that this drive is successful, the resulting cost savings can be distributed in various directions. Some of the benefits might go to workers, through increased pay or through shorter working hours. Some could go to shareholders in the form of higher dividends. Some might be passed on to consumers in the form of lower costs for the product. Some can be used to finance investments in new technologies which further increase labour productivity in the future.
When labour productivity is increasing, all of these things are possible. Workers can be paid more. Consumers can have cheaper goods. Shareholders can enjoy more profit. And the company can afford to invest in the next generation of labour-saving technology, creating a kind of virtuous circle of continuous improvement – and continuous growth. This virtuous circle is the solution to Rosa Luxemburg’s dilemma. The increase in wages is what allows for the expansion of profit. Labour productivity growth affords capitalism its biggest claim to legitimacy in the pursuit of social progress. But this inevitably only happens through growth.
When labour productivity growth stagnates, the profit motive begins to operate in a less benevolent way. The relative wage bill rises. Profit margins are squeezed. Wages, dividends, consumer prices and investment all come into competition with another. The potential for conflict between workers and investors intensifies. So does the tension between the present (consumption) and the future (investment). These too are the conditions that lead to the aggressive expansionism that Luxemburg feared.
I’m simplifying here. But this cursory understanding begins to make sense of the dysfunctional patterns of the last few decades. Behind all that we’ve been looking at lies the steady decline in the rate of growth of labour productivity, stemming from roughly half a century ago. The reasons for this decline are contested. Some regard it as the result of a slowing down – or a change in the structure – of consumer demand in the advanced nations. Others point to technological factors that put the brake on supply.30
There is a disturbing possibility that the huge productivity increases that characterized the early and middle twentieth century were a one-off, something we can’t just repeat at will, despite the wonders of digital technology. A fascinating – if worrying – contention is that the peak growth rates of the 1960s were only possible at all on the back of a huge and deeply destructive exploitation of dirty fossil fuels; something that can be ill afforded – even if it were available – in the era of dangerous climate change and declining resource quality.31
The critical question is how policy should respond to this not-so-new reality. Over the last few decades, capitalism has had a very specific response. Faced with diminishing returns, producers and shareholders have systematically protected profit by depressing the rewards to labour. Governments have encouraged this process through loose monetary policy, poor regulatory oversight and fiscal austerity. The outcome for many ordinary workers has been punitive. As social conditions deteriorated, the threat to democratic stability intensified.
The most prevalent ‘rescue narrative’ relies on the assumption that productivity growth will recover, primarily through new technological breakthroughs. Candidate ‘saviours’ in these rescue narratives are various. For some, innovation will arrive from investment in the same clean, low-carbon technologies that are needed to tackle climate change and offset resource depletion. For others, innovation will come from a new digital revolution: increased automation, robotization, artificial intelligence.
We’ll come back to these narratives later in the book. Each of them has important lessons for us. But for now, we’re thrown back to the question of this chapter with an uncomfortable set of answers. If there is a single culprit responsible for the demise of capitalism, it is beginning to look more and more as though it’s capitalism itself. At the very least, we must conclude that capitalism’s inherent pursuit of growth, when growth itself was elusive, has legitimized a succession of policies which have proved nothing short of disastrous – for people, for the planet and even for the economy itself.
Dead on arrival?
The German economist Wolfgang Streeck is categorical in his prognosis. ‘In my view, it is high time to think again about capitalism as a historical phenomenon,’ he writes in How Will Capitalism End? ‘One that has not just a beginning, but also an end.’ Streeck insists that this ‘end’ isn’t something to which we might one day reluctantly have to look forward. It is already under way. It is happening now. Capitalism is a social system ‘in chronic disrepair’, he claims. A bit like Dennis Quaid’s character in the 1988 film D.O.A. (Dead on Arrival), capitalism may still be talking, and just about walking, but the damage is irreversible. The situation is irredeemably terminal. ‘Nobody believes any more in a moral revival of capitalism,’ Streeck writes.32
If the evidence from Davos is anything to go by, this may not be entirely true. But even as capitalism’s apologists struggle to revive the corpse, their underlying myth appears to be disintegrating. The relentless pursuit of growth has driven us to the verge of ecological collapse, created unprecedented financial fragility and precipitated the terrifying spectre of social instability. Capitalism has no answers to its own failings. It cannot pursue social justice while it continues to prioritize profit. It cannot protect our climate while it continues to idolize the stock market. It finds itself powerless, at the mercy of circumstance, when the lives of millions are at stake. Capitalism’s core belief in eternal growth lies trembling in the ruins. The myth itself is moribund.
A society that allows itself to be steered by a faulty myth risks foundering on the shores of a harsh reality. To cling obstinately to outdated ideas as the world proves them wrong is to court both psychological despair and cultural disaster. But when myths fail, hope itself begins to fade. The role of cultural myth is to furnish us with a sense of meaning and to provide a sense of continuity in our lives. That need is a perennial one. The loss of a sustaining myth undermines our sense of meaning and threatens our collective wellbeing.
Developing new myths, better stories and clearer visions is as essential as understanding the dynamics of collapse. Perhaps more so. That in essence is the task of this book. To look beyond the myth of growth. To dare to see beyond capitalism itself. To revisit its most treasured assumptions. To challenge the truths that have both nourished us and damaged us. To lay the foundations for a different way of seeing and a better way of being. To develop a ‘postgrowth narrative’, a new foundational myth, a more robust vision to guide us into the uncertain future. It is to this task that we now turn.
Notes
2 2. Translation from an extract from Luxemburg’s (1915) Junius Pamphlet in Waters 1970.
3 3. The expert in question was Anand Menon, Professor of European Politics and Foreign Affairs at Kings College London. He wrote about the experience in a review of 2016 for the UK in a Changing Europe Project, which can be found online at: http://ukandeu.ac.uk/2016-a-review/#.
4 4. On the impact of austerity, see the UN Special Envoy Philip Alston’s devastating report on the impacts of poverty in the UK: https://www.ohchr.org/Documents/Issues/Poverty/EOM_GB_16Nov2018.pdf. Post-truth: Davies 2019; see also: https://www.nytimes.com/2016/08/24/opinion/campaign-stops/the-age-of-post-truth-politics.html.
5 5. https://www.db.com/company/en/davos--the-world-economic-forum.htm.
