Two years after the recovery phase of the business cycle began, officially ending the Great Recession in the United States in June 2009, the capitalist economy continues to stagnate with the U.S. growth rate at 1 percent in the second quarter, following 0.4 percent in the first quarter, and with both the European Union and Japan in a similar or worse condition. Indeed, the United States, the European Union, and Japan, as the New York Times declared on August 10, 2011 (“Where Will Growth Come From?”), are all currently headed down a path “that will prolong their economic stagnation and perhaps tip them into another recession.”
Under these circumstances mainstream economic commentators are finally beginning to open their eyes to the realities of endemic stagnation. A case in point is the 2011 New York Times bestseller, The Great Stagnation—a pamphlet-size book by Tyler Cowen, professor of economics at George Mason University. Cowen recognizes that there is a problem in the United States of “multi-decade stagnation.” Thus he writes: “Our last three economic recoveries, beginning respectively in 2009, 2001, and 1991, have been ‘jobless’ in nature. Commerce recovered far more quickly than did employment…. Currently, we are struggling to re-attain the economic output of 2008, and even before the financial crisis came along, there was no new net job creation in this last decade.” His explanation for this is that rapid economic growth is due less to internal economic dynamics than external historical factors. Thus the economic booms in the U.S. past were not the result of the internal workings of the economic system but the product of “low-hanging fruit” such as free land and waves of innovation that the system could exploit. Today, in contrast, there is no low-hanging fruit in the United States (though some other countries like China are able to exploit theirs): no more free land and no epoch-making innovations that can spur economic growth to the extent that the railroad and the automobile once did. Cowen correctly indicates that digital technology and the Internet, however revolutionary, have not played the role of epoch-making innovations with respect to the twenty-first century economy that the railroad and the automobile played in the nineteenth and twentieth centuries. Hence, the economy is left to its own devices, which leads to stagnation.
However, the rational kernel in Cowen’s argument comes to an abrupt end at this point. His book devolves into a conservative argument on the need to contain “entitlements” (Social Security and Medicare), make healthcare more cost-efficient, and privatize public education. He justifies this in terms of a Schumpeterian supply-side view that all of this will help spur a new era of technological innovation (a new period of low hanging fruit) that will lead to renewed economic dynamism. This is the basis of the empty promise at the end of the long subtitle to his book: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better.
In contrast, some mainstream economists are beginning to zero-in on the fundamental cause of the Great Stagnation: the overaccumulation of capital. Thus Nouriel Roubini of New York University recently went so far as to declare in an interview with the Wall Street Journal (August 11, 2011) that, “Karl Marx said it right. At some point capitalism can self-destroy itself because you can not keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand, and that’s what’s happening. We thought that markets work. They are not working, and what’s individually rational…[is] a self-destructive process.” This could have come straight out of Harry Magdoff and Paul Sweezy’s Stagnation and the Financial Crisis, published in 1987 (or virtually any issue of Monthly Review in the last thirty years). We recommend that Roubini, who is apparently willing to take his insights from wherever he can get them, read not only Marx but also (if he has not already) Magdoff and Sweezy. No other thinkers, we believe, perceived so early, and so fully, the deep structure of the stagnation-financialization crisis in which the economies of the triad (the United States, the European Union, and Japan) are now entrapped.
The July-August special issue of MR on Education Under Fire (with William Ayers and Rick Ayers as special issue editors) sold out almost immediately after it was released and had to be quickly reprinted. Readers clearly recognized that it was a powerful counter to the current accelerating campaign to privatize public education. Complementing this summer issue, Monthly Review Press has just published an important new book, Class Dismissed: Why We Cannot Teach or Learn Our Way Out of Inequality by John Marsh. In this book Marsh explains that education in the United States is not—nor can it ever be in a capitalist economy—a way out of poverty for the vast majority, and that education needs to be freed from serving economic goals and directed to education itself, as its own end. To purchase Class Dismissed or the special summer issue visit monthlyreview.org or call 800-670-9499.
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Correction: On page 55 of Debbie Almontaser’s article, “Khalil Gibran International Academy” in the September 2011 issue of MR “Carol Horowitz” should be “Carol Horwitz.”