Riding the Downwave Part 2
LAST week I wrote about Kondratiev waves – generation-long economic pulses triggered by rising profit levels and booming investment in new technological clusters, followed by intensified class conflicts, falling profit levels and slow growth. I argued that the world entered a lnew Kondratiev upswing in the 1980s, with the victory of neoliberal ideas and the arrival of the internet. This peaked in 2009 with the global financial crisis.
We are now in a Kondratiev downswing characterised by falling profit rates, social unrest, trade wars and relative economic stagnation. What happens next and what should we do about it?
All the classic hallmarks of a Kondratiev down-wave are now evident. In particular, class conflicts are on the rise after a decade of austerity. The savage austerity programmes followed by industrial nations are designed ultimately to reduce business taxation, and so alleviate the pressure on squeezed profit margins:
· Cuts to UK corporation tax rates after 2010 have reduced public revenues by circa £20bn per year.
· Business tax cuts introduced by Donald Trump in 2017 cut the US corporate tax rate from 35 per cent to an effective 7 per cent in 2018 – the lowest since World War II.
· In November, Canada announced corporate tax cuts worth US$10.5bn.
· The latest French budget cuts taxes on business by US$23.5bn.
At the same time, trades unions are pushing back against austerity and the rapid increase in exploitation characteristic of a Kondratiev downswing:
· There has been a wave of public sector strikes in New Zealand, the laboratory for introducing neoliberal policies (SNP Growth Commission please note).
· Last month, the independent Swedish Dockworkers Union won a significant victory against both the harbour employers’ organisation and the tradit
ional union bureaucracy, but also in the face of new anti-union legislation introduced by Sweden’s right-wing government (again, Growth Commission please note).
· In Mexico, the election of the leftist Manuel Lopez Obrado as president has encouraged a wave of successful strikes.
· Employees at the big Romanian subsidiary of Electrolux, the Swedish consumer goods conglomerate, are currently on strike, spearheading opposition to the super-exploitation of Eastern European workers by western companies.
· China Labour Bulletin, an independent civil rights group in Hong Kong, recorded 1,700 strikes and labour disputes in mainland China in 2018, up from about 1,200 the year before. These represent only a fraction of disputes, since most go unreported.
The outcome of these social conflicts will determine what happens next.
PECULIARITIES OF THE NEW DOWNWAVE
This Kondratiev also has distinct peculiarities. For starters, it will be difficult to find investment opportunities with a sufficient rate of profit to absorb the vast surplus capital that built up under neoliberalism between the 1980s and now. This is compounded by the fact that much of the capital is locked up in vastly over-valued high-tech stocks, which could crash in price if central banks ever stop printing money (aka “quantitative easing”). Which is why I think the new Kondratiev downswing could last much longer than normal (unless we take action). Also, if profit levels remain depressed, there is pressure on the various imperialisms to take excessive political risks – hence Trump’s trade wars.
Second, we are witnessing a massive, irreconcilable disjuncture between the possibilities afforded by new technologies (especially AI and green energy) and the existing pattern of private ownership and control – what Uncle Marx dubbed the friction between the expanding forces of production and the (social) relations of production. Example: we face irreversible climate change Armageddon within 30 years when it is perfectly possible to introduce smart energy use and end global warming inside that same period.
Which brings us neatly to solutions. We need to impose rational, conscious, democratic control over the ownership and investment of productive assets – and do so on a global scale. Otherwise this Kondratiev down-wave could be permanent.
I’m not a utopian and I distrust theoretical blueprints. What is required is a lot of experiment with different ways of doing things. This is where an independent Scotland comes in. We are an advanced, asset rich and highly educated society that has escaped (so far) the worst of the neoliberal dismantling of the post-war social democratic consensus. We are also tolerably open to immigration. An independent Scotland is therefore in prime position to explore new ways of running the economy on a shared, communitarian and planned basis. And be an example to others.
This will require an immense act of will. It means putting banks and finance into public ownership, so investment can be organised long-term for public good, not short-term to maximise profit and executive bonuses. It means reorganising education not in the interests of business but for the betterment of the individual. It means greening energy and the environment, not burning fossil fuels. It means bringing trades unions onboard as partners, not treating them as potential enemies. It means devolving power to local communities and away from St Andrews House. It means abandoning the bogus GDP “growth agenda” of the Growth Commission.
PS: Nicolai Kondratiev was shot by the NKVD in September 1938, another victim of Stalin’s purges.