Two articles caught my attention today, both from the New York Times. The first is an article by Tyler Cowen, one of the two editors of the blog Marginal Revolution. Cowen posits that the explosive growth of the developing economies (specifically, the BRICS: Brazil, Russia, India, China, and South Afirca) will no longer be the case, as four factors emerge to undercut the ability of traditional growth models to function effectively.
- Automation: As countries begin to replace workers with robots, the bottom-rung of the “development ladder” that defines export-oriented development models will become out of reach for populations who have yet to engage in meaningful industrialization. Additionally, lowered labor costs due to heavy automation incentivizes a shift in productive investment back to the developed countries.
- Globalization of Supply Chains: While this may actually seem like the hallmark of development in the age of globalization, the division of the supply chain is actually in stark contrast to the development strategies employed by economically successful nations like South Korea, Taiwan, and Singapore; these nations consolidated the supply chain within their country, leading to a transformation of the entire political economy, rather than just having a few pockets of industrialization.
- Wider Economic Gaps: This “factor” is suspect, in my opinion: Cowen’s argument is that due to the huge economic gap between the poorer and wealthier countries today, the “cultural drive” for growth is undermined as populations get discouraged and give up. I hope I don’t have to elaborate on why this is a bizarre idea…
- Aging Populations: Birth rates are falling in the developing world, and nations like China are going to face a population crunch similar to what Japan is facing right now.
This is an interesting–and unexpected–viewpoint on the future of world-capitalism, and certainly a stark contrast to the typical optimism that one encounters when reading about the developing world and their prospects for economic growth.
Its especially interesting when juxtaposed against the standard Marxist theory that capitalism is not the end-point for political economy, and that eventually the institutions and dynamics of capitalism will become stagnant, and lead to its disintegration and overthrow as populations seek different institutional arrangements that can overcome stagnation in production development. And while the 2008 crisis and the subsequent deterioration of Western, developed economies lead to much smugness amongst Marxist political economists, the relatively unaffected level of high productivity gains in the developing world still seemed like an elephant in the socialist room. But if Cowen’s predictions do begin to come through, and the developing world begins to stagnate, it will be important for radicals to double-down on their organizing and development of political infrastructure, so as to deal with the inevitable fallout that such a slowdown would have on their specific geographical locations.
But even putting aside the dynamics of developing countries and their implications for Marxism, there is a clear trend in the United States toward the degeneration of capitalism’s ability to “rally the productive forces.” Paul Krugman says as much in his recent op-ed titled “Profits Without Production,” when he argues that US corporations are increasingly deriving profits from market share and monopolistic qualities, rather than actual innovation and investments into production. The well-worn fact of Apple sitting on over $140B in cash is also argued as evidence that businesses aren’t entirely sure where to invest–and, indeed, feel little pressure to spend the capital to figure out where to invest.
In any case, its very interesting to see that the predictions of Marx over a century ago about monopoly capitalism and the tendency of the rates of profit to fall are, on a superficial level at least, holding true. And this certainly gives me incentive to try and plod through highly abstract economic papers like this one about Marxist economics and crisis theory.