The turmoil on the stock markets and the threat of default in Europe bear witness to a further rupture following the GFC of 2008. But the world should be preparing for much more than the possibility of a double-dip recession. Over coming years we face nothing less than the winding down of the global economy. Media commentary has almost exclusively concentrated on whether growth can be restored in order to service debt. But this approach is not only short-term in outlook; its purely economic concerns leave unexplored the deep assumptions about growth and expansion that underpin capitalist economy.
Growth and expansion are not merely difficult in our present circumstances; they are fast entering a zone of impossibility. If this is so it is not only the global economy that is at stake: the viability of capitalism itself is called into question. No longer able to deliver what it has led publics to expect, we can expect growing waves of belligerence. Always a source of structural disorder―generating significant historical resistance, from romanticism to socialism to fascism―it is now culturally and personally destructive as never before, while ecologically it has come up against the limits of a finite Earth. Incapacity to expand on a systematic basis can only mean the breakdown of capitalism; whether we like it or not, we are facing a transition to a non-capitalist world.
The present panic in global markets arises out of confirmation that the recovery from the GFC of 2008 will not quickly restore economic growth. It focuses on two issues. Firstly, significant economic growth is essential for restoring the familiar everyday world of modernity, especially the fulfillment of our consumption expectations. Secondly, growth is needed to maintain employment in the general economy and for restoring financial order: to service and pay down debt.
Arguably growth is no longer defensible culturally or environmentally, but the immediate issue is why it has stalled right now. On this question some economic commentary has offered useful insights into the scale of the 2008 collapse of the financial bubble across the West, and how such collapses produce contractions, multiple ramifications and lagging consequences for extended periods. The model here is Japan of the 1990s, which languished for fifteen years after its property bubble burst. It still has not returned to sustained growth, the effect of undeclared and undeclarable bad debts hidden in the banking system, which restrict the possibility of lending risk capital, thus dampening attempts to stimulate the economy.
Keynesian stimulus solutions in the current global crisis have avoided the level of contraction in production that occurred during the Great Depression. This is an achievement. But it is often assumed that had stimulus been applied in the 1930s then the following decade of average zero growth would have been avoided. Arguably this is not likely. The problem is that finance and credit are not just a function of technical settings. The credit and investment process has to be constituted over time. The same can be said about the consumer and the institutions of consumption. They are more fragile than we usually grant: the systems do not bounce back to normality easily. Further, stimulus has its own costs in the form of debt, which becomes unmanageable when there is zero growth. In the meantime, the capacity for further stimulus has largely been exhausted.
In Europe these problems are compounded by the attempt to sustain a currency across the EU without banking institutions that can properly support it. In particular, the EU has no lender of last resort other than those supports cobbled together out of national differences, which, predictably, are likely to fall apart in difficult times. The prospect of growing indebtedness because of further budget deficits, with the threat that all debts will become unmanageable if interest rates rise, combined with growing public dissension and pain, only fuels this crisis in the heartlands of capitalism.
Looking more broadly, the GFC can be interpreted as a rupture in the major shift in capitalist structures that took place in the 1980s. Arising out of the crisis of the 1970s that ended the Long Boom, seizing upon new technological possibilities (exemplified in the silicon chip), capitalism launched into a most turbulent and dangerous phase, emptying out historical communities and associations, often making them over into abstract associations supported by the media, the internet and the global market. A key to understanding this revolution was the drawing of the universities directly into the ambit of the capitalist process. Capitalism has, for the moment, corralled the intellectual practices directing the techno-scientific revolution into an amplification of the capitalist process. A more abstracted social life has been legitimised through the offer to liberate individuals from biological and prior social constraints, together with vastly expanded consumption possibilities.
At the heart of this intensified utopian project of progress lie two contradictions. At the level of social life and social institutions, this shift undermines social institutions crucial to the renewal of humanity: institutions grounded in history, locality and particular others. The self is released from stable reference points and is opened to reconstruction via the techno-sciences. With respect to our fundamental physical conditions of existence, humanity’s relation to nature become so extended through abstract means that we only know it as a resource to be exploited, destroyed or remade; or as pure wilderness.
So from this perspective the GFC is an aspect of a larger crisis. It arose out of those transformations of the market and capitalist process that opened the world to info-money and high-tech markets. Deregulated markets and currencies, the commodification of international education, the automation of risk in global monetary markets, economies oriented towards leisure and global tourism, easy debt and property as wealth, the endless array of free trade schemes: this is the unstable mix that makes up this new world. Relative to earlier capitalist forms, it draws on the techno-sciences to undermine familiar worlds and reconstruct them around radical individualism, and pushes towards the further dominance of markets, privileging trade over local development and employment. Now, struggling for stability as it lurches from one institutional crisis to another, we might better see these as elements of a world built upon a utopian fantasy, a world unrelated to a viable reality.
It is not the first time capitalism has come up against a wall. The key example from the past, the Great Depression, was so intense that the major counter-movements of communism and fascism were able to challenge its hegemony. Yet their critique of capitalism also left untouched some core elements. F. A. Hayek characterised the genius of capitalism and the market in terms of its constant expansion and growth―of product, territory and population―yet the counter-movements (apart from the communist critique of empire) did not challenge these core properties. Fascism avidly pursued them. Communism defended expansion and growth by purporting to substitute a higher rationality (a command economy beyond the market), which eventually turned sour. The capacity to go beyond class division and irrational cycles of boom and bust while achieving similar levels of prosperity to that of capitalism was a core claim, while criticism of population growth was usually considered counter-revolutionary.
What is markedly different today is not just the crisis of global growth in the short and medium term but that the economy of global capitalism can no longer rely on what has been assumed for 400 years: the possibility of expansion and growth. The reality of a finite world has begun to restrict the possibility of ‘recovery’ and a return to sustained growth. It is hardly possible to overstate the significance of this collapse of modern assumptions.
Capitalism has been the West’s major means of pursuing growth and expansion. This was not only a matter of expanded forms of production. Hunger for territory expressed in the expansion of empire and colonialism in the New World was also important, as were our attitudes towards population. In the early period of the emergence of modernity, the rise of humanism and the doctrine of progress, the population of the world was around 500 million. Today it is 7 billion; soon it will be 9 billion. In little more than 400 years, progress has called into being an expansion of production, territory and population that is now exhausting the environment and resources generally. But it is not only a matter of economic exploitation; progress is a way of thinking about and feeling in the world—it is in our pores.
Whether in high culture or popular culture, the sentiment is the same. Witness John Milton’s openness to expansion into a wider universe, and the unity of his view with that of science fiction writer Arthur C. Clarke 400 years later:
Witness this new-made world, another Heaven
From Heaven-gate not far, founded in view
On the clear hyaline, the glassy sea;
Of amplitude almost immense, with stars
Numerous, and every star perhaps a world
Of destined habitation.
John Milton, Paradise Lost, Book 7, 1674
Across the gulf of centuries, the blind smile of Homer is turned upon our age. Along the echoing corridors of time, the roar of the rockets merges now with the creak of the wind-taut rigging. For somewhere in the world today, still unconscious of his destiny, walks the boy who will be the first Odysseus of the Age of Space.
Arthur C. Clarke, The Challenge of the Spaceship: Previews of Tomorrow’s World, 1959.
Neither Milton nor Clarke is speaking simply of humanity’s wonder at the existence of a wider universe. Rather they, and humanity as they perceive it, are practically oriented towards that wider universe. If not exactly disembarking from Planet Earth, we are nevertheless open to colonising the stars. This is one of the grounding myths of modern culture, yet a myth that has little prospect of finding fulfillment in a finite world.
That the world is finite is denied practically and imaginatively by capitalist progress. One key example is the desperate strategies that have emerged around the peaking of oil production―witness the plunder of the arctic, shale oil and coal seam gas.
And this is a perfect example of the conundrum that capitalist economy faces in the present crisis. Any sign of global growth in Western economies now produces significant spikes in the price of oil, but this immediately undercuts growth. There is a new structure in place due to the peaking of oil production globally. Cheap energy in the form of oil underpinned capitalist growth for half a century. Now that is ending we are witnessing the first stage of an unfolding process around one component of that wall which will deny the option of expansion. It puts an end to the utopias of endless growth and expanding trade. The demise of the export-oriented economy is now objectively predictable. Do we allow our manufacturing industry to collapse before this reality materialises, or do we organise now to have a viable economy in a post-capitalist world? Do we continue down the road of agribusiness and farming that undermines local community, where land loses all local meaning in order to sell through super-marts to the mass consumer organised around world trade?
We are entering an unfamiliar world in which the modern notion of progress as an opening to infinite development must collapse. Now, rather than observe the decline of the academy, as significant elements of it are drawn further into a pact with progress, we must call upon it, together with working people, ethically concerned citizens and those leaders willing to re-think their assumptions to help plot a course that will take us beyond 400 years of capitalism.