(and cannot) find enough money to supply sustainable energy, sanitation and food
to a third of the world’s population (Scharmer/Kaufer 2013: 94).
So, we can see that quite a bit of the capital (energy) is withdrawn from the
system even though demand for more produced goods or use value is clearly there.
The mainstream model of the economy in Fig. 3.3 does not capture this. But if the
purchasing power among the poor does not meet capital owners’ expectations of
return on investment it will not flow there. Current ‘growth’ measurement standards
are indifferent to such distributive effects. They count a euro that pays for a private
jet as having created the same ‘value’ as one that pays for a ton of rice.
In rich countries slowing growth is usually equated with unemployment, the
biggest threat to well-being. A team of economists at the Institute for Sustainable
Development and International Relations (IDDRI) at the Science Po university in
France has conducted a study on “A post-growth society for the twenty-first century. Does prosperity have to wait for the return of economic growth?” Here we find
collated evidence about jobless growth, a disconnect between wage rises and
productivity gains and a missing link between long-term growth and employment
levels. The researchers conclude that political changes in labor policies, taxes,
pension and health systems, and investment criteria would allow for much less
growth-dependent societies in which individual and social prosperity are not
compromised (Chancel et al. 2013).
So, sticking with the mantra in which endless economic growth is needed is a
great way of avoiding the political responsibility and struggles that unlocking those
path dependencies requires. This Herculean task is not helped by the perverse
inequalities that the real rather than theoretical market logics, laws and institutions
like our monetary system have created, overlooked or disguised by undifferentiated
cost–benefit and growth analyses. In the United States, for example, decoupling
productivity gains from real wage developments went hand in hand with lower
taxation on capital and wealth. This cocktail has driven GDP to unprecedented
heights and inequality levels back to those of the 1920s.
In a podcast for the Economist, Robert Reich, labor secretary under Bill Clinton
and an economics professor explains: “Most of the economic gains in the past
25 years have gone to the top 15–20 % of Americans, but more recently, in the past
six to seven years, most of the economic gains have gone to the top one percent….
The average CEO is making about 380 times more than the average worker—a
huge gap relative to what it used to be 40 years ago—it was about 30 times” (Reich
2007). This interview predated the financial crisis, which has accelerated still further the rise in income of those controlling the factors of production.
One major cause of this trend has been documented by the OECD in its 2008
report Growing Unequal? Income Distribution and Poverty in OECD Countries. In
countries where financial capital gains and self-employment income are taxed at
lower rates than wages the pattern is clear: the top 20 % keep on diverging from the
middle classes and lower income strata. Real wages have stagnated in most of the
OECD countries since the 1980s and in many the trend is “moderate but significant” while some countries like Germany, Canada, Norway, the United States and
Italy report ‘significant’ changes.
104
3 Why the Mainstream Economic Paradigm Cannot Inform …
to a third of the world’s population (Scharmer/Kaufer 2013: 94).
So, we can see that quite a bit of the capital (energy) is withdrawn from the
system even though demand for more produced goods or use value is clearly there.
The mainstream model of the economy in Fig. 3.3 does not capture this. But if the
purchasing power among the poor does not meet capital owners’ expectations of
return on investment it will not flow there. Current ‘growth’ measurement standards
are indifferent to such distributive effects. They count a euro that pays for a private
jet as having created the same ‘value’ as one that pays for a ton of rice.
In rich countries slowing growth is usually equated with unemployment, the
biggest threat to well-being. A team of economists at the Institute for Sustainable
Development and International Relations (IDDRI) at the Science Po university in
France has conducted a study on “A post-growth society for the twenty-first century. Does prosperity have to wait for the return of economic growth?” Here we find
collated evidence about jobless growth, a disconnect between wage rises and
productivity gains and a missing link between long-term growth and employment
levels. The researchers conclude that political changes in labor policies, taxes,
pension and health systems, and investment criteria would allow for much less
growth-dependent societies in which individual and social prosperity are not
compromised (Chancel et al. 2013).
So, sticking with the mantra in which endless economic growth is needed is a
great way of avoiding the political responsibility and struggles that unlocking those
path dependencies requires. This Herculean task is not helped by the perverse
inequalities that the real rather than theoretical market logics, laws and institutions
like our monetary system have created, overlooked or disguised by undifferentiated
cost–benefit and growth analyses. In the United States, for example, decoupling
productivity gains from real wage developments went hand in hand with lower
taxation on capital and wealth. This cocktail has driven GDP to unprecedented
heights and inequality levels back to those of the 1920s.
In a podcast for the Economist, Robert Reich, labor secretary under Bill Clinton
and an economics professor explains: “Most of the economic gains in the past
25 years have gone to the top 15–20 % of Americans, but more recently, in the past
six to seven years, most of the economic gains have gone to the top one percent….
The average CEO is making about 380 times more than the average worker—a
huge gap relative to what it used to be 40 years ago—it was about 30 times” (Reich
2007). This interview predated the financial crisis, which has accelerated still further the rise in income of those controlling the factors of production.
One major cause of this trend has been documented by the OECD in its 2008
report Growing Unequal? Income Distribution and Poverty in OECD Countries. In
countries where financial capital gains and self-employment income are taxed at
lower rates than wages the pattern is clear: the top 20 % keep on diverging from the
middle classes and lower income strata. Real wages have stagnated in most of the
OECD countries since the 1980s and in many the trend is “moderate but significant” while some countries like Germany, Canada, Norway, the United States and
Italy report ‘significant’ changes.
104
3 Why the Mainstream Economic Paradigm Cannot Inform …