would be sold a good deal more circumspectly. Yet the very reverse happened..."
The idea of money as a source of social memory was also crucial for John Locke who figures prominently in our story as the philosopher who inaugurated the modern age of democratic revolutions. Locke was obsessed with money’s role both in establishing a progressive social order and in subverting it as its criminal antithesis. Indeed he believed that money launched humanity from the state of nature onto the road to civil government. As long as men’s possessions were limited to perishable products, the scope for property was restricted. Money, by offering a durable store of value convertible against all useful things, unleashed the potential for property accumulation and for the intergenerational transmission of inequality. For Locke then, money was indispensable to that development of cultural memory on which civilisation depends.
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