Commentary on Political Economy

Thursday 11 May 2017

The Ultimate Causes of Secular Stagnation and Populism

We saw in our study on Knut Wicksell that “the natural rate of interest” – a phrase that he coined in his seminal works – is ultimately the rate of profit in a market economy that has established “universally free competition”. Of course, under conditions of universally free competition among both capitalists and workers, the natural rate of interest would ultimately come down to the rate of growth of the working population – because under these conditions only the marginal increase in the working population could provide the marginal product that could then be monetised by capitalists as “profit” or “interest”. Yet this phrase – “universally free competition” – alludes not just to “competition among capitalists”, but it refers above all to “competition between workers”. It follows that the chief aim of the bourgeoisie, so far as it has any political cohesion, is to de-compose and de-politicise the working class. But such de-politicisation will turn workers into a mob or “lumpen-proletariat”, if you wish – an inchoate, formless mass of atomised individuals without any political cohesion or direction.

The biggest attraction of a mob for the bourgeoisie resides in the fact that, first, a mob is easily instigated politically to do what the bourgeoisie wishes it to do; and second, that because a mob represents the decomposition of the working class, this necessarily raises the rate of exploitation or rate of profit or, if you wish, “the natural rate of interest”. The bourgeoisie despises the mob, but it fears the working class: the result is that the bourgeoisie needs continually to turn the working class into a mob as much as it can to reproduce its system of exploitation. That is why we said before that “the bourgeoisie loves the mob” – yes, but equally it despises it, and it fears the working class more than it fears its turning into a mob. Except that a mob is ultimately just as deleterious to the bourgeoisie as a cohesive working class can be.

The conundrum that the bourgeoisie faces with the creation of a mob, however, is dual: first of all, the creation of a mob – that is, the decomposition of the working class – also has the deflationary effect of lowering antagonism in the workplace, which is what drives capitalist ‘innovation’ and investment, with consequent loss of productivity; and second, the consequent lowering of workers’ living and consumption standards leads to a generalised malaise and resentment against the political system (the parties, the parliaments, and ultimately the deep-state administration) that are the forerunners to either revolution or dictatorship.

Any careful observer of the convulsions that bourgeois parliamentary regimes and capitalist economies the world over are experiencing right now and with growing exasperating intensity – any such careful observer will see that each of these phenomena – taken separately – are undoubtedly taking place before our eyes; and, if taken together, will have to agree that they present a compelling outline of the causal chain that links these otherwise seemingly unrelated socio-economic and political phenomena.

Because bourgeois, or “orthodox”, economists view the capitalist economy purely in quantitative terms of stocks and flows, they are quite unable to perceive the all-important sociological aspects of economic behaviour that affect their quantitative variables. One of the greatest conundrums orthodox economists have faced recently is precisely why so much apparent technological innovation has failed to produce any improvements in “productivity”, broadly defined. Yet the answer becomes obvious when one considers that whilst technological innovation has been applied to the “consumption” side of production, the same cannot be said for the “investment” side: and this is for the simple reason that, given the loss of working-class composition and the shift of investment to low-wage countries such as China – where workers as a class have been annihilated by the Communist Dictatorship -, then there has been and there is still no incentive for capitalists to introduce new machinery with higher productivity.

Political Consequences: The Rise of “Populism”

The conspicuous and perspicuous consequences of this de-composition of the working class the world over are, first, the ideological irrelevance of political parties and, with them, of the parliamentary system; and second, the growing need for the Deep State – the executive or bureaucracy – to intervene in politics in the first person, with the consequent re-politicisation of its role in the running of the society of capital. The more political parties lose their very raison d’etre, as is clearly happening everywhere around the world, the greater grows the need for “technocratic governments” to take over the reins of the economy and society at large. For a long time, for instance, central banks were able to make decisions that were then presented by political parties as part and parcel of their overall political strategies. But now that political parties and political governments are unable to legitimise such decisions cohesively – because they no longer “represent” the real conflicting interests of specific constituencies – it is unavoidable that central bankers themselves are called not just to make the decisions (which they always did in any case), but also to explain and justify them to an irreparably divided and antagonistic society of isolated abulic or headless “individuals” whose “opinions” change as fast as the next television drama on Netflix! This is what has come to be known as “populism” – a word that may roughly capture the symptoms of this phenomenon, yet also certainly misses its real origins and causes.

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