Unexpected help from an old friend: Jerry Mander, who wrote the brilliant Four Arguments for the Elimination of Television, is back with a new book entitled The Capitalism Papers: Fatal Flaws of an Obsolete System. The "fatal flaw" is that capitalism, by its very nature, by definition, requires growth:
"Either the system grows, with a constant stream of new income and investment, or it fails...Even liberal media economic gurus like Paul Krugman agonize over growth rates if they fall to a mere 1.5 percent, when they must become about 2.5 percent for adequate profit distribution, and 3.5 percent for new job creation. In capitalist economies, growth is what it's all about...To achieve constant growth in the real economy, capitalism requires constant expansion of three primary ingredients that are, alas, impossible to sustain."
These three ingredients are an expanding stock of cheap resources; expanding consumer or industrial markets ("and a generalized philosophy of life that equates constant consumption with happiness and success."); and cheap (or slave) labor, as in Asia. As Gail Tverberg writes in her simple, logical essays on her blog Our Finite World, you cannot sustain infinite growth on a planet with finite resources. Herman Daly, the University of Maryland eco-economist, made these points long ago in Steady State Economics. The economy, when all is said and done, is based on a derivation of livelihood from the natural world. The complexity of modern life sometimes obscures this basic truth, and we get carried away with "virtual capitalism" (as Jerry Mander calls it) where "derivatives" such as stock options and credit default swaps and the rest of the flotsam and jetsam of modern day financial wheeling and dealing get counted as "wealth" in the calculation of gross domestic product (GDP) as if something real were happening. When it's not. All of the costs associated with the war in Iraq contributed to the national tabulation: all of the bombs dropped, the Hummers blown up by roadside bombs, the prosthetics built for the traumatically-amputated, the downed helicopters, the coffins purchased for the war dead, the counseling for the bereaved, and all of the other elements of this trillion dollar folly: ka-ching!
Which is to say, the calculation of GDP is by its very nature sociopathic and amoral. Yet "mainstream" economists, liberal and conservative alike, are slaves to the concept of growth in GDP, and one of the reasons that the liberal darling Paul Krugman spends so little time criticizing the trillion dollar yearly defense and "homeland security" budget is that, by and large, his Keynesian proclivities lead him to believe that every dollar spent by the federal government is a good dollar because it boosts "aggregate demand," that is, it feeds the insatiable desire of the American populace for more stuff. And that keeps the economy going.
Which is also to say, Mr. Krugman uses his Science in the service of the status quo, but he is regarded as a force for Good by his liberal supporters because he wants Americans to have "jobs," and no one can criticize him for that.
In point of fact, job creation in a stagnant economy with a growing population is a real problem. I note these days that the mainstream economists are throwing a lot of rocks at each other, even more than usual. The liberals blame the conservative fixation on "austerity," and the conservatives blame the debt-ridden condition of the modern industrial economies (e.g., Ms. Reinhart and Mr. Rogoff). The liberals (chief among them, Mr. Krugman) believe that the way to ignite the economy into a new simulacrum of growth is to borrow more money and go more deeply into debt until the economy gains "traction" and operates once again at "full potential." Just like the good old days when the Earth was home to three billion people (instead of seven), no one was worried about climate change (instead of wondering whether we have initiated runaway global warming), the "master resource" for energy, petroleum, was plentiful and cheap (instead of increasingly scarce and ruinously expensive), the oceans were thriving (instead of acidified, with the base of the food chain, phytoplankton, half-dead, and 90% of the large fish stocks gone), and the Green Revolution was easily feeding the world's billions (instead of straining now to meet demand, with famine spreading with climate change-induced droughts).
As I've said before, I don't know how mainstream economists could fail to notice the real world around them. I don't understand why they have pointless arguments about whether the Federal Reserve made a mistake in 1937, or whenever, as a means of explaining what is going on now. I suppose it comes down to academic turf: Scientists such as Mr. Krugman have built a reputation (and an opulent lifestyle) on dry-labbing their analyses of what's going on, and once they open the Pandora's Box of considering the state of the environment, and humanity's 40% overshoot of sustainability, and of the urgent need to power down to avoid a climate catastrophe, then their models become instantaneously obsolete. So they ignore the real world and focus instead on their abstract models of an abstract world where none of these messy details gets in the way.
Reality, of course, is that thing that doesn't go away even when you ignore it. So rail on, Mr. Krugman & Co., against the dastardly proponents of Austerity, and argue for increased borrowing (from whom? from ourselves, from everyone, it doesn't matter), and keep contending that all could be well, right now, if we would just listen. While you do so, I will try not to notice the flop sweat beginning to drip down your forehead and dampen your collar.