The New Class War

May 30, 2017

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Michael Lind, “The New Class War.” American Affairs, May 20, 2017.

Having just read Martin Ford’s The Rise of the Robots, with its very pessimistic outlook for American workers, I found Lind’s perspective to be an intriguing alternative. His article comes from what is for me an unlikely source. American Affairs is a new journal devoted to rethinking conservatism in the light of the Trump ascendancy. The way things are going, we may need another journal to make sense of a Trump descendancy. But let’s assume that at least some of what Trump represents may survive his mess of a presidency–in particular, his nationalistic concern about saving American jobs in an era of global competition. How will that impact the prevailing political ideologies?

Social class in the Cold War era

Unlike many mainstream conservatives, Lind is willing to acknowledge the reality of social class. Following scholars like James Burnham and John Kenneth Galbraith, Lind describes a “managerial elite” consisting of “private and public bureaucrats who run large national and global corporations and exercise disproportionate influence in politics and society.” This is a “mostly hereditary” class, since it draws its membership primarily from the children of the previous generation of the same elite. The class system has a semblance of meritocracy, since educational credentials are an important means of success, but access to the “right” education is itself very unevenly distributed.

As Galbraith argued, “countervailing power” can keep an elite from entirely having its way. This was especially true in the “golden age of capitalism from the 1940s to the 1970s, combining high growth with a more equal distribution of its rewards than has ever existed before or since.” In Lind’s view, the desire for national unity in the face of foreign threats was a major motivation for reaching a reasonable “settlement” of management and labor differences. Workers won the right to organize, more favorable wages and working conditions, and a stronger social safety net. The bargaining power of labor was strengthened by factors that kept the labor market tight, such as the immigration restrictions that had been passed in the 1920s, and the withdrawal of many women from the labor force at the end of World War II.

Multinational oligarchy and popular discontent

All of this changed after the breakup of the Soviet Union and the end of the Cold War. A new pattern of global production and corporate organization destroyed the existing accommodations between business and labor.

Through the empowerment of multinational corporations and the creation of transnational supply chains, managerial elites disempowered national labor and national governments and transferred political power from national legislatures to executive agencies, transnational bureaucracies, and treaty organizations. Freed from older constraints, the managerial minorities of Western nations have predictably run amok, using their near-monopoly of power and influence in all sectors–private, public, and nonprofit–to enact policies that advantage their members to the detriment of their fellow citizens.

Developed countries had long been accustomed to concentrations of economic power within domestic industries. Now those concentrations became more international, so that in many industries, a handful of giant companies controlled over half of the global market. While profits and managerial compensation soared, productivity slowed and wages stagnated. Lind believes that this was because transnational companies had other ways to pursue profits besides technology-driven productivity growth. It was easier to move factories from high-wage areas to lower-wage areas, or to take advantage of favorable tax policies. Apple not only made its iPhones in China, but channeled profits through Irish shell companies to shield billions from taxation. Transnational companies also worked to harmonize national laws in ways that favored capital, especially free trade agreements, while resisting efforts to set international standards for wages and working conditions or environmental protection.

Corporations that had to operate domestically were not as free to search the world for the cheapest labor or lowest taxes. But they did benefit from looser immigration policies that kept labor supply up and wages down in some markets. Marx had already argued in the nineteenth century that ethnic conflict divided labor and strengthened capital: “The ordinary English worker hates the Irish worker as a competitor who lowers his standard of life….His attitude towards him is much the same as that of the “poor whites” to the Negroes in the former slave states of the U.S.A….This antagonism is the secret by which the capitalist class maintains its power.”

As the income gap between the managerial class and the working class has widened, popular discontent has increased. But Lind does not think that populist movements alone will bring about very much change. Historically, oligarchies have usually been able to survive populist challenges. The populists have usually had to give up or sell out. In some places, such as the Deep South and much of Latin America, this pattern has repeated itself for a long time:

Most of the time, coteries within a nepotistic elite run things for the benefit of their class. Now and then, a charismatic populist arises, only to fail, sell out to the establishment, or establish a personal or dynastic political-economic racket. Formal democracy may survive, but its spirit has fled. No matter who wins, the insiders or outsiders, the majority will lose.

It is sobering to think that if we keep on as we are going, the country could deteriorate into a kind of banana republic with chronic and perhaps violent unrest and political repression.

Managerial elites are bound to dominate the economy and society of every modern nation. But if they are not checked, they will overreach and produce a populist backlash in proportion to their excess. By a misguided policy of suppressing wages and thus throttling mass consumption, unchecked managerial elites may inadvertently cripple the technology-driven productivity growth responsible for their rise….

This could even result in a more feudal type of society, in which the rich live off the “rents” from their accumulated wealth rather than creating new wealth by investing in higher productivity.

The multipolar challenge

So what would counteract the drift toward global oligarchy? Lind believes that peace among the international powers has been a necessary condition for managerial globalism. This has been the case “only in the decades immediately following the Cold War, when the United States was the ‘sole superpower’ and no credible ‘peer competitor’ had yet emerged.” But now, the rise of China and other powerful players may be a game-changer. Americans may have to rethink the idea that international boundaries no longer matter, and that the global economy benefits everybody in some kind of classless meritocracy. We must now ask tough questions about whether the cumulative effects of transnational capitalism on the United States are really in our national interest.

Lind sees the world becoming not borderless but multipolar, divided into several “great-power blocs,” most likely China, India, the US and Europe. Within each bloc, countries may trade very freely, but each bloc will need to be careful about giving up too much of its industrial capacity. On that may depend its ability not only to create new jobs and income, but to wage war. Strength, unity and internal harmony could become more prominent national values, as they were during the Cold War.

The elites may be too powerful to have much to fear from populism, but their division into competing power blocs may force them to fear one another. Policies that promote the wellbeing of business and labor as members of the same national team could have broad political appeal.

Unsatisfactory alternatives

Lind accepts part of Donald Trump’s critique of the United States, that we have let other countries produce too much of what we could have produced at home, creating unnecessary hardships for American workers. Our chronic trade deficit with countries like China and Germany is indeed a weakness, and their “parasitic export-oriented strategy” of development is better for them than it is for their debtors. Unlike Trump, however, he rejects the most conservative response, which he calls “radical renationalization” or “radical de-globalization.” He sees it as neither feasible nor desirable to retreat from the world by restricting the entry of foreign goods and forcing consumers to buy only what is produced at home. That would sacrifice the benefits of “supra-national economies of scale,” the efficiencies to be achieved by producing things for the largest possible market.

At the other extreme, Lind also rejects the idea that the ill effects of oligarchic globalization can be corrected by countervailing power exerted by global government, global labor unions, or other transnational institutions. He just doesn’t think that a multipolar world will produce the necessary degree of international cooperation. I thought that Lind was a little too dismissive there, since global agreements like the Paris Climate Accord may be needed, at least to address global emergencies.

A third unsatisfactory alternative is “neoliberalism plus”:

Neoliberalism plus, also called “inclusive capitalism,” is the preferred response of the transatlantic managerial class to the populist revolts in Europe and America. Essentially, neoliberalism plus is Reagan-Thatcher-Clinton-Blair neoliberalism with more subsidies to the “losers” of globalization. The disempowerment of non-elite citizens by the oligarchic capture of politics and the destruction of unions would not be altered. But the masses would be bribed into acquiescence by means of higher wage subsidies, like the Earned Income Tax Credit (EITC) in the United States, or perhaps a universal basic income providing every citizen a poverty wage.

That last measure is exactly what Martin Ford recommends in order to maintain the workers’ purchasing power as the robots take more and more of their jobs. Lind believes that such strategies will fail. As long as companies can rely on cheap labor at home or abroad, they do not need to invest much in new technologies. The full potential of those technologies cannot be realized, and the economy cannot generate the economic growth needed to pay for any new “bribes” for the masses.

I would only add that if “neoliberalism plus” is an inadequate solution, then “neoliberalism minus” is even worse. That may be a good term for the Congressional Republican agenda of more freedom and lower taxes for the elite, but benefit cuts for the struggling working class. That the President goes along with that strategy while claiming to champion the workers puts his presidency on very thin ice.

A “new developmentalism”

What Lind would like to see is a different strategy for national progress that he calls a “new developmentalism.” He describes it only in very general terms in this article. It would require new checks on the freedom of managerial elites, as well as a new “settlement” between business and labor for the sake of economic cooperation and national unity.

Lind wants great powers to compete in the global arena, but do it differently. I would describe what he wants as a “race to the top” instead of a “race to the bottom.” Public policy would discourage corporations engaged in international trade from seeking profits through lower wages and tax avoidance. For companies that operate domestically, it would encourage “tight labor markets for domestic service workers, achieved by immigration restriction, work-sharing, shorter workweeks, or other means.” High wages could boost productivity in two ways, by supporting the mass market for large-scale industries and encouraging labor-saving technologies, which themselves could be dynamic new industries. “If high wages lead to the replacement of fast-food workers by kiosks, the manufacture of the kiosks could become a new, capital-intensive, high-technology industry.”

Keeping labor markets tight and wages up, while at the same time investing in labor-saving technologies, sounds like a contradiction, and it requires a difficult balancing act. The key is productivity–using new technology not just to unemploy labor but to employ it more productively, so as to justify higher pay. That relates to what I wrote previously about favoring human-machine collaboration over the human replacement expected by Martin Ford. Replacement alone could destroy the working class and send the economy into a downward spiral.

The heart of Lind’s argument is perhaps best captured by this statement:

Great-power competition, even in the form of limited cold wars, is likely to reward nations whose economic model is based on developing productive technology and raising the incomes of domestic worker-consumers….In cold wars and trade wars, even if no blood is shed by the contenders, countries and blocs with empowered and patriotic workers are likely to do better than rival nations crippled by immiserated workforces and selfish, nepotistic, oligarchic elites.

The future may depend on how many of our leaders can figure this out.


Hillbilly Elegy (part 3)

September 7, 2016

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Subcultures as adaptations

J. D. Vance has vividly described the “hillbilly” culture into which he was born, but which he outgrew. He has also offered a critique of that culture, showing how its attitudes and behavioral norms can become obstacles to personal health, happiness and achievement.

As with much of the writing in the “culture of poverty” tradition, the critique can exaggerate how much the poor are responsible for their own way of life and all its problems. I fear that Vance is falling into this trap when he says that “these problems were not created by governments or corporations or anyone else. We created them, and only we can fix them.” But the cultures of “hillbillies” or inner-city blacks or Latino farmworkers are not self-contained worlds independent of the larger social environment. They are American subcultures that have always been shaped by the institutions of the dominant culture.

One does not have to be a strict social determinist to argue that subcultures adapt to the institutional realities of the surrounding society. People do create their own culture, often in surprisingly innovative ways. But they cannot do it in a social vacuum. People interact all the time with institutions like work organizations, schools, churches and governments, which provide both challenges and opportunities.  The lack of agency Vance complains about–the feeling that one lacks control over one’s life–arises especially because the poor and uneducated are in such a weak position in relation to such institutions. The poor don’t just need new attitudes and behaviors; they need empowerment.

At one point in his childhood, Vance was called upon to testify in court against his own mother, who had physically attacked him. That was when he noticed that “the social workers and the judge and the lawyer all had TV accents. None of us did. The people who ran the courthouse were different from us. The people subjected to it were not.” On that occasion, Vance lied in order to protect his mother and keep those strange-talking outsiders from hurting his family. Vance describes his people as preferring their own form of justice. “My people were extreme, but extreme in the service of something— defending a sister’s honor or ensuring that a criminal paid for his crimes. The Blanton men, like the tomboy Blanton sister whom I called Mamaw, were enforcers of hillbilly justice, and to me, that was the very best kind.” He does not analyze this further, but an informal, homemade system of justice is a predictable adaptation for people who see the official justice system as not serving their class of people very well.

When Vance is exploring the psychology of work, he says, “When groups perceive that it’s in their interest to work hard and achieve things, members of that group outperform other similarly situated individuals. It’s obvious why: If you believe that hard work pays off, then you work hard; if you think it’s hard to get ahead even when you try, then why try at all?” I would add the sociological point that such beliefs are shaped over time by social experience. When opportunities are opening up, as they were in the heyday of manufacturing expansion, people become more optimistic. But when opportunities are shrinking, families with few generations of success to remember are easily discouraged.  Subcultures do change, but they change slowly, and mostly in response to changing conditions. Vance mentions that the emigrants from coal country who found manufacturing jobs “had largely caught up to the native population in terms of income and poverty level” within two generations. But the postwar economic progress was not sustained long enough to eradicate the culture of poverty. Generations of restricted opportunity had created it, and generations of expanded opportunity were required to repair it.

Women’s agency

Another example of how American social institutions help account for subcultural adaptations involves women and sexuality. One of the best examples of the lack of agency Vance deplores is unplanned teenage pregnancies. They figure prominently in his story, since his mother became pregnant at 18 and his grandmother at 14. If sociologists have learned anything about gender in the past half-century of intensive study, it is that the institutions of patriarchal society are largely responsible for limiting women’s agency in general, and women’s control over their own bodies specifically. A lot of early pregnancies and shaky marriages are what you get when the dominant culture glamorizes sexuality and portrays women primarily as sex objects; when schools fail to provide sex education or limit it to preaching abstinence; when churches teach that sex is too shameful to discuss and contraception is sinful; when the local economy provides few career opportunities for women, so they see no life for themselves except as mothers; when good jobs for men are also in short supply, so they express their masculinity by obtaining and controlling women, sometimes by force, but not so much by supporting their families. This is also a vicious circle, since early motherhood can offer an escape from the troubled homes created by the previous generation of young mothers.

Blaming families for their own problems is easy. No one denies that what girls and boys learn at home can shape their gender roles for a lifetime and affect whether they express their own sexuality responsibly. Parents are primary carriers of culture, to be sure, but they cannot be expected to transform their received culture singlehandedly. Expecting families to change the culture without supportive changes in other social institutions is not realistic.

The politics of pessimism

Vance concludes his book by saying, “I don’t know what the answer is, precisely, but I know it starts when we stop blaming Obama or Bush or faceless companies and ask ourselves what we can do to make things better.” I imagine that few people will disagree with his call for more personal responsibility. I do note, however, that this is essentially the Ronald Reagan philosophy of government, “Ask not what your country can do for you; ask what you can do for yourselves.” Vance does not see much for government to do about the plight of the struggling working class, since “the fault lies almost entirely with factors outside the government’s control.”

In truth, neither of the major political parties has been offering much hope to the white working class lately. Hillary Clinton does not seem to be connecting with them very well at all. Donald Trump is speaking to them directly, but appealing to their prejudices and false hopes. He encourages them to blame their problems on foreigners and immigrants, reject climate change as a hoax, and hope for a return of coal mining jobs.

But I think something is lost if citizens of a democracy become too pessimistic about their own government. Vance doesn’t want people to blame government for their problems, but he doesn’t want them to look to government for solutions either. In that respect, he can be accused of reinforcing the alienation from mainstream institutions that is a familiar trait of “hillbilly” culture. By focusing on agency as a psychological characteristic, he overlooks the value of the social agency that arises when citizens cooperate together in a common political cause.

One thing that government is going to have to do is increase support for higher education, so that students can go to college without accumulating massive debt. States have been cutting spending on education at the same time that the educational requirements of good jobs have been rising. (Vance should appreciate that need, since his own success story depended on a state-supported university and generous financial aid from a private law school.) Another thing for government to do is to promote industries that have realistic hopes of creating good jobs. The solar industry already employs a lot more people than the coal industry. Ironically, Hillary Clinton is the one calling for these things (when she can be heard over the clamor for her emails), but she is getting her least support from working-class whites who might benefit from them.

Assuming the Trump candidacy fails, as I hope it does, I would like to see the white working class join other disadvantaged groups in a progressive coalition for realistic socioeconomic change. If that seems improbable, we should remember that that’s what they did during the Roosevelt era.

 

 


Hillbilly Elegy (part 2)

September 6, 2016

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J. D. Vance describes himself as a “cultural emigrant” from the “hillbilly” culture of his youth to the upper-middle-class world of educated professionals. That puts him in a somewhat detached position, from which he can see his former world as not just a collection of individual characters, but as a common culture with typical beliefs, values and patterns of behavior.

One major theme of the book is that “social class in America isn’t just about money.” It’s also about lifestyle, and upward mobility is unlikely without changes in lifestyle. The attitudes and behaviors people acquire in their early socialization can get in their own way.

William H. Whyte classically defined the “Protestant ethic” as an ethic of hard work, thrift and self-reliance. Vance sees too much of the opposite: laziness, overspending and blaming others for one’s problems. To be fair, he doesn’t actually use the world “lazy,” but he does say, “We choose not to work when we should be looking for jobs. Sometimes we’ll get a job, but it won’t last. We’ll get fired for tardiness, or for stealing merchandise and selling it on eBay, or for having a customer complain about the smell of alcohol on our breath, or for taking five thirty-minute restroom breaks per shift.” Without denying the reality of these problems, I will note that Whyte, writing in the 1950s, was questioning how much of a work ethic American society really wanted anymore. Prosperous, corporate American seemed to be placing increasing value on leisure, spending, and reliance on big organizations. Sometimes I wonder how long many higher-class people would last in some of the grueling jobs that poor people have to do. But I digress.

Vance’s number one complaint is that too many “hillbillies” lack a strong sense of personal agency, a belief that their choices matter and that they can take control of their own lives. That puts them in a strange relationship with their own government. On the one hand, “a large minority are content to live off the dole.” On the other hand, many like to blame the government for their problems. And those who are trying to uphold the traditional work ethic, at least in theory, may blame government for spending too much on public assistance.  Vance suggests that this is a bigger reason why so many low-income whites have abandoned the Democratic Party than the Party’s support for the Civil Rights Movement. I’m not so sure that those two issues can be separated, since white resentment of government spending is probably strengthened by the perception that people of color are getting more help than white people are. In any case, Appalachian whites have shifted their allegiance to the party of limited government even as their economic vulnerability and potential dependency have been increasing.

Vance describes his people as uniquely pessimistic and cynical, much more so than Latinos or blacks. They are patriotic in a vague sort of way, but do not currently have any heroes as they once had Franklin Roosevelt. Largely detached from the wider society, they can be intensely loyal to kin and react violently to perceived threats from outsiders. They pride themselves on their toughness, which they rely on to compensate for other weaknesses. As a child, Vance had a lot of opportunities to learn about drinking, yelling and fighting, but not much else about being a man.

Reacting strongly against the idea of blaming others for one’s problems, Vance concludes that “these problems were not created by governments or corporations or anyone else. We created them, and only we can fix them.”

I have a concern about this perspective that I will elaborate in my next post. I think that Vance’s discussion of “hillbilly” culture is strong on personal observation but weak on analysis. He is, after all, a young lawyer, not a sociologist, anthropologist or economist. He makes the world he describes sound too much like a standalone culture, as if we had just discovered it in some remote jungle. It is, rather, an American subculture shaped and reshaped by the institutions of American society. Those institutions include churches and schools, and yes, government and corporations. American institutions, from coal companies to Bible Belt churches, have been a demonstrable part of the problem, and institutional change as well as personal change will have to be part of the solution.

Continued


Hillbilly Elegy

September 5, 2016

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J. D. Vance. Hillbilly Elegy: A Memoir of a Family and Culture in Crisis. HarperCollins Kindle Edition, 2016.

First, I want to express my discomfort with the word “hillbilly,” a word I have rarely spoken. For many, it is a derogatory term. Vance uses it because that’s the way his family described themselves, but I will use the quotation marks to indicate that it is his term, not mine.

J. D. Vance is a young man who overcame a troubled family history to graduate from Ohio State and Yale Law School. He says that he still identifies with the people he grew up with, “the millions of working-class white Americans of Scots-Irish descent who have no college degree. To these folks, poverty is the family tradition–their ancestors were day laborers in the Southern slave economy, sharecroppers after that, coal miners after that, and machinists and millworkers during more recent times.” The story of such people is a story of generations of economic hardship, considerable upward mobility during the booming manufacturing economy after World War II, but a return of hard times for those displaced by the recent loss of manufacturing jobs.

This is not, however, primarily a book about economics. It is a book about the “hillbilly” culture that often gets in the way of personal achievement. Vance sees it as “a culture that increasingly encourages social decay instead of counteracting it.” Vance found that he had to overcome many of the self-defeating attitudes and behavior patterns he encountered among his own friends and relations. Fortunately he got some more positive messages too, messages about working hard and doing well in school, especially from his grandparents. They had gotten out and moved up themselves during the postwar boom, although they continued to lead troubled lives in many ways.

Vance says that he always thought of Jackson, Kentucky, where his great-grandmother lived, as his home, although he was born and raised in Middletown, Ohio. His grandparents, always referred to as Mamaw and Papaw, moved to Ohio “at the tender ages of fourteen and seventeen,” forming a hasty union as a result of teenage pregnancy. They joined a massive migration out of Appalachia to the industrializing cities, a migration Vance describes as spreading the “hillbilly” culture as well as the people. Papaw got a job at a steel company and provided a good income. The first baby lived only a few days, but the couple had three more, the second of whom was J. D.’s mother Bev. The marriage became increasingly troubled, however. Vance describes his grandfather as a violent drunk, and his grandmother as a socially isolated violent non-drunk.

Vance describes his mother Bev as a good student, but she chose marriage over college when she became pregnant at eighteen. She went on to have five failed marriages and a serious drug problem. Vance says that what he hated most about his childhood was “the revolving door of father figures.” He was born in 1984, a product of his mother’s second marriage, which lasted only a couple of years. He was later adopted by his mother’s third husband. After that marriage ended too, his mother became more erratic in her behavior, more drug-dependent, and sometimes abusive. J. D. began to live much of the time with his grandparents, who still lived close by, although they too were separated. “Mamaw told me that if Mom had a problem with the arrangement, she could talk to the barrel of Mamaw’s gun.”

Vance also relied heavily on his older half-sister Lindsey, whom he describes as the person he has been proudest to know. As their mother’s parenting deteriorated, Lindsey assumed a more adult-like role, and went on to have a successful marriage. After she moved out, J. D. lived for a time with his biological father, who had remarried. Then he came back to live with his mother and her latest husband. When that marriage ended, he spent the last two years of high school living with Mamaw exclusively. That’s what he says turned his life around. During that time he showed dramatic improvement at school, both academically and behaviorally, for which he gives Mamaw much of the credit.

After finishing high school, Vance entered the Marine Corps, which “taught me how to live like an adult.” The Marines assumed that everyone needed to learn basic things like personal hygiene and how to balance a checkbook. By the time he left, he had risen to the position of media relations officer for a large military base. After the Marines, he attended Ohio State and Yale Law School. Because he was poor, Yale gave him a substantial financial aid package. He was the first person in his nuclear family to go to college and the first in his extended family to go to professional school.

At Yale, Vance had the good fortune to meet, and later marry, a law student from a much more stable background. Here he uses a standard list of “adverse childhood events” (ACEs), to make the point. They include things like parental divorce, drug abuse, domestic violence, depression and suicide. Vance had six ACEs in his background, while his partner had none. While his basic approach to relationship issues was fight or flight–attack or run away–he learned from her how to stay and talk problems through. Here is Vance’s rather caustic summary of what he had learned about conflict resolution in his childhood:

Never speak at a reasonable volume when screaming will do; if the fight gets a little too intense, it’s okay to slap and punch, so long as the man doesn’t hit first; always express your feelings in a way that’s insulting and hurtful to your partner; if all else fails, take the kids and the dog to a local motel, and don’t tell your spouse where to find you— if he or she knows where the children are, he or she won’t worry as much, and your departure won’t be as effective.

As such comments make clear, the book is not just an autobiography, but a critique of “hillbilly” culture. My next post will go more deeply into that critique.

Continued


Postcapitalism (part 2)

May 4, 2016

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Paul Mason’s perspective on the current plight of capitalism develops from his understanding of the crises that have occurred periodically in the history of capitalism. The current crisis resembles past crises in many respects, but differs from them in ways that are crucial to his central argument. The current crisis has taken shape more slowly and been resisted more successfully for a time, but will ultimately result in a more profound transformation.

Long cycles of capitalism

The historical part of the book focuses on the “long cycles” of capitalism first described by Nikolai Kondratieff. He discovered a roughly fifty-year cycle of economic activity, divided about evenly between an upswing and a downswing. He described the upswing as a period of technological innovation and high investment, followed by a period of slower growth or contraction, usually ending with a depression. Mason uses these dates for the first four long cycles:

  1. 1790 to 1848
  2. 1848 to mid-1890s
  3. 1890s to 1945
  4. Late 1940s to 2008

Each cycle has its key industries where innovation and growth are centered, such as the steam-powered factory in cycle 1, railroads and machine-made machinery in cycle 2, mass production and electrical engineering in cycle 3, and mass consumer goods like automobiles in cycle 4.

In the late 1990s, a fifth cycle began, “driven by network technology, mobile communications, a truly global marketplace and information goods.” But instead of transforming production, it has stalled out, while the previous cycle has hung on longer than normally expected. Mason’s theory of cycles tries to explain why.

A theory of cycles

In very brief form, Mason’s theory says this: During the upswing of a long cycle, capital that has built up in the financial system flows into new technologies and markets, “fueling a golden age of above-average growth with few recessions.” Because the economic pie is expanding so rapidly, achieving social peace by giving everyone a piece of it is easier. Workers who are displaced by labor-saving improvements can usually find employment in expanding industries.

At some point, the upswing peaks out. “When the golden age stalls, it is often because euphoria has produced sectoral over-investment, or inflation, or a hubristic war led by the dominant powers.” There are limits to how much capital can be invested productively in the same technologies and industries. As for “hubristic wars” I assume he means that nations foolishly squander their wealth trying to grab too large a share of the world’s markets and raw materials. I will add that although military spending can stimulate the economy in times of recession, wars have had devastating effects on many healthy economies, with the impact of World War I on Europe the prime example. “War is good for the economy” is not a very safe bet.

When  dominant industries stop expanding and profits stop rising, employers become more resistant to wage demands, and they may also try to reorganize production to replace skilled workers with lower-skilled workers and machines. Worker resistance increases as displaced workers have fewer alternatives. If profits continue to fall, “capital retreats from the productive sector and into the finance system, so that crises assume a more overtly financial form.” I take that to mean that capital that is not invested productively can only finance debt and inflate the value of stocks and other assets beyond their earnings value. Financial panics and depressions occur when the debtors default and the asset bubbles burst.

Mason thinks that traditional descriptions of long cycles focus too exclusively on waves of technological innovation (not to say those are not important), and not enough on falling profits, class conflict, and the intervention of the state. In the first three historic cycles, businesses tried but ultimately failed to maintain profits by squeezing the workers. When economic conditions and social unrest got out of hand, the state acted to facilitate the transition to the next cycle.

In each long cycle, the attack on wages and working conditions at the start of the downswing is one of the clearest features of the pattern. It sparks the class warfare of the 1830s, the unionization drives of the 1880s and 90s, the social strife of the 1920s. The outcome is critical: if the working class resists the attack, the system is forced into a more fundamental mutation, allowing a new paradigm to emerge….The history of long cycles shows that only when capital fails to drive down wages and when new business models are swamped by poor conditions is the state forced to act: to formalize new systems, reward new technologies, provide capital and protection for innovators.

The issue of falling profits deserves additional attention, but I’ll save that for when I discuss Mason’s theory of value in the next post.

The prolonged fourth cycle

Something different happened during the downswing of the fourth cycle, beginning in the 1970s. As in previous cycles, the growth in productivity slowed. The initial responses were inflationary rather than deflationary. Businesses kept giving in to the wage demands of highly organized workers, and government social spending also increased, although both wages and benefits were eroded by rising consumer prices. As wages went up faster than productivity, profits were squeezed. Business then launched a very successful attack on workers and government, blaming both of them for inflation. Globalization enabled corporations to eliminate high-wage, unionized manufacturing jobs in the developed countries, while finding new sources of revenue in the developing countries.

All this meant that profits could be maintained without transitioning beyond fourth-cycle capitalism. There was a twenty-five-year surge of productivity in the developing world, between 1981 and 2006. But in the developed countries, productivity growth continued to fall, and yet profits remained high because of stagnating wages. Inequality rose to Gilded Age levels, but until recently popular resistance has not been strong enough to force serious systemic change.

So we have been living in a strange time, suspended between an old system that no longer works for enough people and a new one that can’t quite get going. “Alongside higher profits, the overall rate of investment after the 1970s is low.” There is something odd about an economy in which capitalists make so much money while investing so little in the economic progress of their own countries. But another major transition cannot be put off forever.

A fifth cycle?

Twenty-five years ago, I taught a course on Social Change using Daniel Chirot’s Social Change in the Modern Era as a text. Chirot used long-cycle theory as a framework, and he said this about the fifth cycle he saw emerging at the time:

We can expect that the present fifth industrial cycle will gain ground, transform economies and societies, make life ever more materially comfortable, and then come to some sort of end in a half-century or so. Then, a new crisis will come, and a sixth as yet quite unknowable, industrial cycle will begin.

I gave a lecture which began, according to my notes, “Chirot may be right, but I want to raise the possibility that we are coming to the end of an era, not just a transition between cycles.” I based that suggestion on several far-sighted books of the 1980s, such as Christopher Chase-Dunn’s Global Formation: Structures of the World Economy, and James Robertson’s Future Work: Jobs, Self-Employment and Leisure after the Industrial Age.

Mason’s position is basically the same. The new cycle that has begun without yet coming to fruition represents a more fundamental threat to capitalism. That would explain why resistance is so strong, and why capitalists would prefer to export existing forms of production to other countries rather than improve upon them at home.

Continued