Knowledge will change the structure of society fundamentally, creating new political, social and economic dynamics. Land, labour and capital will become secondary to information and network technology – Peter Drukker, 1993.
This reflection was inspired by a recent book van Paul Mason entitled 'Post Capitalism'. It seemed to support many of my own ideas which have started to germinate in the last few months.
We believe that our economies operate according to capitalist ideals. But what does this mean, and is it true? We also believe that our political systems are built on democratic principles. To what extent are they really democratic?
It may be helpful to look at capitalism and democracy in the context of a number of current issues to see if they are sustainable. Let's start with some definitions.
Capitalism, according to Frank Bell, is an economic system based on property rights, a proper and independent legal structure and free markets. In such a system, the fruits of labour can be legally defended and adequately remunerated.
The characteristics (drivers) of capitalism are legally free labour, privately-owned capital, decentralised co-ordination and the pursuit of profit.
We seem to have taken for granted that capitalism actually functions in the spirit of these definitions. We make no mention here of the substantial roles played by governments, or of the many restraints on trade.
Under democracy we have the freedom to elect (and, at least periodically, to dismiss)representatives to govern us. However, there are so many different election systems that you must ask yourself to what extent they are all democratic.
However you elect your government it will probably not be able to govern in the way it promised to, or in the in the way you would like it to. This is mostly because of inbuilt protectionism. For example, if politicians believe that economic or political reform is necessary, and they nearly all do, and we agree, there is little chance that these reforms will be carried out as intended. Unfortunately, there are just too many vested interests which have the power to protect the status quo. And systems which have been put in place during recent history are often no longer functional but cannot be changed under the prevailing democratic structures. Apparently, the best example of this is the American constitution!
1. Inflation – a low, but positive rate of inflation is the ideal of our central bankers, but is this still what we should be aiming for and is it realistic and achievable?
In addition to seeking to preserve an attractive climate for individual and corporate investment, current European financial policy is directed towards maintaining a level of inflation of about 2%. This specific attention to the role of inflation stems from the fears of what happens when there is high inflation, as was the case in many years following the Second World War.
If inflation is too high, then both the values of assets and debts will drop in real terms, often leading to still higher inflation, when goods will be purchased for no better reason than that they will be more expensive tomorrow. Borrowing more to finance new purchases will also be attractive. Inflation discourages saving and raises the cost of capital.
On the other hand, if inflation is too low, then deflation will not be far away, when the purchase of goods will be postponed, leading to still lower prices. Cheap loans may also enable troubled businesses to survive. But the value of existing debt increases in relative terms.
It would appear that the real fear of high inflation in the developed world has ebbed away and that deflation is indeed closer by. One or two countries, for example the UK, are beginning to report levels of inflation around 2%, but it is not yet clear if we are talking about special cases.
Actually, the current rate of inflation may even be overestimated. This arises because the higher the contribution from advanced technology in products, the more the value of these products will be raised without an increase in the price. Wages are likely to be similarly restrained.
Many of the factors which stimulated inflation in the past, such as high oil prices, the fast expansion of the Chinese economy and high rates of interest, are less significant now and may not become significant again.
2. The price and availability of oil – has dominated thinking in our economy in the past, but what effect will it have in the future? How will we deal with global warming?
Oil prices have partially recovered from a recent and significant dip, despite Iran re-joining the market. Brent oil is now priced around $50, well above the lowest point in January last year ($28), but still considerably lower than at the beginning of 2014, and more than 100% below the high levels recorded during the financial crisis (2008). In fact, taking inflation into account, oil prices are now far lower than they have been during many decades.
OPEC, after much hesitation, has again attempted (some say unsuccessfully) to limit oil production to support prices, and Saudi Arabia is reassessing its own policy, even if it hasn’t yet given up its role as a guiding hand in negotiations. It says it is intending to sell ARAMCO to use the capital to realign its economy (in general, oil-exporting countries rely more on the revues from oil than taxation for their financing). In the short term, however, we may still see parties re-entering the market if prices become slightly more profitable, e.g. US companies exploiting shale oil. This will help to re-establish a ceiling on prices. Substantially higher oil prices are therefore unlikely.
Measures to prevent global warming, embodied in the Paris agreement signed by almost 200 countries, will also have a braking effect on oil exploitation. The aim of the agreement is to restrict global warming to 2 degrees centigrade. The implications are that the level of carbon dioxide output must be reduced by 80 – 90% by 2050. Is this something which can be achieved by free markets? Most oil companies are confronted with the choice of when to move away from fossil fuels and invest in forms of renewable energy. The picture is made less clear by Shell’s claim that the use of oil may not only not decline but is expected to increase. But at the same time it is taking steps to be less dependent on oil and seeking to cut extraction costs. The demand for oil is predicted to grow by an average of 0.5% per year over the next 20 years. This is driven, in particular, by the needs of Asia. The equivalent figure for the growth in renewable energy is estimated, over the same period, to be about 40% a year.
Some of the types of renewable energy, such as energy from the sun, water and wind, are plentiful (representing only a 'technical problem' to make use of them) but are still in their infancy. Although its use increased by 25% in 2015, renewable energy contributes only a fraction to world energy usage. Further, it generates only electricity which accounts for only 18% of the total. There are several places in the world, such as deserts, where it would be possible to increase the supply of renewable energy dramatically, but there is then the problem of energy storage.
There seems to be some optimism that renewable energy can make a breakthrough if we are able to achieve sufficient steering. Against this is the fast deteriorating economic situation of many of the countries dependent on the export of oil or similar fuels, and this needs equal attention.
3. Debt – we are becoming increasingly more in debt, but is this stimulating the economy as we thought and hoped? Or is it preventing us from investing?
Debt far exceeds sustainable levels. The global financial system is dangerously overstretched after years of ‘easy (cheap) money’. This money has been used to pay dividends, buy back shares, fund mergers and acquisitions and buy property.
Global debt reached 300% of GDP in 2008. By 2012 it had reduced to 250%. But this is still too high. The practical maximum which can be made available to meet interest payments and to repay capital is about 15% of GDP per year.
The amount of debt can have a crucial impact on short and medium term performance. Debt which grows faster than GDP over a lengthy period may be expected to lead to economic slowdown, with little finance available for new investment. China has been grappling with the need to reduce debt without triggering rapid deleveraging, which would imperil growth and encourage capital flight. This would push the currency lower, affecting half the developing world.
According to Adair Turner, rising debt is not leading to increased growth. He claims that this is because the investment in production which is necessary for this growth is not taking place. Property accounts for 50% of wealth but for the majority of lending, and then mostly limited to existing property. Borrowing also comes about through inequality; compensation through borrowing is required because the rich are not spending and the poor do not have the financial resources to do it. The result is that debt is growing faster than GDP because it is not generating it.
4. Growth – is necessary if we are going to feed more mouths and keep unemployment at acceptable levels, but where is it going to come from, and how we are going to measure it?
It seems that economic growth is now returning to the US and Europe. This follows a long period of no or little growth. This growth is mostly dominated by exports and not consumption. Inflation is also slightly higher.
However, economic growth is getting more difficult to measure. The conclusion could even be that we are measuring economic growth incorrectly. For nearly a hundred years we have used GDP, which has excluded the contributions from households and those (a fast increasing number) working on a voluntary basis. GDP has been synonymous with the standard of living, but this latter profits now from the many services which are free (internet), or where we haven’t yet found a means of measuring them. For example, music sales in the US have dropped by 60% since 1999 against a background where more music is available than previously. But not having to pay for something no longer means that it has zero value. This is difficult to interpret in terms of added value and may also mean that the taxation of goods and services has to be reformed. The number of complicating factors is increasing.
In addition, official statistics are becoming more puzzling and are often changed retrospectively. For instance, last year in a quarterly bulletin, the US reported an increase in the number of new jobs, a drop in the rate of unemployment but little economic growth. The drop in the rate of unemployment was then thought to be supported by those giving up the search to find respectable employment. Immediately after this there was a faster increase in new jobs than expected, including more full-time jobs, but the rate of unemployment went up from 4.7% to 4.9%. Despite the unreliability of the figures they continue to be eagerly awaited by the markets.
The productivity of labour becomes more important as the employed ‘pool’ in Europe and Japan declines, probably significantly (lower birth rates seem to be a permanent feature). In Europe, no expansion in the population is expected in the coming decade. In the same period, productivity is not expected to exceed 1.5% per year.
For many years we have found it important to develop trade agreements between various economic blocks. Progress has been slow but, just recently the WTO has ratified the TFA (started with GATT in 1996. This is intended to remove many restrictions from world trade and may lead to an increase of ½% in overall growth. Against this there is a perceptible movement towards protectionism
5. The rate of interest - if interest rates are very low or even negative, then what role will interest play in the future? Why invest (or lend) if you are not going to be rewarded?
The role of interest is becoming more insignificant, with the rewards from investment only available to those able and prepared to run (substantial) risk. Share markets are tending to reflect this at the moment. Institutional investors are being discouraged by solvency legislation from being too aggressive. This is not a positive context for saving, and certainly not in bank deposits. In many cases it actually costs money to save (negative rates of interest, which heralds even further drops in the rate of interest). Further, if interest rates do rise, there will be an (enormous) erosion of capital.
The level of the rate of interest has been influenced by a decision of the European Central Bank to continue with quantitative easing (the purchase of €80 billion of fixed-interest bonds per month). The proposed end date was March 2017 when the ECB would own a fifth of the relevant market. This date has somewhat surprisingly, been extended. The effect on the rate of interest is thought to be between 70 and 100 basis points. Whatever happens, there are no substantial increases expected in rates of interest in the near future, although perhaps with greater spreads between countries representing relative risks. This is unless a state of full employment succeeds in bolstering inflation and therefore wages. There is now reported to be about €9,000 billion worldwide which is invested at zero or negative rates of interest.
After a while we will get used to dealing with very low rates of interest. They are absolutely related to deflation. They reflect expectations of anaemic nominal growth with both real economic growth and inflation expected to be strikingly low for decades ahead.
Discounting at low rates of interest produces little reduction in the capital required for investment. In particular, pensions are too expensive, even without worrying about longer life. In fact, discounting at such rates, tends to make this latter aspect almost irrelevant, and is a relatively useless exercise.
6. (Dutch) Pension funds – their financial structure is under pressure, but perhaps, more importantly, what are the expectations for pensions in the future? And how will the gap be bridged from the end of work to the start of a pension?
In the current social climate of people living longer, savings would appear vital for self-maintenance during those extra years. Pension funds, as we know them now, are struggling to provide comfort in this area and nobody has any concept of what work individuals may be expected to do if they are required to remain in employment to an older age (and much older than we are now anticipating).
The next challenge is to understand that guarantees cost a lot of money and mostly can’t be given. Either guarantees are worth nothing, when the rate of interest is higher, and is expected to remain higher than the guaranteed rate (not the situation at present), or the guarantee is too expensive. With the low rate of interest, the purchasing of annuities with accumulated capital (an essential facility for defined contribution pension schemes which have replaced their defined benefit predecessors) will need to be completely rethought. A new law here or there, such as giving annuity payments a more flexible character, is unlikely to be sufficient and will only increase administrative costs. This is because such payments have a complex structure, combining the withdrawal of savings with investment returns and long-life risks.
In general, guarantees absorb financial and emotional energy. Ultimately they cost money and reduce expected returns. We have got to learn to do without them (at least partially). Governments are ideally equipped to make this possible.
Although we have established that pension funds, in general, need to be reformed (solidarity is not considered in the same light as previously because, for instance, careers proceed differently), progress is woefully slow. There appears only recently to be any official urgency. The slow tempo is not surprising given the complexity, but it should not be an excuse. The fundamental flaws in the current system need to be repaired. The interest curve used to value the liabilities (swap curve, adjusted or unadjusted) leads, on every change in the rate of interest, to intergenerational divisions. If the rate of interest increases or falls, one of the groups of members will be disadvantaged. The combination of the differing interests of the various parties and the complexity of the whole could well be fatal.
When we reflect deeper on these matters, as we should do, looking at the bigger picture, then group sharing may still be the best, but perhaps organised in a better (more flexible way). Whatever is decided, it is only creating a new basis for the future. The past will remain as a legacy unless we are prepared to realise losses on the current arrangements. And if premiums become more related to age than being an overall percentage of the payroll, one generation is going to end up paying more than the others. Financing more via the government, and then from current earnings (’pay as you go’), will, without doubt, become more of a consideration (no capital needs to be accumulated). But how long will it take us to realise this? And how long will we tolerate the restrictions imposed by industry-wide pension funds?
7. Income and wealth – inequality is a threat, which it seems can only be corrected by major disruption? Or are there steps which we could take to avoid this?
The increasing concentration of income and wealth in a few hands, monopoly (wealth) being one of the few remaining ways to sustain prices at a relatively profitable level and maintain influence in the world, reduces spending power, and therefore economic growth, which has always been supported by money in the hands of the middle and lower classes.
DNB has also admitted that the contribution/earnings from the self-employed (however you define them, and that is one of the problems) have been over-estimated, suppressing purchasing power further than was necessary. In the first quarter of 2016 there were 1.7m flexworkers in the Netherlands. This is 25% of the working population. And according to the CPB, 40% have no permanent contract. It seems likely that the preference for self-employment will only increase. This needs to be looked at in terms of the effects on society, in general, and pension rights and insurability in particular, and will require far more insight when making relevant economic projections.
The differences in income between high and low earners in the ‘rich’ world have widened and globalisation which has tended to favour those who are already well off. This offsets the reduction in the differences between countries. Those who earn less in this same ‘rich’ world are losing out. The middle classes, particularly in Asia, are gaining relatively. In fact, the financial crisis in 2008 saw a strengthening of an existing trend in favour of Asia. Since 2000, developing countries have been growing, on average, at 4.1% per annum against about 1% for developed countries. In actual fact, we have to go back to 1970 to find the developed world growing faster than developing countries. Growth in developed countries is determined by the impact of technology at the frontier of their production. In general it will be slow and never as fast as in developing countries.
Remuneration for unskilled labour in developed countries has dropped with the competition from developing countries, with increased profits resulting from the supply of capital and better remuneration for highly skilled labour. Perhaps we should also remember that we previously paid workers enough for them to ignore a proper education. And in sport today it is no different. We continue to create a huge problem.
Sub-Saharan growth is accelerating but probably more due to the extraction of natural resources. No structural change is taking place in the economies. Their performance will determine if the equality between countries can continue to decline. They are the poorest countries but have the highest rates of demographic growth. By 2050 this population will have doubled to 20% of that of the world.
Measures to reduce inequality tend to lower economic efficiency. However, steps taken against inequality which are directed towards access to credit, education and job opportunities, generally, work positively.
8. Unemployment – how much is there, and what are we going to do about it, particularly with regard to the youth? How should we educate the youth in these circumstances and how should this be financed?
Unemployment in the EC is falling slowly, but is still above 10% (Germany and the Netherlands have been well below average). Unemployment is now under 5% in the US, but see earlier comments. Youth unemployment is particularly worrying (above 10% in the Netherlands, but nearer 30% in parts of the EU) and needs far more attention than it seems to be getting. These figures are also thought to lack accuracy, in the sense that the measurement of jobs, and therefore (un)employment, is less easy than in the past.
One of the reasons why we see little change in the unemployment levels in the EC is the restriction on budget deficits. They may not exceed 3% of GDP. Previously, governments have spent more to create jobs. But nobody seems to know whether the budget or unemployment is more important, and certainly not how they might be linked.
Unemployment is an important factor when surveying the social situation. Being without work causes stress and provides the opportunity to spend available energy wastefully. At the same time, as we target higher productivity within a meagre growth situation, we are actually talking about unemployment. In the past, a low level of unemployment was threatening for inflation. For the time being we don’t have to worry about that.
One question which is difficult to answer is how should we establish a sensible education policy. Educating for jobs (rather than for skills) which do not exist or are only temporary, and requiring borrowing to finance to education (an old concept based on career potential) which then can’t be repaid, seems to be particularly senseless. And yet not educating condemns youth to unemployment and is therefore not an option. Further, the provision and remuneration of teachers never seems to have priority. This is a major issue.
9. Banks – the most important of the financial institutions of the past, but are they on their way out?
In theory, borrowing money when rates of interest are low should become more attractive. Against this, banks are less prepared to finance long-term lending with short-term borrowing as there are insufficient margins. Or at least there would be insufficient margins if there was not a partial monopoly which operates against other potential lenders. Movements in the rate of interest of central banks have now insufficient effect. In fact, it is difficult to see what the future role of the banks is going to be, certainly as we don’t like it when they do the ‘non-banking’ things which helped bring on the last financial crisis in 2008.
The (EC) controls which they are under (recent stress tests) have been rigorously strengthened. According to informed opinion the capital reserves involved may still only be 50% of what is necessary.
The deposit rate with the European Central Bank is now negative, in an attempt to encourage banks to lend more. Banks have reported poor results. The banks blame this on the low rate of interest. The share prices of the banks have also fallen. This has not been helped by Brexit. Many are considering substantial redundancy schemes.
The major part of the lending of the banks is now relatively risk free, being in mortgages on existing property. Is this what we want?
10. Insurance companies – have seen their role greatly reduced. What changes will they have to make to deal with the future?
Insurance companies are also rethinking their contribution to the economy, but making seemingly little progress. They were major players in the financial services industry in the past.
The position of the car insurers is serious. Claims and expenses in the Netherlands amounted in 2015 to 111% of premium income, with a total loss of €309m. The number of accidents is not actually increasing but the claims per accident are. Soon every claim will have to be investigated! Investment income, which filled a smaller gap between income and outgo in the past is no longer sufficient. This is a very old problem with general insurers. If claims and expenses are not covered by premium income then these insurers will eventually be caught out.
Competition ensures that premiums cannot really be increased, although there are reports that insurance companies are doing this to a certain extent. The position in the other branches of insurance is not substantially different. For instance, fire and theft insurance is also loss-making. The general insurance sector as a whole in the Netherlands made a loss of €42m in 2015. And, for life insurance, where previously the margins were better, premium income is dropping significantly.
In fact, the move by some of the major insurance groups to operate more in the areas of the world where, in the past, insurance played a lesser role, and where insurance was less affordable, was predictable and has speeded up. In addition, the EC solvency legislation is placing increasing demands on the availability of capital. This has to be provided by the shareholders who are supposed to be attracted by the prospect of being able to invest at lower prices.
We are starting to see major merger projects with the opportunity for better financial results but with undoubted negative consequences for employment.
As the economy is currently structured we cannot do without insurance, but who will be prepared to provide it?
11. Welfare for the aged – will be become a major industry, but how will it be financed? And what would be a sensible (political) policy?
This is a very complicated situation. The better the elderly are cared for, the longer they live, the more they consume but the more health care they will absorb. The quality and the cost of the health care tends to increase the older they get. In the future, they may not be receiving the pensions they are now enjoying to contribute as some now do. This is not to mention that the families who provide care are becoming much less financially capable.
The original philosophy was that a system offering care to the less fortunate is necessary to curb the rough edges of capitalism. But how should it work? We need to get a better understanding. In total, the expenditure on health and safety in the Netherlands is 9% of GDP (was in the 1980’s, 18%). The drop can be somewhat explained by the fact that flexworkers and the self-employed now fall largely outside the system and disability no longer masks unemployment.
Of course we need to find a way to care for the elderly. We also need to do it properly. On the other hand they are not the future, but the next generation will be. There is also the growing political divide between the younger and older generations. This is a difficult balance, but we need to find it. Otherwise the elderly will only be looked after at the cost of youth unemployment, for example. It seems likely that the family will have to play a larger role, but how? Spending will need to be more effective if the situation is not to be self-perpetuating.
We may need to concentrate more on immediate needs and priorities, such as accommodation, warmth, food and attention and look at the best ways of financing these. Care workers will also need to become part of a proper profession.
12. Migration – nothing has been recently discussed more without knowing exactly the role which it plays and must play, but what should be the policy?
Migration obviously has to be managed in some way, but the effects are not yet sufficiently understood. Migration seems only likely to modify the overall economic situation. Actually only 3% of the world’s population lives outside the country of birth. That is 230m. It also includes (10%) who became members of other countries when the Soviet Union collapsed.
It is thought that about 16% would actually like to migrate. In fact, 15% of the populations of the US and Spain is immigrant. The discussion about migration is not only about how many, with how much money and with what skills, it is about the treatment which immigrants should receive once they arrive in their new countries (there is fairly wide-spread discrimination). Further, few people know or care about just how a new arrival finds the way to a better future.
The number of immigrants (percentage growth) has been faster than the growth in the world population. Immigrants have often dissimilar religious beliefs and other cultural norms. And this is not to mention language. This brings pressure on the welfare state and reduces the effect of globalisation.
How can they be helped to feel more at home, to develop themselves and believe that they have a future? And how can we learn to communicate properly on this sort of subject?
On the other hand, the ageing working population in western countries will need supporting from outside. No shortage of effort should be applied to providing solutions. Apparently the UK is already thinking in terms of a retirement age in the mid-70's, if immigration significantly reduces in the context of Brexit.
Building physical walls between countries, or parts of countries, seems incongruent with modern forms of communication!
FUTURE DEVELOPMENTS – IF WE DARE TO LOOK AHEAD
In the past, we would have seen the current economic uncertainty and the related dilemmas as a temporary situation until the effects of panic measures, such as those linked to Brexit, wear off or the economic cycle changes, which it always did. But we appear now to be entering, albeit with some difficulty, perhaps the fifth of Kondratieff’s long waves (50 years) – which is dominated by the effects of information technology, when an increasing part of production is based on the availability of information, which, unlike other resources, is abundant and cheap. Put another way, if prices (values) are based on the cost of labour (labour theory of value supported by Paul Mason), then prices will reduce as the role of labour is replaced (at least to some extent) by information technology. Further, investment becomes more durable and therefore less costly per unit of production.
There is a growing body of evidence that information technology, far from creating a new and more stable form of capitalism, is dissolving it, corroding market mechanisms, eroding property rights and destroying the old relationship between work, wages and profit.
Pascal Bruckner feels that capitalism, by paying small sub-groups in the population vast sums of money, forcing them often to seek tax havens, is its own worst enemy (see previous remarks about increasing inequality in income and wealth distribution).
History teaches us that inequality always increases until checked by wars, social upheaval or other exceptional circumstances. High inequality is unsustainable and will not reduce by itself. If we are lucky then rising education, declining premiums for skills (more freely available) and social security will help to restore the balance. More likely, the countervailing power which opposed that of the rich in the past, mostly in the form of trade union membership or similar, will have to be rediscovered. Even those who are now benefitting from the ‘distribution upwards’ will ultimately suffer from there being nobody any more who can afford to buy.
Since 2000 inequality, in a global context, has dropped, but only slightly, as expected. This has to do with the growth of the developing countries compared with the developed world. A significant drop is, however, not likely. Both China and the US are particular situations. It is expected that India will ultimately take over from China.
During the recent Hannover Messe, there was much attention for Industry 4.0. This concerns the investment in the ‘internet of things’- digitalising fabrication. PWC estimates that $ 900 billion have been invested already by 2,000 companies in 26 countries. The Netherlands is way behind in the race and doesn’t even meet the European directive requiring at least 3% of GDP in R&D. Although the direction is unmistakeable, it will take time to tackle the new requirements for knowledge, skills, organisation structures and relationships with customers and suppliers.
We could be moving gradually (a transitional phase) in the direction of zero marginal cost and weaker property rights. Remunerated work will become less important and less available.
But with so much change, understanding what is going on will be very important. It is not going to be an extension of a trend or a recurrence of a past pattern. Further we have got to be able to measure better. The old methods have not stood the test of time.
Politics will have to get used to being more concerned with promoting strategic direction (only valid if sufficient thought has been given to implementation) and motivating this, than with short-term infighting. The reforms which seem to be necessary are much larger than ever could have been imagined. There will be social struggles and external shocks which will have to be survived. Brexit has only served to confirm this. It may be the first of many.
Governments/parliaments must play an important role. But will they be able to sense sufficiently that their current role needs to change, and then probably dramatically? In Europe, they are becoming more splintered and divided and certainly less professional. There is more emphasis on populism and nationalism and none on globalisation. In the US, there is plutocracy (dictatorship by the propertied classes but within the structure of democracy). In the US, the top 5% of incomes are as great as the income of the whole middle class, which has now less than 27% of total income. The Chinese system of government may also prove not resilient enough to deal with increasing prosperity in the provinces. Governments are no longer capable of developing a vision or giving direction.
Up to now, we have been happy that we resided in a part of the world which had chosen for ‘democracy’. It seems, however, that modifications to this system of government will be necessary, and perhaps also to all other forms of government. This begins with education and the mixing of children from different social and economic backgrounds from an early age. Plato and Socrates argued that forms of dictatorship (extreme left or right wing government) evolve from democracy when freedom and inequality become such that differences between people are too large and therefore unstable. We are at our most sensitive to this type of movement when recovery from a major economic falls never quite materialises. We might have already reached this stage.
What is also manifesting itself (demonstrated by Brexit and the US election) is the gulf between the generations. This is the typical effect of the entry of a new technology but doesn’t only apply to technological issues. The younger generation adapts relatively easily and the older generation doesn’t. But who is voting for whom? The similarities with the industrial revolution and Karl Marx are striking. Only Marx failed to take account of how adaptable capitalism was to prove to be when confronted with economic change. But can it continue to adapt?
As I have demonstrated, it is difficult to fully understand the effects of the (economic) changes which seem to be upon us. It is even harder to write about them logically or clearly. In fact, some trends are in direct conflict with others, some are clearly likely to be de-stabilising and some will turn out to have little substance. Some institutions, which have always played an important role in the economy, may not be able to continue without major reforms. In fact politicians have paid lip service to the reforms which are necessary to restore our (economic) health. There are too many parties, including politicians, who are practised in preventing the desired reforms from being effected. This concerns, principally, those related to labour and products. In fact, we have built a system which stops important progress. This is Catch 22.
Based on the issues we have discussed, the most central, leading and important actions which we will have to take appear to be:
This whole will require some considerable philosophical thought. Which factors will be important? How will these factors influence our behaviour and how will we educate ourselves to deal with the future? How can we reform when there is so much built-in opposition? And, if accepted, how will we know which reforms are going to be productive? Perhaps it is still possible to welcome a new age of enlightenment, but then with engagement?
23. 3. 2017