Capitalists are the Luddites now

Traditionally resistance to inevitable technological change has been viewed as the typical reaction of workers who find their jobs threatened by innovation. The original Luddites were English textile workers who sought to destroy steam-powered spinning and weaving machinery introduced as a result of the Industrial Revolution in the early 19th century, which they correctly saw as a threat to their livelihood as handloom operatives. Ever since then the term has been used to describe those who resist the advance of new techniques in any sector of the economy where this appears likely to result in loss of jobs or earnings to the concerned sections of the workforce.

A famous more recent example of this syndrome in Britain was the resistance (for long successful) of print workers in the newspaper industry to any attempt to replace traditional manual typesetting with more automated techniques. This resistance – which enabled the workers to delay the inevitable until the mid-1980s – was only possible thanks to supine newspaper proprietors prepared to run their papers at a loss because of the political influence they believed this gave them – and to well organised unions who were also able to maintain their position as the best paid manual workers in the country.

Less extreme cases of such resistance to change have been common in societies where people’s living standards have depended heavily on their access to paid employment. There is no doubt that increasing recognition of this obvious reality after World War II prompted governments in the industrialised West to try and design labour laws and welfare regimes that would cushion redundant workers against the hardship of unemployment – and also enhance their ability to find new employment – and thus lessen resistance to technological change which might otherwise hold back advances in productivity that could be beneficial to the development of the economy as a whole. Since around 1980, however, such protection has progressively disappeared in the face of an accelerating decline in the traditional demand for both manual and “white-collar” labour in the industrialised world.

The resulting progressive “devaluation” of labour has naturally had a profound impact on socio-economic trends in the developed world, particularly in altering the pattern of income distribution – to the disadvantage of those workers not endowed with skills that are scarce enough to enable them to command high, or even in some cases minimally adequate, salaries. This has been mirrored in the decline in the industrial power of trade unions, whose bargaining position vis-à-vis employers has been progressively eroded by such technological change.

This decline in the market power of labour has been widely recognised by mainstream economists and has led some – such as the widely acclaimed Thomas Piketty – to identify (correctly) recent technological advances as a cause of growing inequality in the contemporary global market economy. However, what very few have been willing to accept is that this trend in the labour market may signify a move towards a permanent, structural surplus of manpower, even though it is obvious to all outside the charmed circle of those with a vested interest in preservation of the existing economic order (who are also the main beneficiaries of this trend). Rather the ruling establishment clings to the deterministic assumption that market forces will somehow – against all the evidence – eventually permit the absorption of this labour surplus in a more or less spontaneous renewed expansion of the economy.

Capital devalued

What mainstream analysts and their political masters are even less willing to recognise is that this world-wide structural surplus of labour is now matched by a similarly permanent and growing surplus of capital, which is also largely a function of technological change. The present writer can claim to be one of the few to have consistently drawn attention to this phenomenon since first identifying it nearly 20 years ago as well as in more recent blog posts.

For defenders of the status quo the inescapable conclusion, that capital is becoming progressively as redundant as labour – not simply, as in earlier periods, on a cyclical basis in line with the traditional fluctuations of the market, but on a long-term, structural basis – is one that hitherto has met with ferocious and virtually unanimous denial. Such a reaction may hardly be thought surprising. For if, in a world of chronically, and perhaps increasingly, weak growth in final demand, it can be demonstrated that capital has permanently ceased to be a scarce factor of production, not only is the market value of capital assets bound to decline over the long term; so is the market and political power of their owners.

As in other instances of decaying power structures throughout history, the ruling élite is not willing to surrender its existing dominant position without a struggle. Hence, in the effort to hide the reality of their dwindling market power and economic relevance corporate entities are resorting to ever more extreme forms of fraud and misinformation. As noted in my last blogpost, the structures of Western corporate law and governance have evolved in such a way as to incentivise serial misconduct – to the point where enterprises feel little restraint from committing criminal acts such as (for example) fraudulent manipulation of markets.

Short of such blatant breaches of the law the corporate sector increasingly demonstrates its fundamental market weakness by its shameless – but perfectly legal – lobbying of governments to support manifestly wasteful and uneconomic investment projects, obviously on the understanding that the same governments will a) subsidise or directly finance the necessary costs, and b) largely indemnify participating private companies or investors against potential losses. For clearly without such official guarantees, explicit or implicit, most if not all of these schemes would be neither commercially nor economically viable and hence would not attract private investment.

White elephants

As it is, big corporations feel able to pressurise government to underwrite the most blatantly unviable investment projects. Examples of what we may term “capitalist Luddism” range from the building of roads and bridges to nowhere in Japan, “ghost cities” of empty apartment blocks in China, airports in Spain that have never opened and nuclear power stations in numerous countries that will probably never be allowed to open (if they are ever built).

In the UK alone there is a long list of such white elephants for which private corporations have been lobbying, calling for the injection of hundreds of billions of public money even as essential public services are being decimated while corporate taxes are being cut and evaded as never before. These include:

  • The London Olympic Park – the most fitting epitaph on which is the fate of the Don Valley Stadium in Sheffield, built for the World Student Games of 1991 and finally demolished by the cash-strapped city council in 2014;

  • The High Speed 2 rail project intended to link London and Birmingham and ultimately points beyond at a cost of scores of billions of pounds – which no economist has been found willing to declare capable of making a positive return on investment;

  • The London “super sewer” – costing at least £4.5 billion – on which work has just started but which many experts judge to be unnecessary;

  • An extra runway for London’s airports (likely to cost at least £20 billion) – despite the fact that air pollution in SE England is already at dangerous levels and spare capacity exists at regional airports;

  • Hinkley Point C nuclear power station, Somerset, over which potential investors are hesitating despite the promise of an extraordinary public subsidy equivalent to 100 per cent of the market price for electricity..

Perhaps the biggest single black hole of all into which British public funds could be wastefully poured is the renewal of the Trident nuclear submarine fleet at a projected cost of £100 billion or more. Although the case for this expenditure is more than ever discredited in terms of defence needs – especially given indications that it may soon be technologically outmoded – there is a powerful lobby in favour of renewal which is likely to carry the day in Parliament. Yet as with all armaments expenditure, which by definition does not need to show any direct financial or economic return, the cheerleaders for this project may be suspected of links, if only indirectly, with what President Eisenhower famously denounced as the “military-industrial complex” at the height of the Cold War over 50 years ago.

Regular readers of this blog may have noticed that the symptoms of systemic dysfunction described above fit with our recurring theme of the growing redundancy of capital and the consequently inevitable slow fading away of the capitalist profits system which has dominated the world for at least the last 200 years. As has been made clear, the ultimate manifestation of this tendency is the slow demise of the huge financial sector itself, reflected also in the Global Financial Crisis (GFC) which, so far from abating after nearly nine years, is now predictably intensifying.

Another major sector where the phenomenon of capitalist Luddism is strikingly manifest is the still enormous petroleum industry. Not only has it, like big finance, exploited its huge political power – aided by inherently corrupt structures of political “democracy” in the industrialised world – to procure unduly favourable tax and legislative treatment for itself; it has also used its market power, particularly through the media, to distort public perceptions of its continued economic and political value to the community. Thus it has been able to

  1. delay public acceptance of the disastrous environmental impact of both global warming and aerial and other pollution resulting from excessive reliance on fossil fuels;

  2. prevent or delay adoption of new technologies (including renewable energy sources), which are less harmful and ultimately cheaper.

Such efforts – combined with those of the increasingly corrupt motor industry (so shockingly revealed by the recent Volkswagen emissions scandal) – have tended to obscure the fact that the age of the internal combustion engine (and thus of petroleum) will likely soon be over, bringing to an end a technological era which has roughly spanned the 20th century.

For true believers in the efficacy of market capitalism – and in Joseph Schumpeter’s famous concept of “creative destruction” – such a drastic transformation of the economic landscape may seem healthy, and no more threatening than was the first industrial revolution ushered in by steam power in the early 19th century. It may even be thought that with the vastly greater resources, both public and private (physical and social capital), that has been accumulated over the last 200 years, it should be relatively easy to cope with economic and social upheavals similar to those that caused such distress in the 1830s and 40s. Yet if they were to consider realistically how the mass of the population in the industrialised world has now become far more deeply entangled with the institutions of the capitalist economy than in previous major downturns they might be far less sanguine.

For not only do many millions stand to lose their jobs as such major sectors as finance and petroleum are faced with massive and possibly terminal contraction. Equally, given the trillions of dollars that have been, and continue to be, invested in discovering and developing new oil and gas deposits across the world, millions more who have been officially induced (often via tax-incentivised pension schemes) to put their life savings into such potentially “stranded assets” – not to mention other unviable investment projects – now face financial ruin on an unimaginable scale.

As suggested earlier, it is precisely because the global ruling élite know all too well that such a cataclysmic upheaval will spell the end of the world order that sustains their power and privileges that they are seemingly prepared to resort to any expedient to prevent or postpone it. Hence the growing incidence of open fraud, including the blatant rigging of financial markets for which virtually none of the perpetrators have been brought to justice, safe in the knowledge that any fines imposed on their institutions can be passed on to the shareholders while the executives responsible continue to award themselves huge bonuses. Yet all the while, as those responsible skate on increasingly thin ice, the risk of an accident triggering an uncontrollable financial holocaust becomes ever greater.

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s