A debate rages on, mostly in the United States, regarding the secular stagnation of our economies. This secular stagnation is due, in my opinion, to the extraordinary productivity of capitalism. The very low, zero-boundary or even negative interest rates are simply the consequence of capital’s very efficient productivity. As for unemployment, it is itself a reflection of the incredible productivity of labor. In other words, both labor and capital are paid very little because our economy needs less labor and less capital to deliver its goods and services. The corollary is that we produce much more than we can buy and consume.
The stagnation of our economies arises from anemic demand and consumption and not from a supply shortage. This situation will further worsen in the upcoming years, because progress will lead society and business to create and produce even more with less capital and fewer employees. A worker produces 350 tons of steel in an hour today compared with one ton per year in the 1920s!
However, and contrary to what one would expect from a society that produces more with less, this abundance benefits only a tiny minority of its members. These massive productivity gains will eventually destroy the economy – and capitalism – because they do not have a positive effect on overall consumption. It does nothing for capitalism to produce products and services with fewer workers and employees if there are fewer consumers who can afford to buy those products and services. As for the central bank policies called “quantitative easing” or “QE”, they have done nothing but enrich the big global financial players through the giddy swelling of bank reserves and the unnatural rise of equity markets. “QE” has had zero impact on overall consumption.
For the time being, the global financiers have been able to offset the potentially disastrous effects of declining consumption with the mind-boggling and artificially created gains from the soaring equity markets. However, the current secular stagnation’s lack of a revival in future consumption will end up trapping these same financiers.
That is why one of the most effective remedies that could be put in place today, which would both help the immense mass of working citizens and strengthen businesses, would be a universal minimum wage. Some of the most flagrant shortcomings of capitalism are increased poverty, higher income inequality, and fewer outlets for overproduction. This capitalist system, which has been tremendously successful in creating and multiplying its wealth, now sees its prosperity threatened by the inability of aggregate demand to keep up with the fast pace in productivity gains. The system will not be able to indefinitely pad its nest with the capital gains from rising equity markets. This is because these markets will eventually be ‘’infected’’ by the events in the real world. And the real world is that of the “reserve army of labor” (Marx’s expression) that must always fight and often suffer in order to survive.
The necessary and appropriate fiscal measures remain blocked by the global financiers for obvious self-serving reasons. But increasing the income of every citizen would boost consumption, stimulate the economy, and give those citizens a minimum equity in our societies, while having a positive impact on employment. Today, it is in the interest of capitalism to create a universal minimum wage: at least to save itself…