political economics

tmsa at ibm.net tmsa at ibm.net
Sun Sep 13 23:31:18 PDT 1998

A few days ago CNN had a talking head from Merrill Lynch with the title of "political economist." I thought they had all been banished to the 19th Century and Marxism. Anyway, I would love to see that guy's job description. Maybe he has pondered some of these points.

1. The stagnation of real incomes in the USA since 1973 arguably may be related to the tightening grip of the Republican Party over elected posts. This would include the Presidency, Congress, Governorships, state legislatures, and local positions such as as mayoralties. Although real incomes have grown rapidly in the top fraction of the economy since 1973, a sizable majority of Americans are not much better off. And they are often worse. Despite Watergate and increasingly hard right platforms, the Republicans have done increasingly better in electoral contests across the board. If they do well this November 3rd, they will position themselves in 2000 to control the Presidency, both houses of Congress, most of the governorships, state legislatures, and other posts. In sum, Republican political dominance.

It is common knowledge that while a $5 or even a $50 contribution to a candidate is appreciated, the ones that elect candidates are those in the $1,000 range which carry a high level of impact and convenience for candidates. The only people with that level of discretionary income are the top fraction of income earners, whose incomes have grown tremendously since 1973. For example, the average real income of the upper 5% is now about $189,000 per year, which is fully 50% higher than 20+ years ago. Of the 68,000 income earners who clear at least $1 million per annum, the average income is about $2.4 million, $1.6 million of which derives from interest income. This could only be if they owned most of the revenue producing property. While the top 20% incomes grew heavily over the last 20+ years, incomes in the bottom 80% barely grew at all. The increased concentration of wealth could conceivably have led to an increased concentration of political power. Is not the Republican Party seen as the party of bankers, interest-earners, and the very rich? Do Republicans not consistently raise significantly more funds than Democrats? I would argue that the dominance of the Republican Party is due to the contributions of the wealthy, who have been getting a lot wealthier.

2. But in reality the USA does not enjoy the robust economic growth required for a true "lifting of all boats". As jobs amenable to rapid productivity growth, like those in mass production facilities, are sent overseas by capitalists, the American economy has become more of a service economy and less of an industrial economy. Productivity growth has run only 1% per year since 1973, compared to 2.25% during the previous century. Growth in this new service economy is not very heroic. Since 1973 GDP growth is 0.5% slower than during the period of American industrialization -- the previous century. After the early-90's recession, growth is so weak that only in 1997 did average family incomes again reach their highpoint of 1989.

(All these figures copied from Jeff Madrick's article in the New York Review of Books, 14 Ag 1997.)

3. A capitalist revolution attaches a powerful economic dynamo to a society. But in the data of economic historians the greatest boost to a society's fortunes occurs in the relatively early years of capitalism. Over time the dynamo loses some rapidity and slows. Although periods of crapulent depression intersperse those of growth, the overall trend is strongly upward, if not as quickly. After the initial period of "industrialization," or capitalization, the economy faces less promising export markets and comes to be increasingly a service economy. The most technical of jobs, those most susceptible to sharp productivity gains, are moved to "emerging countries," or newly capitalist countries to take advantage of lower payrolls. The highest cost to any capitalist is labor.

For instance, since the passing of the industrialization of Great Britain and its accompanying massive growth, the English economy has grown increasingly anemic over the last 300 years to the point of requiring intensive care. The American economy graduated from its "third world" status in the early 19th Century to the world's leading economy, but growth has been simply pathetic since 1973.

Japan's economy blossomed after WW2 where capitalism reinvented itself and took over the entire country very quickly, but since the late 1980s the Japanese economy declined tremendously. South Korea and the "Asian tigers" had an even shorter period of boom following their even more rapid industrializations. China has enjoyed 10%+ GDP growth for several years and is still growing, enduring the world economic crisis. The capitalist revolution in China proceeds today at a breakneck pace, with old forms of production like subsistence farming constantly running into the capitalist mode of production represented by the thousands of factories popping up throughout the countryside. But if capitalism in China continues the long-term trend, it too will face a future of glacially slow economic growth.

It appears that India is slated next. Numerous economic "reforms" have been introduced (such as those that cut away at regulations and corruption), intended to give capitalism the legal standing it needs to prosper there. If the long-term trend continues, India will industrialize more rapidly than any previous society, and then fall away as a site of capitalist superprofits more quickly than any other. Finally, to except Latin America, the formerly socialist economies including Russia, and much of the Middle East on the basis of them being mostly capitalized already, that leaves sub-Saharan Africa. And although sub-Saharan Africa is today nowhere near the state of economic readiness of a China or even an India, it is progressing in this direction without delay. South Africa has modernized its political system, and now Nigeria may be doing the same. Military conflict has been sharply curtailed in Sierra Leone, Congo (fmr Zaire), and Rwanda. There is serious ongoing talk of a Pan-African effort to attract foreign direct investment and promote trade.

And so that leaves us with Africa. Capitalism will have no new economy after Africa to newly attach its economic dynamo. Africa is the place of origins for the human race, and it may be the place of termination for capitalism. Africa has never proven to be highly conducive to the grandest, most arrogant plans of human beings. Since humans have lived there far longer than anywhere else, the native diseases of the region are far more devastating. (I refer you to English biologist Colin Tudge's fascinating book, "The Time Before HIstory.") Capitalism will find new and more serious obstacles there than anywhere else. I daresay it will simply not work in Africa quite correctly.

What will happen when/if all of the world's economies are winding down, presumably for good? What future will capitalism have then? And how will the political economists explain it all for us?


TMSA <tmsa at ibm.net>

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