The BoC’s “New Normal”: (S)low
Most probably future historians (assuming there are any) will look at the 2008 Great Market Meltdown as a landmark event in the fortunes of the Modern Era. The global economy has not really recovered from it, and, apparently, is not predicted to very soon. Slow to low to no growth is the “new normal” according to the Bank of Canada and the IMF.
Slow growth is the “new reality” according to the BoC. It’s a mixed blessing, and a mixed blessing is often just another way of saying “predicament” or “dilemma”.
Stagnating growth rates (or the decreasing rate of profit) were exactly what neo-liberalism and “free trade” were supposed to rectify, no? Yet, it seems to be doing the opposite. Nobody it seems can figure out why, but the solution chosen is just more of the same. If neo-liberalism isn’t working as promised and predicted, well then, the reason is that there’s not enough of it yet. More! More! and Encore!
Something’s wrong with the model, obviously. Something’s wrong with the thinking and the Grand Narrative. It’s being frustrated by something-we-know-not-what. The problem, suggests the deputy head of the BoC, is labour and productivity — the “usual suspects” whenever the rate of return and profit is inhibited. But meanwhile, back at the ranch, there isn’t even a mention of automation coming down the pipes. Is that the growth and productivity boost that the model is hoping for and relying upon — eliminating labour from the equation completely?
The model is, apparently, now running into self-contradiction as much as Keynesian economics earlier ran into self-contradiction (the dilemma of “stagflation”) — and that means, “vicious circle”. And I can’t help but reflect on whether the BoC’s prospectus for the global economy isn’t a description of Peter Pogany’s “chaotic transition” in effect.
For my part, slow growth, as the decrease in the rate of return on investment and pressure on profit margins, also means a decreasing rate of consumption of natural resources. At least, that seems to follow. It also seems to signal that the pace of economic globalisation has stalled, which is usually bad news for capitalism. Looks like the party’s over.
As usual, whenever there’s a problem of the declining rate of profit, labour is to blame. And the usual solution is to find ways to squeeze more wealth and productivity out of labour, or to get rid of it completely (and therewith, also, as a bonus whatever political influence or say labour might have in the order of things). There seems to be little other reason for “autonomous vehicles” or artificial intelligence except to salvage the general declining rate of profit.
The other possibility is that we’ve hit the “Limits to Growth” forecast earlier, and there are some signs that this is so and that climate change may be implicated in putting the brakes on further economic expansion. How’s this for a contradiction? — discovery of new oil supplies are at a 70 year low; runaway climate change is anticipated to occur within the next five years; the rate of consumption of oil is anticipated to increase by 2025 and not decrease (suggesting that the Paris accords on Climate Change were pretty much only a dog and pony show). The slowdown in the global economy might possibly suggest another possibility — that the cost of extraction of new energy sources now exceeds the reward, and is infringing on the general rate of growth which, if so, can be anticipated to become negative in the near future.
That’s my preferred interpretation for the slow-to-low-to-no growth decline — that the energy presently being expended to extract and produce an equivalent amount of energy is beginning to exceed the energy actually generated to drive the economy, resulting in a slowly accruing energy deficit that is beginning to impact on the rate of growth. That’s an explanation for the apparent self-contradictions of the neo-liberal model that makes sense to me.