Surfing the Long Waves

Most Marxists who talk about profit rates do not believe in a long-run tendency of the rate of profit to fall. Instead, they are long-wave theorists. They chart transitions between long periods of rapid economic growth and periods of slower growth and economic crisis. Ernest Mandel, Immanuel Wallerstein, Giovanni Arrighi, Robert Brenner, Anwar Shaikh, Gérard Duménil, and Dominique Lévy are all long-wave theorists.

In this respect, they can all count themselves as followers of Nikolai Kondratiev, who first theorized the existence of fifty year supercycles of economic growth and decline, on which shorter business cycles are superimposed.

Typically, theorists like this argue that 1852–1873 was a period of boom, followed by an 1873–1896 bust, followed by an 1896–1914 boom, followed by a 1914–1945 bust, followed by a 1945–1973 boom, followed by a 1973–1985 bust, followed by a 1985–2007 boom, followed by a 2007 to present bust. As we will see below, Brenner has distinguished himself by arguing for a 1973–2023 “long downturn.”

The Austrian economist Joseph Schumpeter did much to develop Kondratiev’s long-wave theory. For that reason, I think of Marxists in this camp as neo-Schumpeterians, although some would probably resist the label. Schumpeter’s essential argument was that what drives long waves are periodic technological revolutions. As they unfold, these revolutions lay down certain tracks on which society proceeds to run: railroad tracks, telephone wires, asphalt for cars, and fiber-optic cables.

There are expensive switching costs involved in transitioning from this built-up infrastructure to a new infrastructure, so it takes time for the next revolution to break out. Switching typically involves what Schumpeter called creative destruction.

In the course of each long wave, not only new infrastructures, but also new firms, new organizational techniques, and new markets displace the old. All of these features of long waves are aggravated and intensified by the credit system, which overlays a boom-and-bust dynamic on top of what would otherwise be, Schumpeter says, a surge-and-slowdown trend.

There is nothing in this long-wave theory that contradicts the Nobou Okishio Theorem, because it has nothing to do with any kind of hiccup in the basic mechanism of capitalist decision-making regarding investments. I doubt that Okishio took his theory to be incompatible with the business cycle, or with these long waves.

The point of the long-wave theories is to say that capitalism’s historical tendency to achieve 1.5 to 2 percent average growth per year does not take the form of a calm expansion at a steady rate. Rather, it is a tendency that emerges only as the average of turbulent boom-and-bust cycles and at times brutal competitive conflict.

Given Ackerman’s interest in non-price-based forms of competition, it is important to note that Schumpeter integrated a theory of oligopolistic competition into his long-wave theory, in a way that also influenced Brenner. Schumpeter famously argued that the appearance of oligopoly — that is, of a few large firms capturing most of the market in an industry — is not a sign of the maturation or exhaustion of capitalism. Nor can it be counted among the causes of an inbuilt tendency of the system to slow down.

On the contrary, big business is the organizational form most adequate to the immense scale of investment needed for modern-day production. Large-scale firms emerged victorious during the Gilded Age boom. They are responsible for massive improvements in productivity. Of course, they prefer to battle it out with one another on the basis of quality, rather than price. They also create many barriers to entry, by increasing the costs to customers of switching between brands.

Oligopolistic competition reigns, Schumpeter argues, because it is the only way for large-scale firms to secure the space for the major investments in plant and equipment through which they realize massive efficiency gains. The point is not only that these oligopolies do not block progress. Their research and development arms, which they are able to pour money into precisely because of their oligopolistic pricing strategies, become the major sources of productivity growth for the wider economy.

Thus, oligopolies do innovate, and they pass on gains of innovation to consumers. They do so because they know that the next challenger to their reign is always around the corner. They are always at risk of being dethroned and are periodically dethroned in every industry. During periods in which industrial leadership is contested, polite, non-priced-based competition often gives way to brutal, price-based conflict.

International Competition

We now have all the tools we need to understand Brenner’s theory of the long downturn, as published in The Economics of Global Turbulence, which first appeared as a special, book-length issue of the New Left Review in 1998. Brenner’s book offered a simple modification of Schumpeterian long-wave theory. He said that capitalist creative destruction plays out in international markets.

In the book, Brenner accepts the existence of Schumpeterian-style oligopolistic competition, in which firms fight “gentlemanly” battles over quality, not prices.

Brenner takes that to be the situation of American large-scale firms in the long boom of the 1950s and ’60s. They weren’t price takers. Instead, they engaged in “cost-plus” or markup pricing strategies. Their polite, non-price-based competition was, however, interrupted in the mid-1960s by the incursion of low-cost Japanese and German manufactured goods into the US domestic market.

The German and Japanese states had fostered the growth of their own large-scale firms behind tariff barriers and protected by currency undervaluation. These firms launched themselves first into the world market, and then invaded the US market, using a low-price strategy to rapidly grab market shares.

Ackerman does not seem to deny that that was the case. I’m not sure how anyone could deny that the same sort of thing happened in the 2000s with Chinese goods, which rapidly took both global and US domestic market shares via a low-price strategy. Right now, EU politicians are extremely worried about the growing dominance of low-cost Chinese batteries, solar panels, and electric vehicles, which either have already or are on their way to achieving high market shares.

In the context of this argument, Brenner deploys profit-rate accounting to show that the decline in profitability in the 1970s was the result of a fall in capital productivity, that is, the income generated for each unit of capital invested, rather than a fall in the capital share, that is, the share of this income capital keeps for itself.

In other words, Brenner argues, it wasn’t workers’ success in raising wages, but capital’s failure to restore the conditions of non-price-based competition in manufacturing that led to the fall in profit rates.

Brenner argues that US firms dug in their heels and refused to cede their ground, as did their competitors. The result was a long war for price leadership, accompanied by a temporary but ultimately long-lasting fall in the rate of profit. Brenner has argued that this battle continued for longer than it should have because, as Shaikh has argued in his own theory of real competition, major spoils will go to the winners.

The more pertinent reason, however, is that these trade wars took on a growing geopolitical significance. Most of Brenner’s subsequent work is about how what started as a trade war became a currency war, and how state policies aimed at preventing their firms from suffering defeat issued in financial bubbles, then crises, and then long bouts of stagnation.

Crucial to Brenner’s account was a real but ultimately short-lived recovery in the United States, in the 1990s. Meanwhile, states in countries like South Korea, Taiwan, and later China did not wait for firms in the United States, Europe, and Japan to work out their conflicts. They built up their own large-scale firms, which subsequently entered the international fray and won greater market shares.

Obviously, oligopolistic firms in the United States and elsewhere responded to these onslaughts in a variety of ways. There is no doubt that product differentiation has been one of their strategies. Writing in the late 1970s about intensifying competition, business strategist Michael Porter advised US firms to abandon any market, or slice of the market, where there was competition, and instead to focus on areas where they retained monopoly control. Peter Thiel made the same argument in his recent book Zero to One.

Central to Brenner’s account, and to the general perspective of the long-wave Marxists, is that capitalists responded to the vanishing of investment opportunities in a second way, too: by making war on their domestic working classes. The result was a well-documented tendency of the capital share to rise, which has partially offset the decline in capital productivity, but at the cost of fifty years of real wage stagnation.

Why So Down for So Long?

Brenner’s theory thus has no relation to any Marxist theory of the long-term tendency of the rate of profit to fall. It is also unrelated to any Keynesian theory of “secular stagnation.” His account is a Schumpeterian long-wave theory, modified to account for the ways that international competition among oligopolistic firms has been key to explaining shifts in economic growth rates over the past fifty or so years.

What separates Brenner from other long-wave theorists has been his unwillingness to call the end to the “long downturn,” despite the fact that it has gone on for much longer than expected. It was supposed to last twenty-five years, but it has been fifty years!

Brenner’s long downturn has lasted so long that other long-wave Marxists have been able to argue instead that we have passed through another turn of the wheel, with the period 1985–2008 representing a new upswing, and the period since 2008 a downswing.

Instead of following the lead of these other theorists, Brenner has simply tracked what he sees as a continuous period of decline. The fact that so many non-Marxists are now talking about secular stagnation is probably grist for his mill, but the extended nature of this downturn remains a puzzle. It makes Brenner himself uneasy.

If you go back to the original book, Brenner’s idea was that, eventually, states’ flagging efforts to stimulate the economy back to health would give way to a deep economic crisis. Either workers would overthrow capitalism in the context of that crisis, or capitalists would reestablish themselves on a new more solid basis, with a restored rate of profit.

That isn’t a policy prescription, mind you. Brenner would no doubt prefer that society have done with profitability concerns and reorient toward meeting people’s needs.

Over time, however, Brenner has abandoned this theory, and has instead begun to argue that capitalism had transformed fundamentally. Brenner believes that capitalists have made peace with low growth rates. They are no longer interested in restoring dynamism to the wider economy. Instead, they are focused on maintaining a high capital share of income.

Firms distribute profits as share buybacks and dividends, which are siphoned off for elite consumption or stashed away in growing piles of personal wealth.

That shift perhaps explains why Brenner’s theory feels, to Ackerman, as if it were a theory of the long-run tendency of the rate of profit to fall, even though Brenner’s evolving theory continues to have no relation whatsoever to a theory of that type.

On the contrary, for Brenner, this shift is difficult to explain. Ackerman speaks of the resulting puzzle in the form of a question of how, “in Brenner’s theory there is somehow always an economy-wide investment drought alongside continual excess capacity.” Ackerman raises a related question, via Shaikh’s critique of Brenner, which is: Why would excess capacity in manufacturing, however persistent, cause the whole economy to turn down? Ackerman refers obliquely to my work, but neither reconstructs nor refutes my answers to these questions.

Deindustrialization Is the Answer

I point out that long-wave theorists all focus on one specific sector of the economy: industry. That’s the sector at the center of long-wave theories because it has long been the main source of capitalist dynamism (they don’t call them “industrial” revolutions for nothing). Investment booms and busts in industry — and especially in manufacturing and residential construction — drive the larger boom-bust cycles of the entire economy. Manufacturing is additionally central to Brenner’s theory, because manufacturing accounts for 70 percent of international trade.

Once we realize that we are talking about a specific sector of the economy, we can resolve Ackerman’s puzzle easily. There can be both investment drought and excess capacity in a sector that is undergoing a long-run decline in its share of total income.

Let’s take an obvious example: agriculture. Agriculture has long been shrinking as a share of GDP and employment. We might call this process “de-agrarianization.” As a result of de-agrarianization, there are fewer farms and farm workers. Yet all of this exit does not resolve the problems that continue to beset farming; it declines further.

Starting in the late 1960s, the US economy began to deindustrialize. Industry began to decline in terms of both its share of GDP and employment. Deindustrialization subsequently spread like a virus through the world economy, affecting even poorer countries that, if they had followed the path of the richer countries, should have continued to industrialize for some time. Deindustrialization has hit China, too.

Once you see that Brenner’s story about rising international industrial competition is unfolding in the context of global deindustrialization, the puzzle of the long downturn becomes much easier to understand. Even though GDP is still growing, that income growth generates less new demand for products in the industrial sector, limiting the growth of industrial markets.

Countries that do better in international competition, and hence win larger international market shares, like Germany, do see a slower pace of deindustrialization. A larger share of their GDP, or production, remains tied up in industry. But everywhere, as that share falls, industry sheds both labor and capital without ever resolving its problems of overcapacity.

This same point helps us solve the riddle of Shaikh’s critique. Shaikh points out that one sector’s output is another sector’s inputs, so the nonmanufacturing sector should have benefited from the decline in prices in manufacturing. That no doubt happened.

But the nonmanufacturing sector was not able to do much with its good fortune, because possibilities for efficiency gains outside of manufacturing — that is, in the service sector — remained low. Profit rates in nonmanufacturing are low not due to excess capacity, but rather due to the sector’s low productivity growth potential.

Toward Secular Stagnation

In the 1970s and ’80s, many economic analysts recognized that old industries — such as cars and consumer durables — were in decline. The question was: What would replace them? Where could the next turn of the Schumpeterian wheel take us?

Most supposed that the next big thing would be information and communications technology, or ICT. ICT did grow, but as a sector of the wider economy it remained small; its capacity to raise productivity growth rates across the economy was also limited. Hence Robert Solow’s famous statement of the productivity paradox: “You can see the computer age everywhere but in the productivity statistics.”

The reason, in my view, is that whatever positive transformation has come from the computerization of the economy, these effects have largely been swamped by another tendency, pushing in the opposite direction. Deindustrialization issued an ongoing transfer of workers from typically high-productivity-growth activities in industry to typically low-productivity-growth activities in the service sector.

In services, there are just fewer options for continually increasing efficiency. Productivity growth is on the order of 1 percent per year, or less, rather than, as in industry, 2 percent or more. One way to understand the intuition here is that services generally require direct interactions between workers and customers. The more people a worker interacts with, generally speaking, the lower the quality of a service.

The galaxy-brain version of this intuition comes when you recognize that the service sector isn’t just any collection of activities: it is a residual sector, where we find those activities that have resisted industrialization or computerization for a variety of material or social reasons. The heterogeneity of the service sector is one symptom of what economist William Baumol calls the “cost disease,” which, while not exclusive to services, is widely found there (construction is also beset by a cost-disease problem).

As services come to represent larger shares of the total output of the economy, that has lowered the economic growth potential of the economy. Meanwhile, as manufacturing comes to represent a smaller share of the total economy, it higher productivity-growth potential translates into fewer economy-wide effects.

Making these points about the causes of the ongoing economic slowdown requires no further references to profit-rate analysis. Although the point is a little technical, it is not difficult to understand. Brenner documents a long-term fall in capital productivity, that is, the income produced for every additional unit of capital invested.

This decline could occur for at least two reasons. One would be worsening overcapacity: firms are piling into an industry, in the context of a brutal competition for market shares, increasing output beyond what the market can bear.

The other would be reduced opportunities for technological change: every unit of capital added to this industry generates less income than before, because there are fewer opportunities for raising productivity levels. In the latter case, a declining trend of capital productivity reflects declining labor productivity growth and finds independent conformation in it (in analyzing this tendency, we don’t have any reason to try to figure out which factor is “truly” responsible for increasing efficiency).

Brenner’s account may have been right about the initial causes of the fall in the economy-wide profit rate — and may remain correct about the manufacturing sector, under conditions of ongoing deindustrialization — but once deindustrialization set in, and the shift to services unfolded to a greater extent, that changed. Continued low capital productivity reflected, not economy-wide overcapacity, but rather the shift to services. That’s also why the ongoing exit from industry has not resolved the problem.

For a time, the effects of the transition to services on the overall economic growth rate were somewhat muted due to the continued growth of working hours. Even if the efficiency with which people work is rising at a slower pace, you can get a lot of economic juice out of putting more people to work, or getting them to work more.

However, by now, the integration of women into the paid labor force across the wealthy economies has largely been completed, and post-baby-boom population growth rates are falling to zero (one big advantage of the United States, compared to Europe and Japan, is that the US population has been more willing to accept in-migration).

My revision to the Brenner thesis aligns me much more closely with certain strands of the “secular stagnation” literature, which arrives at a similar pessimistic conclusion about the long-term growth prospects of the economy. That literature has nothing to do with Grossmanite theories of the tendency of the rate of profit to fall, either. But secular stagnation theories are theories of a long-run decline in rates of profit.

Long-Run Tendencies

Competition tends to lower the profit rate, and when competition is widespread across the economy, that lowers the rate of profit overall. Who said it? Karl Marx?

No, it was Adam Smith:

When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit,” he said, “and when there is alike increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all.

Smith theorized a long-run tendency of the rate of profit to fall, as societies develop economically. He noted that poorer countries, like France, saw higher rates of profit, while richer countries like Holland saw lower rates of profit.

Smith predicted that in a highly developed country — “which had acquired that full complement of riches” that its natural resources, population, and trade allowed — “the profits of stock would probably be very low” and competition high.

In fact, with the exception of the marginalist economists of the late nineteenth century, and their great synthesizer, Alfred Marshall, most economists before 1900 probably believed that the rate of profit had a long-run tendency to fall. Marx was hardly unique in thinking so, even if he tried to explain this tendency in a unique way.

Among twentieth-century economists, John Maynard Keynes was the most famous to revive the theory of a long-run tendency of the profit rate to fall. He referred not to the overall rate of profit, but to the rate of profit on new investment in plant and equipment, which he called the marginal efficiency of capital. “To-day,” he wrote in The General Theory, “and presumably for the future, the schedule of the marginal efficiency of capital is . . . much lower than it was in the nineteenth century.”

Writing in the midst of the Great Depression, Keynes predicted that if society got capital accumulation going again it “ought to be able to bring down the marginal efficiency of capital to zero within a single generation.” Keynes thus took a fall in the rate of profit to zero not only as a tendency of his time, but as a goal.

Some of Keynes’s reasons for thinking that the rate of profit was falling and would fall further were like Smith’s: he believed that the essential phase of capital accumulation — the equipping of society with structures, machines, and other equipment — was coming to an end, and that in the future, growth would slow to the true rate of technical change, which he assumed to be much lower than 2 percent per year.

Keynes inspired the American economist Alvin Hansen to theorize what Hansen called “secular stagnation” as a tendency of the twentieth-century economy. This, too, is a theory of the falling rate of profit. Schumpeter said derisively: “There is surely no such gulf between Marx and Keynes as there was between Marx and Marshall. . . . Both the Marxist doctrine and its non-Marxist counterpart are well expressed by the self-explanatory phrase that we shall use: the theory of vanishing investment opportunity.”

Schumpeter thought this theory was wrong. He pointed out that there was still a high degree of unmet need in the population, suggesting that humanity was still far from fully equipped. Writing in the 1940s, Schumpeter also thought — correctly — that capitalist economies had a massive potential for further technological innovation.

However, even Schumpeter suggested that at some point, capitalist evolution might “permanently slacken down, whether from reasons inherent in or external to its economic mechanism,” making socialism more likely to succeed it.

Schumpeter’s point about Marx and Keynes having similar theories of the falling rate of profit is apt but wrong. For Smith and Keynes, as for many contemporary theorists of secular stagnation, the reasons for that stagnation are trans-systemic: they would affect a socialist as much as a capitalist society. Marxists were trying to find reasons for systemic long-run low profitability. The idea was that a transition to socialism would restore the potential for long-run economic dynamism.

The latter research program, as Ackerman explains, ran into a dead end. The same is not true of the non-Marxist alternative. On the contrary, this theory has seen a revival.

We’re All Stagnationists Now

Contemporary stagnationists cite a number of tendencies to support their belief that we live in an era in which the growth potential of the economy has ratcheted downward. Robert Gordon, like Smith and Keynes, believes that we have done the main work of equipping rich Western societies with plant and equipment, as signaled by the end of urbanization, that is, the end of the build-out of residential construction.

Gordon also believes that we have picked all of the low-hanging fruits of technological change, and hence have reached the Schumpeterian concluding act.

Dieter Vollrath, like Keynes before him (and also Gordon), emphasizes the decline in the rate of population growth, which is tipping over into population decline.

Vollrath, like me, also believes that a major contributing factor is the end of industrialization, and the transition to a services-based economy. Pace Gordon, the big problem is a falling potential for process innovations, not product innovations.

Larry Summers, who restarted the debate on secular stagnation, initially placed more emphasis on an excess of private savings rather than a deficit of private investment. But his analysis comes to the same point: savings are excessive because of a vanishing of investment opportunities. Summers cites declining population growth and falling rates of productivity growth as causes. He also discusses, as a third cause, rising economic inequality.

Note that these theories are not seeking to explain a single decade of low economic growth rates. They observe downturns as beginning, like Brenner’s, in the 1970s. These theorists also trace a similar long-run decline across a range of economic indicators, above all productivity growth rates and population growth rates. These are theories of low profitability, but need make no reference to profit-rate analysis.

By now “secular stagnation” has become a mainstream view, having no necessary association with Marxist or heterodox economic thinkers, like Robert Brenner or myself. Oliver Blanchard thinks that, alongside a too-high savings rate, the vanishing of investment opportunities means that secular stagnation is likely to return in the near future. As he recently said:

I believe that global secular stagnation was and is driven by deep structural factors that neither COVID nor inflation have done anything to reverse. Once central banks have won the fight against inflation, which they will, we shall most likely return to a macroeconomic environment not dramatically different, at least in this respect, from the one before COVID.

Of course, to say so is not to say that it is logically impossible that secular stagnation might one day be reversed. There could be breakthroughs that radically raise the productivity growth rates of capitalist economies. The issue is that, in spite of all the fanfare, and as Blanchard avers, “Such a technological explosion did not happen in the last 40 years, but it could.”

Earlier this year, the World Bank put out a report called “Falling Long-Term Growth Prospects.” The headline of its press release? “Global Economy’s ‘Speed Limit’ Set to Fall to Three-Decade Low.” On the global scale, the bank, like many commentators, is worried about the ongoing decline in the pace of Chinese economic growth, which is expected to have huge knock-on effects on poorer countries around the world.

Brenner isn’t the one who sees only what he wants to see in the runes of the global economy. Ackerman is the one burying his head in the sand.

Important to note is that none of these secular stagnationists believe that the economic growth rate is likely to fall to zero, but that it will tend to fall to around 1 to 1.5 percent in the high-income countries. Still, many of them believe that, if the economy gets stuck at this growth rate, the results will be politically contentious.

Why would that be? The failure of most non-Marxist secular stagnationists to draw out the political implications of their theory in more detail is one of their failings.

By contrast, Marxist long-wave theorists do offer a political account of changes in class relations over the course of long waves, which is relevant for thinking through the political consequences of secular stagnation today. Ackerman seems to find this account scandalous, but in fact, it helps us understand our present moment.

Political Implications

The basic Marxist theory goes like this. During long systemic upswings, capitalists’ rates of profit are higher, and so are economic growth rates. Capitalists are more willing to engage in polite competition with one another. Capitalists are also more willing to share the gains of growth with the working class and with society.

These positive outcomes are not necessarily guaranteed in upswing eras, but they are possible if workers and other groups organize and fight for change. In these eras, the reformist wings of these groups will tend to win out because there is a lot to gain from compromising with the capitalists in periods of high profitability.

By contrast, during systemic downswings, capitalists’ rates of profit fall. Capitalists are more likely to undercut one another through nasty price competition. They are also less willing to share the more meager gains of rising productivity with workers or the broader society, so wages stagnate, and so do tax takes.

Ackerman’s reconstruction of Brenner’s account makes no mention of this essential aspect of the argument: that periods of low profitability are associated with rising class conflict, from the side of the capitalists. As Warren Buffett said, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” According to Brenner, in making this war, capitalists are trying to make up for falling capital productivity by raising the capital share, resulting in wage stagnation.

That said, we shouldn’t be too economistic about this tendency. Stagnating wages are just one indicator of a much wider set of hardships imposed on working people in low-growth periods: economic and financial insecurity intensifies; capitalists encourage changes in the law allowing for the spread of precarious employment; and they fight politically for austerity to be applied to health care, education, and social services.

For forty years now, capitalist rapaciousness has been reducing long-run human life chances by resisting efforts to organize a transition off of fossil fuels.

The upshot is that, in downswing periods, advocates of compromise with capitalists mostly just organize the defeat of the working class. Does this theory feel so out of step with what has happened since 1973? Trades unions lost a lot of support as they stopped fighting for working people and instead organized the working-class defeat. The same is often said of social democratic and labor parties: they stopped fighting for people and instead organized their defeat. Where Brenner got it wrong was in his hope that workers might break free of these organizational constraints.

Still, maybe that has finally started to happen over the last ten years, as indicated not only by a rising curve of social unrest, but also by the rise of democratic or rank-and-file unionism. The recent victory of democratic unionists in the United Auto Workers, which was immediately followed by a combative strike, is a pertinent example.

Incidentally, Schumpeter drew the exact same political insights from his own long-wave theory, but had the opposite worries. Schumpeter feared that, without the protection of a war-making aristocracy, the capitalists would prove too weak-willed to resist workers’ economic and political advance during downswings. He saw the advent of the New Deal as a sign that capitalists didn’t know “how to say boo to a goose,” and as a result, were allowing the social and political infrastructure of the capitalist system to break down, paving the way for socialism.

If he were around today, Schumpeter might be proud of the capitalists. They seem, over the past fifty years, to have found their war-making spirit.

The problem from Schumpeter’s perspective would be that, in an era of secular stagnation, capitalists have given up on using the profits they have gained, through their success in raising capital shares, to fund further dynamic economic expansion.

That’s one reason why efforts to stimulate the economy, at least before Bidenism, were less effective than expected in raising economic growth rates. Profit rates rose, but because capitalists saw little change in the long-term horizon, they chose to cash out these higher profits in the form of more elite consumption.

Witness the stunning increase in the wealth of billionaires, during the 2010s, which was an era of incredibly weak economic growth.

Nothing that has happened so far, in the Biden era, suggests a deep, tectonic shift in the outlook of the capitalist class, but that doesn’t mean it can’t happen.

Nor should we, in the face of secular stagnation, simply resign ourselves to long-run low levels of investment, or shrug our shoulders and say that we can’t afford a green transition. On the contrary, we need to radically transform production, both to meet people’s needs and to green production. The issue is that, as Nicolas Villarreal has also argued, to the extent secular stagnation persists, getting there will require significant reductions in elite incomes, which will call forth gigantic resistance.

A Green Future

What does it mean for the future to say that Marxist theories of the “unfettering” of the productive forces are largely wrong, so that the vanishing of investment opportunities would apply equally to a socialist society as a capitalist one? For mid-twentieth economists like Keynes and Schumpeter, the great advantage of socialism would be in its ability to manage a long-run, low-economic-growth society.

Instead of depositing so many of society’s resources in the hands of the rich, and in the accounts of oligopolistic firms, a socialist society would place these resources in the pockets of everyday working people, raising their consumption levels. Workers could take these gains, not just as higher consumption, but also added free time.

As Keynes himself argued, such an “underconsumptionist” solution has nothing to do with an underconsumptionist diagnosis of the economic problem. The problem, as I’ve already explained, is a vanishing of long-run investment opportunities.

However, before transitioning to low-savings, low-investment, high-consumption economy, we would want to engage in one last effort to reshape the economy. In this effort, public investment would have to displace private investment as the main engine of growth.

William Beveridge, perhaps the foremost wartime radical Keynesian, called this final effort society’s conquest of the “four Great Evils”: “We should regard Want, Disease, Ignorance and Squalor as common enemies of all of us,” he said, “not as enemies with whom each individual may seek a separate peace, escaping himself to personal prosperity while leaving his fellows in their clutches.” It’s hard to disagree.

Capitalism, it turns out, is good at economic growth but does a lousy job at serving people’s needs. It equips society with plant and equipment, at the prevailing technological level, but will never do so “fully” on its own, as Smith believed it would. That’s because such a build-out would require large public investments in low productivity growth activities like healing the sick, or building houses for poorer workers.

In our time, such a breakneck effort to build out the plant and equipment of humankind would have to take as its major goal to green the economy, under the advisement of both scientists and a diverse assortment of citizens. Indeed, investment throughout the economy would need to place with much greater democratic involvement than Keynesians — in their overwhelmingly technocratic fantasies of economic transformation — imagine.

Were society to undertake such a buildout, the economic growth rate would necessarily rise for one or two generations. But in a humane economy, we would not measure our success in the abstract terms of growth accounting.

Our main interest would be in the rising number of schools, houses, and hospitals, and in the decline in carbon emissions and premature deaths. We would track our progress along all of these indicators, while debating when would be the right time to switch tracks — to reduce savings, increase consumption, and expand our free time.

Getting to a Better World

Last week, I debated Ackerman on Jacobin Radio’s Behind the News With Doug Henwood. In response to my criticisms, he countered that, even if there were a reduction in the long-run growth rate of the economy, that would not be a major problem. The United States is already a rich society, he says. What does it matter if our economy grows at 1 percent per year and doubles in size every seventy years, rather than growing at 2 percent per year and doubling in size every thirty-five years?

The fall in growth rates matters because we live in a class society. Economic elites have not simply accepted lower rates of return, that is, of profits, since the 1970s. Instead, they have fought for, and won, significant increases in their share of income growth at the expense of the wider society. Workers’ real wages have stagnated. Much-needed investments in public services have been aborted and infrastructure has deteriorated.

A rational society, facing a lower potential productivity growth rate going forward, would make sure that the gains of economic growth go where they are needed most: into public services aimed at meeting people’s real, unmet needs for health care, education, nutrition, community, child- and eldercare, and a green transition off of fossil fuels. Instead, we have been living through decades of elite rapaciousness, a new Gilded Age.

The organizations that previous generations of workers built, including trade unions and, in other wealthy countries, labor and social democratic parties, have largely accepted working-class defeat in the new Gilded Age. They have, moreover, successfully fended off most efforts to shift the fight into a more combative mode.

Things are now hopefully beginning to change. But getting to a better world will still require an immense political struggle to transform the balance of class forces in our society. No matter what the Keynesians say, and no matter how good their economic analyses, there is no neat trick for getting elites to relinquish their economic and political power.

Brenner’s analysis of the long downturn — especially in the modified form I have laid out above — helps us understand what the battles are in which we are already engaged, why they matter, and what the hope is for the future. Ackerman’s analysis does not.