Saturday, April 29, 2017

“Economic growth stumbles to worst rate in two years ….”



The power of states to intervene in the operations of contemporary globalized capitalism is severely constrained in a world of deregulated capital markets: states no longer have the same degree of power they once held in the period of “national capitalism” (a term that reminds us of the diminished power of Keynesian-inspired states to robustly ‘steer’ the economy, as well as the prescient arguments made by Claus Offe in Contradictions of the Welfare State and Disorganized Capitalism). The current round of globalization is a conspicuous “combination of deregulated capital movements, advances in information/communication/transport technologies, and a shift in ideology away from social democracy [as well as the ‘Liberal’ capitalist ideologies that buttress liberal or corporatist welfare policies] and statism towards neoliberalism and libertarianism.” “One consequence of this new phase,” writes Meghnad Desai, “is that the state no longer controls the economy, but is one player (a major one of course) among many. The state has to adapt and adjust to forces which it cannot control but must respond to.”

In short, nation states cannot control all of the terms and conditions of economic growth, thus when Trump repeatedly blames Obama for the comparatively disappointing rates of such growth during his two terms of office, he evidences failure to appreciate this conspicuous feature of contemporary economic reality. And, in any case, a high rate of economic growth is not a necessary condition for, say, eliminating endemic undernourishment and deprivation or making considerable improvements in standards of living, as countries that have relied on public policy strategies oriented around what A. Sen and J. Drèze termed “support-led [socio-economic] security” (rather than ‘growth-mediated [socio-economic] security’) such as China (in its ‘pre-reform’ period, that is, prior to its turn toward Party-State directed capitalism), Sri Lanka, Costa Rica, Cuba, Chile, Jamaica, and the Indian State of Kerala, have made remarkable accomplishments in eliminating poverty and improving the standards of living or quality of life, attaining comparatively impressive heights in more than a few significant socio-economic  indices concerning welfare and well-being (eradication of hunger, literacy, education, health care, etc.). In fact, these socio-economic indices are frequently high or higher than those attained by (sometimes far) “richer” countries (based on standard measures of GNP per head) devoted in the first instance to economic growth.* Thus, for example, the elimination of poverty and child hunger in this country need not depend on higher rates of economic growth if the government makes a wholehearted commitment to public “support-led security.” The conditions of affluence and opulence characteristic of the U.S. generally and the upper classes in particular, provide no guarantee that poor children will not go hungry, that the needs of the homeless will be met, or that absolute and relative poverty will be eliminated.

Which brings us to today’s “business” headline: “Economic growth stumbles to worst rate in two years, underscoring Trump’s challenge.” Of course we’re all too familiar with Trump’s penchant for taking credit for any “good” news while disavowing any association with “bad” news, be it political or economic. But in this case, it would be unfair to blame Trump and his cronies for the fact “total economic output, also known as gross domestic product, increased at just a 0.7% annual rate from January through March as consumer spending posted its worst performance in more than seven years….” At the same time, Trump appears to believe he has—with the Republican party behind him—the power to significantly affect if not control such economic phenomena as are causally linked (both rightly and wrongly) with economic growth as conventionally measured in GDP terms. And his proposed tax reforms (alongside other economic-related policies, like deregulation), such as we can discern them (e.g., ‘one of the biggest tax cuts in American history’), are premised on the axiomatic belief that they will fuel the engine of economic growth at rates not seen for at least several decades. Expert analyses to date from disparate sources leave us bereft of any reason to believe Trump’s economic policies will have significant redistributive effects downward so as to move this country in an egalitarian direction. Indeed, it appears they will only exacerbate existing trends in inequality and enhance the conditions of opulence for the wealthy. The recent history of trickle-down economics, as well as our variation on the theme of “capitalist democracy” generally,** provides ample evidence of economic policies that possess a disturbing capacity to distort and subvert the values, processes, and institutions of a would-be democratic polity, a history lesson of the sort Trump lacks all disposition toward learning. 

* Please see the analysis in chapter 10, “Economic Growth and Public Support,” in Jean Drèze and Amartya Sen, Hunger and Public Action (Oxford University Press, 1989): 179-203.

** See, for example, the following titles:

  • Chang, Ha-Joon. 23 Things They Don’t Tell You about Capitalism. Bloomsbury Press, 2011. 
  • Cohen, Joshua and Joel Rogers. On Democracy: Toward a Transformation of American Society. Penguin Books, 1983. 
  • Goodin, Robert E., et al. The Real Worlds of Welfare Capitalism. Cambridge University Press, 1999. 
  • Przeworski, Adam. Capitalism and Social Democracy. Cambridge University Press, 1985.
  •  Quiggin, John. Zombie Economics: How Dead Ideas Still Walk Among Us. Princeton University Press, 2010. 
  • Therborn, Göran. The Killing Fields of Inequality. Polity Press, 2013. 
  • Wolin, Sheldon. Democracy Incorporated: Managed Democracy and the Specter of Inverted Totalitarianism. Princeton University Press, 2008.

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