1990s >> 1997 >> no-1119-november-1997

Wild Guess Chase

Anyone who spends any time observing the erratic workings of capitalism will realise that it almost never lives up to the claims made for it. It is a social system supported by mythology. One myth – that it provides for everyone – is easy to debunk. You only have to look at the Third World, or even the poor sections of the West. Another – that its competitive motor always produces the best products – is also easy to debunk. Here one may point to the market success of the VHS video system over the superior Betamax, or again that of IBM/Intel computer chips over the vastly superior Apple/Risc chips.

But the biggest myth – that which keeps people voting for political parties to run capitalism – is that it is indeed possible to “run” capitalism. With no steering wheel, no brakes and no happy end in sight, capitalism is nevertheless not short of prospective “drivers” who will do and say anything for a chance to sit up front with the big hat on. Governments of the world govern by the myth of control. They persuade us that they can control market forces, but only until the next crisis, whereupon they blame market forces or foreigners, or both.

Evidence for the chaotic nature of capitalism is not scarce. Since the days of Adam Smith in the 18th century, economists have been trying in vain to find the right combination of knobs, levers, sliders, switches and buttons with which to control the monster reactor of the money and market system. Each would-be government has to claim that it has everything finally figured out, so that you will vote for them. If they admitted that they can’t control capitalism, nobody would bother electing these self-styled “market managers” at all.

Peter Day (In Business, BBC Radio 4, 8 August) presented the curious proposition that the present boom might actually continue forever – that is, without the presumed inevitable slump. The wishful thinking behind this daring notion tells you a lot about how much of economics is real theory, and how much is wild guesswork. Peter Schwartz of the Global Business Network points to the fact that where 50 years ago the ratio of measurable to unmeasurable growth was around 60/40, today it is the other way round. In other words, 60 percent of the modern US economy is “invisible” and cannot be measured.

This gives you some idea of how difficult the “experts” find it to measure growth in capitalism. Naturally, all policies and strategies for the future are based on these vague measurements, which should confirm us entirely in our lack of faith. The problem with new technology, says Schwartz, is that you have to wait for the society to learn to use and apply it. And you may have to wait some considerable time. Electricity was around for 40 years before anyone thought to use it for anything besides electric lights. Henry Ford in Chicago realised that you could use it to revolutionise the factory, and as a consequence the growth rate for Chicago between 1900 and 1930 was 68 percent per annum, where previously it had been nil. In today’s terms we have the silicon chip, but apart from a few geeks on the Internet, this technology has not yet come into its own. Beyond the telecommunications revolution stretches the even more awesome potential of nanotechnology – the building and application of molecular machinery. What the world will look like in 20 or 30 years from now is anyone’s guess, and what the world’s economy will look like is also anyone’s guess.

So the “experts” frankly don’t know. They can’t predict what the market will do. And they can’t control it anyway. It is on this basis that they are suggesting a slumpless economy. In short, when nothing is predictable then anything is possible.

Makes you wonder why people bother listening to them, doesn’t it? In all the breathless excitement about the hi-tech future, those predicting “No end of a boom” are enthusiastically ignoring the past. They do not have the evidence of history on their side, and so are obliged to claim that today’s economy is not like yesterday’s. Because telecommunications are exploding, and productivity relies on telecommunications, they reason that productivity will explode too. But in that case the demand also needs to grow, and although it will do for an unpredictable period, the time will come when demand slackness its pace (people only have so much to spend). Productive forces are never able to anticipate this, and always overshoot the mark, like a man walking over a cliff. It doesn’t matter what is being produced. If it is a commodity in capitalism, it relies on buyers. If there are no buyers, the ground disappears from under foot and production takes the long drop.

The most enduring if not endearing thing about capitalism and the market is that its supporters, fully recognising what has unfailingly happened in the past, always insist that this time it will be different. Allow us therefore our own little prediction, and you can hold us to it: No, it bloody well won’t!

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