Monday, April 18, 2011

What transition? Part 1: How we've gotten to where we are

Over the course of the next few posts, I would like to set out a more or less complete picture of what I see as the causes of the current crisis, the current responses being devised and why they are insufficient, and the framework conditions I consider indispensable if a different response is to be forthcoming. In a sense, the vast majority of governments and international agencies today are well aware of the need for a transition beyond the current system, but for understandable reasons they are tied down by political and economic agendas that are likely to make the “transition” proposed by the mainstream innocuous. Of course, it is also important to understand why the economic and political agenda is so heavily rigged, because any sort of transition we might advocate is going to have to be (like it or not) emerging from the current situation. That’s why, in fact, I believe we cannot advocate any single pathway, as if everyone was already agreeing about what to do next; and we cannot, either, advocate institutions that would require all citizens to make changes and re-think their lives in one single, synchronic whole. The transition model is about acting, sure, but it’s also about creating the conditions that will allow each citizen, as much as possible, to follow his or her own rhythm. There are urgencies, yes; a large-scale collapse is possible, yes; but short of breaching the most sacred principles of democracy, we simply can’t predicate our political and economic agenda on the need for authoritarian measures and structures, as compelling as they may appear to some fringes of the environmental movement.


Let me begin with an account of how we have gotten to where we are now. Today's crisis is anthropological, ecological, and financial all at once. Three processes have been at work, at different speeds and over different time spans.

(a) Since the middle of the 19th century, an economic logic dominated by industrial capitalism has been generating both (i) exploitation and alienation of human beings and (ii) a degradation of the natural environment. Sure enough, the industrial-capitalist system is no monolith: In most capitalist societies, the labor movement as well as various elite as well as civil-society components made sure there could be a public sector (which actually grew quite large in most nations thanks to the taxation of private profits -- income tax being also, ultimately, a second-degree profit tax since wages are paid from profits) as well as an associative and non-profit "third sector." Nevertheless, as the prime economic "motor" of the whole social-democratic endeavor, industrial capitalism has created both
  • bio-environmental externalities, i.e., effects on the biosphere that are not adequately accounted for in the cost and price structure of goods and services, and so that the corresponding natural-environment problems are not appropriately internalized by producers and providers of these goods and services. [Examples include the well-known problems of measuring the long-term social costs of private pollution, or of pricing the loss of biodiversity or of nonrenewable resources so as to include long-term impacts.]
  • anthropo-environmental internalities, i.e., effects on human beings that are not sufficiently voiced and made visible within firms and organizations, as well as within the general structures of social exchange, so that the corresponding human-environment problems are not adequately externalized and expressed in the public sphere and, in a capitalist culture that largely functions to individualize them, get neutralized as issues worthy of political debate and therefore remain largely private "dirty secrets." [Examples include the multifarious forms of suffering at work, which rarely come out into the open except in extreme cases such as karoshi or workplace suicide, or the various forms of more or less invisible alienation connected with consumerism. The term "internalities" is taken from Ivan Illich.]
(b) The logic of extreme concentration, and hence flagrant inequality, of incomes and wealth generated by these industrial-capitalist processes has led directly to the globalization of trade in goods and of capital flows. I realize this is a contentious claim, since many progressive trade economists believe that, on the contrary, it is the globalization of trade and capital flows that has allowed for wealth concentrations, which are a "natural" part of the free-trade dynamic and simply need to be redressed by taxation and redistribution, to whatever extent possible given the need for market incentives. I don't deny the validity of that idea, of course. However, it seems to me to be a secondary effect of a process that initially went the other way around: Industrial capital constantly needs new outlets for its excess profits, and this has implied a steady pressure to break down borders and barriers -- not so much in the general interest of all economic actors, as is often claimed in well-intentioned defenses of globalized trade, but in the interest of a minority of capital owners and movers. (In this area, my current thinking closely follows the analysis offered in various books by the British economist Harry Shutt, which I find enlightening.) Once this process of "profit-overflow-led globalization" was launched, of course there were cumulative effects so that further income and wealth concentration occurred -- and it has been, and continues to be, utterly massive.

In terms of policy, this led to successive waves of liberalization and deregulation, whose defenders -- once again -- are made up of two opposed camps: on the one hand, those well-meaning individuals who firmly believe that a more level playing field will benefit the smaller producers and the weaker workers the world over; on the other hand, the special-interest-holders -- call them the "transnational capitalist class," to borrow from the title of a recent book by William K. Carroll -- who are mainly concerned with safeguarding their head start by getting policymakers to give them a free rein to accumulate worldwide before the little ones get organized and become a nuisance... Needless to say, this class has been more successful than the level-playing-field progressives in advancing its agenda, which has included hands-on geopolitical manipulations (with military help, often) surrounding the appropriation of mineral and energetic raw materials through various transnational, elite-driven "public-private partnerships" (P3s). (You may want to indulge with Michael Ruppert's massive tome, Crossing the Rubicon. And remember: Just because you dislike conspiracy theories doesn't mean, alas, that well-engineered conspiracies don't ever exist...)

What's the problem I see with this form of globalization? Let me say outright: it's not cross-border trade per se. I am not an advocate of protectionism as an overarching principle. (I do believe that certain protective measures can be justified, as I'm sure will become clear in later posts.) The problem, rather, is that the hyper-accumulation-driven form of world trade, hence of world production and labor, that dominates today's economic scenery (well-intentioned defenses of small producers and their need for market access notwithstanding) has imposed an inordinate stress on human beings and ecosystems through a totally non-selective proliferation of exchanges. What drives the anarchic trade and capital flows we are being submitted to is the maximal net valuation of industrial capital (as well as, increasingly, financial capital, see (c) below), and this caters less to the legitimate interests of the world's poor and meek than it spawns an anything-goes hypermobility of goods, a relentless pressure for international competitiveness, and hence for constant domestic productivity hikes, and so on.

(c) It was inevitable (and this is well-documented in much of today's political-economy literature: see Harry Shutt's books, Frédéric Lordon's remarkable work in France, and Yanis Varoufakis's pathbreaking forthcoming book, The Global Minotaur) that industrial and commercial globalization would lead to massive and rapid bouts of financial globalization, so that the financing of globalized private activities via asset markets could come on top of classical bank financing (with the latter remaining, nevertheless, the sole purveyor of debt-money through the credit multiplier). In addition, since States had deregulated goods markets in the name of the competitiveness of capital, they were themselves driven to deregulate the financial markets they needed (since they had long abandoned any sort of statutory right to create money) in order to finance public expenditures, i.e., public services and third-sector subsidies, which would otherwise have had to be paid for through taxation -- a tool that had fallen into disrepute at the hands of the globalized elite's alleged "competitiveness imperative."

Banking actors themselves saw financial deregulation as a prime means of securing huge additional profits by speculating in the global casino -- an addition they welcomed because their own globalized shareholders were increasingly dissatisfied with the return on investment flowing from the classical, statutory intermediation activities of banks. Overall, the planet's local territories (countries, regions, provinces, urban agglomerations, rural districts, etc.) became more and more dependent on a logic of "attractiveness" to international investors, which has led to an increasing and deepening disconnection between income and wealth generation and the lives of local populations.

Exploring in detail all the adverse synergies at work in this vast tapestry would require at least one whole book. Some of those mechanisms are less clear-cut than others (such as, for instance, the link between intensifying world trade and the damaging effects of macroeconomic growth). There is little doubt, however, that as a whole these three processes -- secular domination of the industrial-capitalist logic of production, industrial and commercial globalization, and financial globalization -- have been instrumental in preparing the current crisis. There have already been, and there will yet be, large human casualties (unemployment, job-related stress, consumerism-driven loss of meaning) as well as ecological ones (pollution, climate change, destruction of biodiversity), and while these casualties have been around for quite some time, they have long been eclipsed by the exuberance of the globalization process and its huge, albeit highly unequal and concentrated, short-term financial benefits.

The incumbent logic is ruled by what we may legitimately call an economic growth imperative. On the one hand, consumption has been given the task of "pulling" the economic machine, especially in large economies with overindebted States such as the U.S., so that relentless consumerism is, in fact, one of our system's last leases on prolonging its life. Wanting to purchase and own more and more "stuff" each year has become a civic virtue -- and it is indeed, given the system's underlying logic. On the other hand, the very logic of private debt-money, hence of interest-bearing private bank loans, as well as the logic of maximal R.O.I. on financial markets, coupled with the systematically pro-paper-asset-owners bias against even moderate inflation, all imply a structural necessity of generating annual real surpluses (not just nominal ones) for private-profitability reasons. Many technological advances which could stabilize and even reduce the per capita throughput of matter are offset, and usually more than offset, by the finance-driven imperative of a rising per capita throughput.

So this is why we have gotten to where we are now. In the next posts, I will
  • try to show why the currently adopted responses to this situation (the "reform" of the financial system, the "cleaning-up" of public finances, the "flexibilization" of labor markets and priority to competitiveness, and the intensification of the exploitation of fossil reserves) are flawed when it comes to sparking a genuine transition away from our current predicament
  • attempt to trace out the lineaments of a new political and economic worldview that might help us address the challenges of a genuine transition in a more adequate manner (essentially, I'll argue that we need to deeply re-think the notion of equality of opportunity that underlies our claims to being democracies and, therefore, to allow citizens to choose the sorts of economic lives they want to live)
  • and suggest concrete framework conditions (an economic Kyoto protocol, new governance structures inspired by libertarian municipalism and participatory economics, an Economic Transition Income scheme, economic democracy and "social economy," and a new ecology of money and currencies) that I believe can spark a genuine transition towards the Next-Step Economy we need

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This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

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