Wednesday, 11 April 2012

ECONOMICS: 'Grow or Die'-- A Dangerous Dogma (L. Pawłowski)


Krzysztof Kęciek's article 'Reagan's Timebomb' from the March 18th edition of 'Przegłąd' magazine has compelled me to write in response. Like many Poles, I was a fervent admirer of Ronald Reagan in my youth. During numerous visits to the USA I was surprised to find that most academics had distanced themselves from the Reagan administration.

In recent years I have become professionally involved in the problem of sustainable development. Reading academic papers concerned with the challenges facing our civilisation, I am becoming increasingly convinced that modern liberal capitalism poses many grave dangers. One of the principle dogmas of today's capitalism is 'grow or die', which leads to a constant growth of production, demand for which is fuelled by advertising rather than genuine need. This would be harmless if it was not for the fact that massive growth in production inevitably involves increased depletion of the planet's non-renewable resources. At current levels of consumption we have enough oil to last us for a further 40-50 years, gas for 60-70 years and coal for around 140 years. The outlook for other resources such as metals is not any better. Even if these estimates are overly pessimistic, the fact remains that the spectre of resource exhaustion in an economy based on 'grow or die' is a real possibility rather than a theoretical one. It is a problem which could occur within the lifespan of one generation, and it is only the first of several problems...





The second problem concerns social issues. Predatory 19th century capitalism was gradually tamed under the influence of Catholic social teaching (especially the famous encyclical Rerum Novarum of Pope Leo XIII), socialist movements and the growth of trade unions. The result was the welfare state. In reality, the USA never developed a full-blown welfare state but the UK did. Britain had well-run state education and universal healthcare free at the point of use. Margaret Thatcher, in her battle against the trade unions and in her quest to privatise everything possible, liquidated many public services, including free school milk.

Since the days of Reagan and Thatcher social inequality has risen sharply. Income inequality has grown from around 30% to 700%. 40 years ago the richest 20% controlled 70% of wealth and the poorest 20% only 2.3%. In 2000, the share of the richest had grown to 85% and that of the poorest had fallen to 1.1%. In the following years the gap widened even more. It can be said, therefore, that the huge technological progress made in the same period has only benefited a narrow group of people.

Another trend has been the separation of money and production. Speculating on financial markets has become the main source of large fortunes. If these fortunes are made without producing added value (ie: producing goods) then it means that they are based on money alone, especially other people's money-- financial speculation does not create anything. This creates serious social problems. One of the most serious is unemployment, especially amongst the young, which in my opinion is an integral part of the current socio-political system. Starting with Reagan and Thatcher, the state has consistently reduced its role in the social sphere. The idea of the state acting as a guarantor of a decent standard of living for all its citizens has fallen by the wayside.

***********************************************************************************

Unfortunately, such an understanding of the role of the state has been heavily promoted here in Poland. Huge inequalities in income are still growing yet we always hear complaints that the minimum wage is too high-- complaints lacking in basic decency. The younger generation are those who are worst affected.

Some countries look after the rich with tax cuts and labour deregulation and encourage financial speculation through privatised banks. At the same time they announce that they simply cannot afford basic social programmes, this at a time when the efficiency of production is rising, along with the supply of basic goods. I am convinced that if improvements are not made in social policy over the next few years then we might see some type of social catastrophe. The Scandinavian countries bear witness to the fact that a welfare state can exist, and that high taxes for the richest do not necessarily strangle entrepreneurship at birth.

Author: Lucjan Pawłowski, member of the Polish Academy of Sciences, Dean of the Environmental Engineering Department and director of the Institute of Environmental Protection Engineering at Lubelski Polytechnic.

Taken from 'Przegłąd' magazine nr.14 (640) 09/04/12

From the archives: Reagan's Timebomb
                             Interview with Czech economist Tomas Sedlacek

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