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Re: <nettime> Nobel laureate in economics aged 102 endorses the human ec
Brian Holmes on Tue, 29 Jan 2013 10:14:36 +0100 (CET)


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Re: <nettime> Nobel laureate in economics aged 102 endorses the human economy...



I quite enjoy this discussion.

On 01/28/2013 08:36 AM, Newmedia {AT} aol.com wrote:

> What sort of economic growth does "informationalism" (or what many
> have long called "The Information Age" and what was originally
> called "Post-industrialism") offer for those economies that no
> longer have industrialization (i.e. the earlier 4x "surges"
> described in her work) to drive living standards -- like North
> America, Europe and Japan?

Ha ha! Well, in the US from about 1980 onward, the information
age offered a very high return on private finance and a steady
stream of purchasers for govt bonds. Mr. Reagan pioneered this
combination, in concert with Paul Volcker who was then head of the
Federal Reserve. By raising the Fed prime rate to almost 20% they
provoked an extremely deep recession which produced double-digit
inflation and destroyed entire sectors of US business, including much
of the former manufacturing base. However they also attracted capital
from around the world, first because of the interest rate itself,
then because financial returns surged after the "short, sharp shock."
On the strength of that "accomplishment" Reagan launched his Star
Wars program, which the US paid for by selling a very large amount
of bonds: the two Reagan administrations doubled the national debt,
pushing it over $1 trillion for the first time. That set the pattern
for the entire period that followed, up till now, since the 2008
crisis has not changed anything in this respect. The US can easily run
a trade deficit of $785 billion in 2011, and bail out the banks to
boot, and pay for a variety of overseas wars as well, all because of
this strange "political" capacity to borrow outrageous sums of money,
something that no other country in the world can do. (The City of
London was, however, also quite good at attracting global investment
in the 80s and 90s, even while the UK went down the tubes, public
services collapsed, illiteracy rose, etc.)

I follow the technology all the time, Mark, but I can't disentangle
it from political economy as you seem to want to do (but maybe I am
reading you wrong). The internationalization of business since the
early 80s, or "globalization," required huge regulatory changes from
the participating countries: the abandonment of import tariffs; the
abandonment of capital controls and the acceptance of foreign direct
investment; the abandonment of welfare programs to cheapen labor
costs; the free convertibility of national money; the expansion of
currency futures markets to handle the monetary fluctuation; etc. All
of this was an international political agenda driven by Reagan and
Mme Thatcher, with Hayek and Friedman as the key theorists (Friedman
actually launched the currency futures market at the Merc in Chicago
in 1972, he was way ahead of the curve). It's called "neoliberal"
because it is inspired by important aspects of the British free-trade
regime of the 19th century, which itself was called "liberal." The two
regimes are finally quite different though, because the British one
used gold and the current one uses fiat money that can be produced
whenever govts want it, especially the USG which has been printing
wildly since 1968. You can't separate the development of technology
from political management techniques, both of domestic economies and
of international economic relations.

So, as far as I can tell, the change of the US economy from 1980
onward was indeed technological in at least two respects. First, the
development of the new military technologies that came to be known
as the "revolution in military affairs" fortified the US role as
global policeman (the US military budget is larger than the rest of
the world's military budgets combined) and in that way, "protected"
the status of the dollar as international reserve currency, ensuring
that the US could go on borrowing from the rest of the world. Second,
the surge in information and communications technologies, stimulated
by the military budget, ultimately gave rise to the 1990s network
technology growth wave, where the US economy grew relatively fast,
salaries rose for professionals and the budget was even balanced for
a short time. Between the 80s and the 90s two very political things
happened: the collapse of the Soviet Union and the first Gulf War
(where the revolution in military affairs was put vividly on display).
These political events set the stage for a huge round of foreign
direct investment and then a massive expansion of the financial
economy, which together make up what is called US-led globalization.

The cabling of the world and the installation of network technologies
in all major urban areas seems to have had a knock-on effect on
financial markets: computerized trading, centered in New York,
Chicago, London and Tokyo, began to expand from the mid-80s onward and
since the mid-90s it has never stopped exploding. A further important
change brought by the global installation of networks has been the
capacity to coordinate global manufacturing and distribution according
to "just-in-time" methods; this, along with foreign direct investment,
was essential for the industrial development of China. It ultimately
led to the "Walmart effect," ie the almost complete disappearance of
basic manufacturing in the US.

The result of all that is not sustained growth in the US, but instead,
a global economy where capital elites can get very very rich off
operations happening anywhere on earth, whether in industry or in
finance. Thus the surging fortunes of the 1%. What has happened is
that the US capitalist class, with the aid of allies in the UK and
around the world, has guided the development of the computer-tech wave
for their exclusive interests - somewhat like the British imperial
elites managed the railroad boom back in the heyday of liberal free
trade. However, what's happening to the US now is also a little
comparable to what happened to the Brits in the early 20th century:
by putting all your money in a financialized world economy, and then
spending the profits on war in order to protect overseas assets,
finally you ruin yourself in every sense of the world. The migration
of industrial development out of the US and the abandonment of US
populations to poverty is now causing the decline of the country. At
some point there will be a larger crisis and the ability to borrow
will be curtailed. On this we undoubtedly agree. Plus I also agree
that robotization of production is very much a part of the current
crisis, and Race Against the Machine is an important book (on the same
subject there's also The Lights in the Tunnel by Martin Ford, check it
out).

Now, I further agree with you that the Left has been pretty bad at
following all this, although if you hunt around you can find some
decent scholarship. In addition to the technological innovation
school of Freeman, Louca, Perez, etc I would suggest you look into
the "Social Structures of Accumulation" theorists who provide exactly
what Perez calls for but does not produce, namely an understanding of
the institutional frameworks in which the long waves of technological
development unfold. These two schools would appear to be a marriage
made in heaven, but they never quote each other, most people have
never even heard of them and so we all remain ignorant!

In terms of numbers, I have been looking at a bunch of them. Here
is an interesting tidbit for you: Europe, or at least Germany, is
not doing so bad when it comes to export-led growth. In 2011 Germany
exported $1.48 trillion, for a positive trade balance of $220 billion.
That compares pretty well with China, a country almost twenty times
larger in population, which exported $1.9 trillion in 2011, for a
positive balance of $156 billion. Germany seems to have managed its
political economy differently than the US!

Here's another tidbit for you, taken from the UN's comparative GDP
stats that you can find here:

http://unstats.un.org/unsd/snaama/downloads/Download-GDPcurrent-USD-countries.xls

In 2011, China's GDP was $7.2 trillion and its gross fixed capital formation totalled $3.3 trillion. The US GDP for that year was $15 trillion - over twice as much - and yet gross fixed capital formation was $2.2 trillion. Who do you think will have better infrastructure coming out of this depression and into the next long wave?

still trying to make sense of it all, Brian





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