Global carbon emissions stop rising (again)

According to the Financial Times, the head of the International Energy Agency (IEA), Fatih Birol, is “hopeful” that global CO₂ emissions have finally peaked after news that they were flat in 2019.

Emissions have been downgraded after preliminary predictions in December last year that they rose by 0.6% in 2019. Now, however, it’s been revealed that emissions from energy use were unchanged from 2018, at 33 gigatonnes.

Birol was optimistic what the “clean energy transition” was rapidly accelerating and that emissions will now start to decline. “2019 is a year that gives me hope that the 2020s will be a decade of relief,” he said.

The trouble is that we’ve been here before.  For three years in the middle of the last decade – 2014-2016 – emissions were flat. Many, including the IEA, celebrated the fact that carbon emissions were finally decoupling from economic growth, as global GDP showed a steady, if unspectacular, rise.

According to the IEA, 2014-16 saw “strong energy improvements” and “low-carbon technology deployment”.  Strangely, however, this was a false dawn as the “dynamics changed” and demand for clean technology was not sustained. Emissions resumed their upward path in 2017 and 2018.

As previously noted in this blog, this mystery – why there were “strong energy improvements” in 2014-16 and again in 2019, but not in 2017-18 – becomes a lot less impenetrable if world trade is taken into account. According to the United Nations Conference on Trade and Development (UNCTAD) Status of World Trade 2017 report, world trade grew at less than 2 per cent a year from 2011-14, declined by 10 per cent in 2015 – during which time the profitability of global shipping companies sank like a stone – and dropped by a further 3 per cent in 2016. But trade rebounded strongly in 2017 and 2018.

Likewise in 2019 world trade hit the buffers. “World commerce is deteriorating rapidly”, noted the New York Times in October last year, reporting on the slashing of the World Trade Organization’s forecast of world merchandise trade levels – from a 2.6% increase in April to 1.2% in the autumn. Just last week, it was revealed that US imports and exports both fell in 2019. In the context of the trade war with China, US exports to, and imports from, that country, both dropped.

This is the background to the flatlining of carbon emissions in 2019.

To put things another way, the only occasions when global carbon emissions have not risen this century have been when world trade has also been depressed. The same is not true of economic growth per se which has seen significant, although below average, rises when emissions have been static.

What we have never seen is the combination of robust world trade and stagnant, or falling, CO₂ emissions. Given the unerring commitment of the world’s liberal-capitalist establishment to both ‘open trade’ and the ‘clean energy transition’, this is what needs to happen if the IPCC’s scenario of droughts, inundation of coastal areas, crop failures and massive refugees flow is not to come to pass. In fact, what is necessary is a huge and sustained drop in CO₂ emissions – of about 15% a year from now until 2040 (15^th para).

My guess is that this is because the two things are mutually contradictory.

Hyper-globalised Capitalism is Slowly Killing Civilisation

It is easier, according to the adage, to imagine the end of the world than the end of capitalism. Judging by the muted reaction to the raging Australian bush fires, the truth of that observation is being borne out. But actually it may be worse than that – it is easier to imagine the end of the world than the end of the particular version of hyper-globalized capitalism we live under.

Over the previous decade – in spite of calamitous warnings of what lies in store if massive cuts are not instituted – carbon emissions have continue to rise. Except that is for three years (2014-2016) when coincidentally world trade – but not, strangely, global economic growth – shrank.

Look closely and 2019 follows a similar pattern. According to first estimates, carbon emissions continued to increase last year, but the rate of increase – at 0.6% – was smaller than before. It compares to 1.4% in 2017 and 1.7% in 2018, according to one means of calculation, and 1.5% and 2.1% according to another. It should also be noted that the 0.6% estimate is based solely on the first 9-10 months of last years and could be revised downwards.

Coincidentally, 2019 was also a decidedly rough year for world trade – when it faced the headwinds of a trade war between Trump’s America and China. The imposition of unilateral tariffs on goods by both countries undoubtedly had a dampening effect on trade levels. After the strong rebound of 2017 and 2018, trade suffered. In October, the World Trade Organisation revised its April estimate of a 2.6% increase in world merchandise trade downwards to just 1.2%.  But given that a – possibly temporary – truce has been called in the trade war, rates may return to more ‘normal’ levels in 2020 – unless of course a global recession, or war, intervenes.

The conventional perception of world trade is that it involves the one-time transport of finished goods – clothes, cars or refrigerators for example – to the consumer. Undoubtedly that’s part of it but not all, or even most, of the story. Most world trade now occurs within firms during the production process. It is part of what are called ‘global value chains’ – where multi-national corporations scour the world for the most cost-effective and appropriate venue for making one part of a commodity – the engineering of components in one country, assembly in another (poorer) one and branding in yet another. The sinews of intra-firm trade between numerous countries involved in the construction of an iPhone illustrate the ‘new nomadism.’

But Apple is far from unique. Global value chains make up, it is estimated, 2/3rds of world trade. The ‘value chain’ of US vehicle manufacturer, General Motors, comprises 20,000 businesses worldwide, while the imported parts can make up 50% of cars ostensibly ‘made in the USA’. The World Bank defines global value chains in the following way:

Companies used to make things primarily in one country. That has all changed. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.

There is a glaring contradiction between, on the one hand, wanting to reduce the world’s carbon emissions and, on the other, aiming to increase, or shore up, the volume of global free trade. Yet any number of conservative, centrist, liberal and social-democratic politicians happily exist in such a state of cognitive dissonance.

Just as it makes no sense for a consumer to proclaim a commitment to the environment while simultaneously seeking out the cheapest products regardless of how they were made, it makes no sense for corporations – and their backers in the media and politics – to say arresting global warming is their overwhelmingly priority whilst, at the same time, pursuing a production strategy whose fundamental amoral, profit-maximising purpose ensures that it won’t happen. Yet the latter is precisely what our political and economic system has reified as sacrosanct and non-negotiable.

And we are talking about maximising profit here, not the difference between profit and no profit at all. Apple, for example, would still have an ample profit margin if its iPhones were assembled in the US, not China. Just not quite as big.

But it is not, sadly, a question of corporations simply pursuing their institutionally selfish aims without the public in their domestic countries knowing or approving. They also enable us to physically and mentally outsource the problem of global warming to other countries. They are the ones burning coal to produce commodities flooding the global market, while we are ‘doing our bit’ by reducing our territorial emissions (ironically largely because we have off-shored dirty production to those very countries). It becomes a matter of out of sight, out of mind. And that suits a lot of people just fine.

Capitalism versus the end of the world

“Our choice comes down to this,” George Monbiot concluded in the Guardian newspaper last month. “Do we stop life to allow capitalism to continue, or stop capitalism to allow life to continue?” Notwithstanding the strong suspicion that if a politician arose promising to stop capitalism he or she would be instantly denounced by the same newspaper as a far left anti-Semitic, misogynist demagogue, it’s an urgent question.

However, despite its urgency, I would suggest no satisfactory answer will be found until two further questions are also addressed. Firstly, what exactly is capitalism? Secondly, what role does capitalism – through its inevitable companion economic growth – play in material progress and poverty reduction?

Capital-ism involves the advancing of money to make more money, the generation (hopefully from the point of view of the capitalist) of a financial return that is invested again, barring some deductions for luxury consumption. That’s the semantic difference between capital and mere money. Thus, the system is inherently expansionary. This accumulation – capital advanced to make more money which is then invested again and so on ad infinitum – drives the process and is the beating heart of the capitalist system. John Maynard Keynes in his now famous 1930 essay The Economic Possibilities for our Grandchildren explained the transformations in the “standard of life” since the 16^th century as the result of a joint process – technological improvements allied to the accumulation of capital.

The accumulation of capital occurs in spite of other strongly held desires that contradict its purposes – it has an imperative and logic of its own, to which other social needs, such as the preservation of a liveable climate or the wish to pursue, in Keynes’ phrase, life’s “non-economic purposes”, are sacrificed. This is not to suggest that many activities related to this accumulative process simply occur without anyone wanting them – the slave trade and slavery, colonialism, the seizure of common lands from the European peasantry will were all consciously willed and carried out. Nor does it mean that everyone benefits from capitalist accumulation or such benefits are evenly spread, geographically or socially. But imperialism, subjection, slavery and exploitation have existed throughout history and the last 400 years have been qualitatively unique in terms of the development of technology and the exploitation of material resources. The reason, I would suggest, is not just due to the thirst for profit but the pressure of accumulated funds.

What this constant build-up of capital does – one contemporary economist has described it as a ‘wall of money’ – is to create an incessant pressure for new outlets for investment. Such outlets might take the form of the extraction of raw materials, privatisation or debt-fuelled financial instruments. It is the hope of enlightened defenders of the system that this glut of capital can be directed towards socially , beneficial, low carbon forms, such as renewable energy or retrofitting the economy. But, as Monbiot notes, this seems a forlorn hope.

It is true that in recent decades investment has increasingly taken ‘fictional’, non-physical forms – financial instruments or property speculation – but, besides the fact that this leaves the system increasing crisis-prone, capital cannot migrate entirely to making money from rents, interests and royalties. It cannot become completely immaterial.

Keynes – erroneously – believed that this accumulative process could, in essence, be called to a halt once it had achieved its social purposes – once the technological developments it spurred had enabled a comfortable life for everyone and we were free to “value ends over means”. He imagined that by 2030 everyone would be working 3 hour days and 15 hour weeks. Monbiot appears to slip into the same delusion. “Like coal,” he writes, “capitalism has brought many benefits. But, like coal, it now causes more harm than good. Just as we have found means of generating useful energy that are better and less damaging than coal, so we need to find means of generating human wellbeing that are better and less damaging than capitalism.”

However, no such voluntary euthanasia on the part of the capitalist system is going to happen. Accumulation and expansion will go on inexorably and will increase hugely in scope thanks to the growth in funds requiring investment which themselves will generate profit demanding a financial return.

Thus if we are serious about finding a “means of generating human wellbeing that are better and less damaging than capitalism”, this accumulative process must be consciously snuffed out. And to do so requires confronting the immensely wealthy and powerful interests that have developed around this accumulative process and wish, whatever else they wish, that it continues and they remain wealthy and powerful. Moreover, we can’t comfort ourselves with the notion that it is just the 0.1% versus the rest of us. Hundreds of millions of people who aren’t fabulously wealthy also have a stake in the system’s perpetuation through stock market invested pensions funds. The capitalist system, we can be certain, will not go quietly into the night. It won’t depart with its hands aloft because our most sensitive minds have thought of something better.

The paradox of economic growth

The second problem we face relates to the fact that attempts to challenge capitalism often seem to make it stronger. This hinges on the role of economic growth. “Capitalism collapses without growth” says Monbiot, “yet perpetual growth on a finite planet leads inexorably to environmental calamity.” This is inescapable but at the same time partial. Economic growth, through being transmuted into social spending, money transfers and public provision, has resulted in huge reductions in poverty since the middle of the 20^th century. This is not to defend capitalism itself as some miraculous engine of prosperity. It has dispossessed as many people as it lifted out of poverty. But given strong social movements and/or sympathetic governments economic growth can, through taxation, be directed towards socially beneficial ends. The most glaring example is China. The Chinese economy has quadrupled in size since 1978 and per capita income grew fivefold between 1990 and 2010. Coincidentally, poverty has been slashed and the country is thought to be responsible for more than three quarters of world poverty reduction. This has all happened in the context of chronic and lethal air pollution and a major contribution towards global warming.

You might regard China as, until recently, peculiarly benighted as regards the environmental catastrophe we are heading towards. But a similar dilemma afflicts far more enlightened countries. In 2009 Bolivian president Evo Morales said climate change was driven by a western, capitalist “culture of death”. His government contrasted ‘living well’ (vivir bien) with a capitalist insistence on ‘living better’ (vivir mejor) and, in 2012 through the ‘Law of Mother Earth’, became the first state in history to grant rights to nature.

But at the same time, Bolivia’s great strides in poverty reduction – the country is the poorest in South America – have been achieved through redistributing the proceeds from, primarily, gas and oil extraction. Morales nationalised the hyrdocarbons firm YPFB, hiking royalties and taxes and increasing revenues from gas to over $2 billion from a mere $332 million. Over the past 13 years the Bolivian economy has tripled in size and now boasts the highest growth rate in the region – 4.7 per cent.

This is the background to a tripling of the minimum wage, conditional cash transfers to poor families and the creation of a free health service aiming to bring coverage to the 70% of the population who don’t have any. Poverty has been cut in half and the middle class has grown by a million people.

This is far from a painless process, however. As one one sympathetic assessment of the Morales years concludes:

The result is that Bolivia, with the world’s seventh largest tropical forests, now suffers the highest rate of deforestation in South America. In 2015, the MAS government promulgated a law permitting hydrocarbons and mining companies to explore up to 20 million hectares, much of it in protected areas. Large-scale hydro-electric projects, now in the planning stages, would further the goal of turning Bolivia into a regional energy hub. Soy production has roughly doubled since Morales took office ten years ago.

However, it would be the height of arrogance to, from a safe distance, condemn the Morales government for making the wrong choices and maximising the proceeds from economic growth, given its constricted options. Not least because it bears an uncanny resemblance to the way European countries attacked poverty and transformed the life chances of millions of their citizens in the decades after the Second World War.

And that is the nub of the problem. There will, in all likelihood, be many more Chinas and Bolivias in the coming years. Unless zero or minimal economic growth can deliver the same poverty-reducing benefits as taxing high economic growth, the temptation will always be to go for the latter, despite the fatal consequences.

The only way this can happen, I would surmise, is by systematically reducing the cost of basic goods and services – such as housing – to something approaching zero, so that poverty is abolished from the opposite direction so to speak. The pressing need of the vast majority of people to earn a livelihood from selling the labour – the foundation of economic growth – can be ameliorated through a generous basic income which would sever the link between work and existence. However, that basic income would still need funded somehow.

There is not an ‘off the shelf’ answer to this question. But we can’t pretend that it doesn’t exist. Though nothing is painless, if we are to ‘stop capitalism to allow life to exist’ indulging it to cream off the proceeds for the benefit of the poor must cease to be the only practical option.

The Mystery of the Post-War Boom – or why has economic growth been falling for over half a century?

According to a recent study, economic growth among the industrialised countries of the world has been declining for around sixty years.

“… contrary to what is widely believed,” the report from Geopolitical Economy Research Group (GERG) at the University of Manitoba in Canada states, “this [post-war economic growth of the industrialised North] has fallen continuously, with only brief and limited interruptions, since at least the early 1960s.” The trend includes all major Northern economies “without exception” and shows no sign of ending.

The study includes the usual suspects – the US, Germany, the UK, Japan and France – as well Australia (which isn’t in the Northern hemisphere admittedly) and 10 other countries.

Today’s “meagre” growth rates of 3 per cent are treated as evidence of economic success, but fifty years ago – when rates of 6 per cent or more were common – such an economic performance would have been greeted with “alarm and despondency”, the report’s author, economist Alan Freeman points out.

The erroneous widespread belief the report aims to counter is that either economic growth started falling after 1973 (i.e. a decade later than the reality) or – as in common on the Right – that the nadir of the strike-ridden 1970s was banished by the successful attempts of Thatcher, Reagan and others to revitalise Western economies.

And although the report doesn’t speculate as to why economic growth has fallen so drastically it does affirm the original cause – “an historical event, the Second World War, which brought in its wake one of the greatest and most prolonged economic expansions since the Industrial Revolution”.

The post-war enigma

As can be seen below, there are various explanations for the post Second World War boom, an economic expansion which few sentient people deny occurred. The US economy more than doubled in size between 1948 and 1973, while the UK, West Germany and Italy grew fourfold in the same period and the Japanese economy swelled tenfold.

However, the boom is treated very differently on the Left and the Right. For the mainstream Left, it was the consequence of a peculiarly benign set of economic policies, or in the words of the late economist Andrew Glyn, “a unique economic regime”. The so-called Golden Age of capitalism was built on collective bargaining with strong trade unions resulting in wage growth and rising effective demand, restrictions on finance which funnelled investment away from speculation and into physical assets (resulting in rising productivity) and an international economic architecture (the Bretton Woods system) that fixed exchange rates, stopped currency speculation and ensured global economic stability.

For the Right – or those elements on the Right willing to deal with the facts – the post-war boom had nothing to do with correct policies or regulations. Indeed those policies – for example high corporate and personal levels of taxation – may have ‘worked’ in spite of themselves and were exposed as impediments to growth in the stagnation years of the 1970s.

Rather the post-war boom was the result of an inherent, and frequently unnamed, economic vitality that gradually evaporated as the second half of the 20^th century wore on. This perspective can be seen in reactions to the inconvenient fact that, although Margaret Thatcher radically changed British society in innumerable ways, she left the rate of economic growth virtually untouched. Or in scepticism towards the advocates of a Basic income.

However, the debate about the post-war boom usually takes as it as read that it concerns capitalist economies only – GERG’s 16 country list solely comprises industrialised capitalist economies. But, there are, in fact, good reasons for including the communist Eastern bloc and the former Soviet Union. Although reliable economic statistics for the Soviet years are hard to come by, the broad outlines are widely accepted – the Soviet Union enjoyed strong economic growth for two decades after World War Two but this growth petered out in the mid-1960s.

Such was the economic optimism, Soviet leader Nikita Khrushchev boasted in 1961 about leaving the United States far behind in industrial and agricultural output – and was taken seriously. This boasting was based on the fact that output had shot up, towns and cities had been rebuilt, life expectancy had doubled and many infectious diseases conquered. And the ‘socialist’ system was responsible.

Unfortunately, from the mid-1960s all this went into reverse. Health spending was cut, mortality started rising (by the end of the 1980s the USSR had the worst mortality rates of any industrialised country anywhere in the world) and deaths from heart disease, cancer and respiratory diseases started increasing. Indeed, in 1976, a French demographer, Emmanuel Todd, predicted the collapse of the Soviet Union on the basis of rising infant mortality. The Soviet state stopped collecting these figures in 1974.

So this should not be mistaken for a paean of regret about the unfairly maligned ‘socialist’ economy in the Soviet Union. The Soviet system that emerged from the Second World War was a full ripe Stalinist one, based on terrible repression – the secret police had executed over 680,000 people in 1937-8 alone. Although direct repression significantly abated after Stalin’s death in 1953, this was still a police state and, moreover, one based on the expropriation by a small ‘nomenklatura’ of the wealth created by the mass of people. This nomenklatura – comprising about 1 million people or 0.4 per cent of the population – even had their own health service which was, unsurprisingly, vastly better than the one ordinary people had to rely on. And this property-hungry elite, incidentally, was first in the queue to buy up all the Soviet-era assets when ‘communism’ collapsed in Russia in 1991 and mass privatisation was rushed through by Kremlin decree.

The idea – common in the West after 1991 – that the Soviet system was, economically, profoundly dysfunctional and inefficient, may also have been true. But what was also true, the evidence strongly suggests, is that this dysfunctionality was hidden by – or perhaps overwhelmed by – the vigour of the post-war boom.

 However, if this is true – and we should include the Soviet Union in any analysis of the post-war boom – then none of the explanations for its existence quite fit:

1 Reconstruction after the Second World War made an economic boom all but inevitable

This is the explanation most favoured by the Right because it excludes government policy and a strong labour movement from any credit for what ensued. The immense physical destruction caused by the six years of total war, the argument runs, guaranteed robust economic growth once peace had returned because so much work needed to be done rebuilding cities and repairing physical infrastructures.

This account makes sense for many post-war economies such as Japan (whose GDP grew at 7.8% between 1950 and 1973 but at only 2% from 1973 to 2008), Germany and Italy. It is also very plausible for Western Europe and, to a degree, Britain. And it most certainly works for the territory of the ex-Soviet Union which had been devastated by Nazi invasion at the loss of 20 million lives.

But for other economies which grew strongly in the post-World War Two decades, this rationale is far from convincing. The United States enjoyed robust GDP growth after the Second World War and, although it played a decisive role in its outcome, internally the country was untouched by it. So there was no rebuilding to be done.

True, the United States was pivotal in the rebuilding efforts of other countries – in Europe through the Marshall Plan and in the case of Japan – but were those endeavours sufficient to set its own economy on an upwards trajectory for around two decades? In recent years US companies have made huge investments in China and the country’s largest corporation, Walmart, sources 80% of its products from China. But these connections have not shown up in US GDP growth.

There were also countries in Europe – namely Portugal, Spain, Sweden and Switzerland – that enjoyed strong post-war economic growth (and in the case of Spain caught up with the rest of Europe) despite not being involved in the Second World War.

Moreover, the basic premise here – that economies emerging from war always experience impressive economic growth – is dubious. In the years since the post-war boom there have been many devastating wars – wars of independence from colonial control and civil wars – but nothing to compare with the post-Second World War boom. To take one example, the countries of the former Yugoslavia endured a brutal four year civil war from 1991-95, but – despite the devastation – subsequent economic growth has only been marginally better than the EU and global average and pales in comparison with the 20% growth rates achieved in Europe in the post-1945 years.

2. A benign policy environment aligned with powerful labour movements

In contrast to the Right, the mainstream Left (by which I mean Left Keynesians and some Marxists) draws attention, not to the physical environment, but the policy one. Free market capitalism had been thoroughly discredited by the experiences of the 1930s and the rise of Fascism and what emerged from the wreckage of World War Two was a regulated, managed capitalism. There were heavy restrictions on fractional reserve banking – the practice of banks’ inventing money by lending out a multiple of their capital assets – and a stable international exchange rate which nipped currency speculation in the bud.

This was allied with the acceptance by private owners and capitalists of strong and unyielding trade unions that had to be negotiated with. Welfare and health spending, in conjunction with pension provision, also increased. As result, real wages rose impressively, and because workers were also consumers, effective demand sustained an economic boom. And unlike today, this auspicious economic environment ensured productivity – output per worker – rose healthily, reaching 5% a year on a regular basis. All this without, it seemed, the downside of capitalism: there were no significant recessions for three decades after World War Two.

There are problems with this explanation even if the Soviet Union is not included. These are ones of timing. According to GERG’s figures, economic growth started falling around 1963 or ’64 – well before this benign policy architecture began to be dismantled. The ‘Nixon Shock’ – the refusal of the US allow the conversion of the US dollar to gold, thus effectively ending the Bretton Woods system and paving the way for free floating currencies, took place in 1971. Efforts to “zap labor” (the phrase belongs to Arnold Weber, the head of Nixon’s Prices and Wages Board) gestated in the 1970s but began in practice – in the United States under Reagan and the UK under Thatcher – in the 1980s. And in Germany, hostility to organised labour only really materialised (in the form of the ‘Hartz’ labour market reforms and wage repression) in the first decade of the 21^st century.

However, include the Soviet Union, and the ‘unique economic regime’ explanation becomes even less tenable. The Soviet Union was not in any sense a consumerist society and its economy did not depend on effective demand on the part of consumers. Wages were deliberately supressed under Stalin – until the 1950s they were lower in real terms than they were in Tsarist times. They rose somewhat in the post-Stalin era but the economy cannot be said to have been driven by consumer spending. Nor was there any finance sector in the Soviet Union to regulate. There was no need to ensure banks invested in the productive economy in Soviet-era Russia because private banks did not exist. But the country still experienced a post war economic boom.

3. The decline of profitability

This third explanation is definitely less in vogue that the first two – it is far from universally supported even among Marxian economists – but it deserves elucidation nonetheless. According to Marx, ‘the fundamental law’ of capitalism is for profit to decline – profit in the sense of the financial return on the amount of capital initially invested. This is known as the ‘Tendency of the Rate of Profit to Fall’ – TRPF for short. Barring certain counter-veiling tendencies – such as the opening up of new markets – this will deplete economic growth and lead to a recession. However, contrary to myth, in Marxist theory this is not a terminal problem. If the resulting bust is allowed to play itself out and companies permitted to go bankrupt, the stage is set for a new boom. In Marx-speak, ‘capital value’ has been destroyed and so profitability spikes again, inaugurating a new cycle of economic expansion.

According this group of Marxists, this is exactly what happened in the aftermath of the Great Depression. In the laissez-faire atmosphere of the 1930s, businesses were allowed to go the wall and unemployment to rise inexorably. But this prior destruction is exactly why conditions were ripe for prolonged economic expansion after the Second World War.

However, given the consequences of allowing the Great Depression to unfold without ameliorative action – political radicalisation, the rise of Fascism and World War – governments since then have been determined to stop all economic downturns wreaking the havoc they are bent on. They have been usually been washed away – as in 2008-9 – with bail-outs, stimulus programmes and subsidies. As result, economic downturns have not been nearly as devastating as in the 1930s. But they have also not paved the way for any subsequent boom – precisely because ‘capital value’ has not been destroyed to any great extent.  So economic growth has gradually and inexorably declined, an erosion which, in Freeman’s words, “shows no signs of ending” (the one partial exception since the 1930s to government action arresting economic downturns may well have been the recession of 1980-81, which was exacerbated by the hiking of interest rates in the US and UK and led to a quarter of UK manufacturing industry being wiped out. Coincidentally it was followed by an “8-10 year blip” in the trajectory of slowing growth).

The chronology problems in the second explanation are manageable here. Although there are disputes among TRPF economists about precisely when in the post-war era profit began to fall, one, Michael Roberts, places the tipping point in the mid-1960s.

However, this explanation applies to capitalist societies. That the Soviet Union was not ‘socialist’ is not in dispute. A self-selecting elite ruled over the mass of society, denying most people any democratic rights or control over their work. It is not widely appreciated how unequal the Stalinist Soviet Union was – a ruling class enjoyed a materially comfortable existence while, in anti-Stalinist revolutionary Victor Serge’s words, “the rest of the population, 85 to 88 per cent lives in primitive conditions, in discomfort, in want, in misery”. Such a society fully deserves to be described as accumulative – a small minority exploited and benefitted from the labour of others. But it wasn’t actually capitalist. Investment decisions were not based on the level of profit they would accrue.

That the ‘law of the tendency of the rate of profit to fall’ did not apply to the Soviet Union can perhaps been seen by what transpired when it collapsed. As noted above, the law is cyclical – if capital value is decimated, then profitability is restored and economic expansion can begin anew. But in 1991-94, in the transition crisis in the former Soviet Union, the conditions for the destruction of capital value were undoubtedly met. Production “fell by almost half in the 1990s” and 80% of the 27,000 Russian state enterprises were privatised. Life expectancy endured the largest falls in modern history outside of war and natural disaster. But Russian economic performance in that decade ranged from terrible to mediocre.

So if gross profit – as opposed to profit share – did not spike in the ex-Soviet Union in the 1990s, one can be fairly sure that rising profit expectations were not behind the economic boom that undoubtedly occurred there in the post-war years.

What does it all mean?

According to the GERG report’s author, Alan Freeman, the findings have “profound implications”. The high growth of the post-war years was the result of a “long historical process”, rather than wise policy decisions, he affirms. The other side of the coin is that the protracted decline of economic growth since the mid-1960s cannot be undone by reversing government policy and replacing austerity with fiscal and monetary stimuli. Such policies may be urgently necessary socially, but they will not transform the economic environment of ‘advanced’ industrialised countries.

Rather – and I’m extrapolating here – if the post-war boom was the consequence of epoch-making events such as the Great Depression and World War Two, for any new boom to occur similarly momentous phenomena have to precede it.

And we have every reason for not wanting this to happen. Firstly, because deep economic downturns and hugely destructive armed conflict are intimately connected – you’d have to try very hard not to see a causal link between the Great Depression and World War Two. Secondly, because the world cannot endure a repeat of the high economic growth of the post-war decades. We are already in a situation where GDP growth levels are causing CO₂ emissions to rise year on year when they have to fall drastically and rapidly if a future of submerged cities, huge refugee flows and mass hunger is to be mitigated. And this is happening when the growth levels of industrialised nations are – in historical terms – insipid. The annualised growth of OECD countries (35 industrialised countries, excluding China and India) currently stands at 2.4%. The growth rate of GERG’s 16 Northern industrialised countries is probably just over 2 per cent. Caveats apply about how growth has been outsourced to the Global South and global trade, rather than economic growth per se, drives climate change. However, the “routine” growth rates of the 1950s – 6 per cent and higher – are unthinkable even if, though some miracle, they are achievable.

Logically, therefore, the requirement is for an economic system that provides stability and material assurance to people’s lives whilst at the same time keeping growth at negligible levels. Regardless of the visible effect of austerity policies, declining economic growth clearly has human consequences. Even in the Soviet Union, high economic growth spurred the rebuilding of cities and rising health spending, while economic stagnation produced its opposite.

Therefore the necessity is for an economic system that retains the socially benefits of high and equitable growth without relying on such growth. Such a system will not be capitalism – it will be post-capitalist – and it will negate capitalism’s fundamental characteristic: the accumulation of profit which is then used to reinvest in new profit-making schemes, and so on ad infinitum, thus turning the system into a perpetual growth machine.

We may be nearer to that outcome than we think. The ebbing of the post-war boom in the Soviet Union was accompanied by rising mortality and declining health spending. In the mid-1970s, its demise was predicted, though at the time few were listening, by someone who noticed that infant mortality figures were going up. And in 25 years’ time, that prediction came true.

And, now in the heartland economies of the industrialised North, life expectancy is falling. Granted, in countries such as Britain, this is intimately connected to austerity policies, but it is also apparent in the United States, a country that has shunned austerity, at least at the federal level. The question is, are we a quarter of a century away from the end of capitalism in its heartlands?