Monday, September 5, 2011

Cycling At The Edge

“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”
Kenneth Boulding (1910-1993), founder of evolutionary economics and co-founder of General Systems Theory

One of the philosopher Bertrand Russell’s best analogies was ‘the inductivist turkey’. A repeated experiment apparently gives the same answer every time. Has an eternal truth has been discovered? Never. It only takes one fresh, contrary observation to disprove the hypothesis. The turkey receives food every day. For 364 days. Without fail. Until the day it becomes food itself.

Yesterday’s Mail on Sunday included an unexpectedly erudite piece, penned by Bristolian William Rees-Mogg, who used to edit top London tabloid The Times but is much better known in Wessex as head of the landowning family with political ambitions from rural north-east Somerset.

Rees-Mogg’s theme was the business cycle, and more especially the long wave cycles into which individual business cycles fit. These are known as Kondratiev waves, after the Russian economist, shot by Stalin, who analysed them in the 1920s. Others had already grasped the idea of successive technological eras. Patrick Geddes at the beginning of the 20th century contrasted ‘palaeotechnic’ industries, led by coal, iron and textiles, with the emerging ‘neotechnic’ world of oil, electricity and chemicals. Kondratiev, and later Schumpeter, added much more detail. The historical economic data is just about sufficient to trace cycles of boom and bust all the way back to the South Sea Bubble in 1720.

The theory suggests that the boom is kick-started by capital investment to replace worn-out plant such as machinery, blast furnaces or vehicles. What synchronises this investment across competing economies is technological development. New products, or new ways of making old ones, give competitive advantage, so everyone is busy investing in plant in rapid succession to stay in the game. The bust comes when all that costly plant is starting to wear out and the market is too saturated for anyone to take the risk of replacing it. Especially, of course, when the financial sector has become top heavy in relation to the real economy.

According to Rees-Mogg, we’re now in one of the big dips in the Kondratiev long wave, a dip not seen since the Great Depression of the 1930s. History should warn us that wars are usually a sure way to perk up production. Rees-Mogg’s prognosis is not that bad. His educated guess is that the depression won’t end until 2020. It’s only a guess, as the dead turkey would testify, but is it a credible guess? In fact, it’s more than likely that 2020 comes and goes and still there’s no growth, but we can certainly agree that no spectacular upswing will happen before then.

Which should make us protest all the more forcefully against the antics of Osborne and Pickles in the press this weekend, both adamant that they will deregulate the planning system to, in their fevered imaginations, stimulate growth. OK, let’s take this slowly then boys. If there’s no underlying push for growth in the economy then deregulation will not stimulate it. Businesses without markets will not get loans and will not want to build. Housebuilders will not be moved by those who want to buy but cannot get mortgages. The quantity of development that takes place will be the same, regulation or no regulation. All that will happen is that the quality of development will plummet. Development will happen in the wrong locations, judged over the long term, cherry-picked according to the random nature of landownership. It will be cheaply built, to poor environmental standards. Developers will be let off making a contribution to funding the new schools, parks, etc. that their development makes necessary. Cash-strapped local folk, who may have fought the development tooth-and-nail, will pick up the bill instead. Wessex towns and Wessex countryside alike face ruin, for nothing. The Coalition’s planning reforms are a cowboys’ charter that promises an El Dorado it can never deliver. Growth is over. Fact. With Peak Oil looming, that’s even more certain than Christmas.

It’s also pretty certain that the cycles of economic change will continue. Just not in a context of growth. A world that at last realises that resources are finite will start to divert them from sunset industries into sunrise ones as quickly as possible. We will, for example, see a big shift towards resource efficiency and clean technology. Expect too a big revival in railway engineering as demand picks up for rails, signalling, power supply and rolling stock. Most items will be imported to start with, mainly from France, Germany or China, but there are advantages in being the last and therefore newest entrant to the market. Wessex will be starting out with some of the most modern engineering facilities in the world. Optimum sites for them need to be in the planning stages now. (Money to invest? You could do worse than buy former railway land at Bristol and Yeovil, two places with existing reputations for engineering excellence and poised to move from aerospace into rail.) All these sites need to be safeguarded against short-term fantasists who’d cover them with shopping malls and tiny little boxes for locals temporarily priced out of buying real homes by Londoners fleeing the mess they’ve made of their own world.

Wessex Regionalists have been articulating our vision of the future since 1974. Futurology is our specialist subject and it’s painful to watch the rest of Wessex take so long to catch up. Even seemingly good ideas like Transition Towns have been hijacked by hippies who think old railway lines are for country walks and not the backbone of our future regional transport system. Small is beautiful but thinking big has its place. Especially when dealing with ideas about the long term, a space and time almost defined by difference from the here and now. Along the way there are many things to learn, and re-learn. Skills. Attitudes. Values. Some things will be new. Others will certainly be coming round again. Wessex itself is a bit of both. The best overall metaphor for the future we’re preparing today is not a circle or a wave but a spiral, taking the best of the past onward to a new level.

3 comments:

Nick Xylas said...

George Monbiot has a good article on this at http://www.monbiot.com/2011/09/05/terra-nullius/

Westcountryman said...

That was such a very good piece that you can even be forgiven for calling Bertrand Russell a 'philosopher'.

You don't reach Peter Hitchens's column in the MoS? It is usually very erudite. ;)

Are you familiar with the work of Kevin Carson, particularly his work on historical and contemporary capitalism? He writes about the capitalist business cycle in the tradition of Marx(his business cycle theory and not the rest of his work.), Hobson, Chesterbelloc and Keynes(to mention a few.). This tradition shows the other reason for boom and bust in capitalism; its massive structural inequality and concurrent constant need for investment and spending. Through Keynesian demand management, various -industrial complexes and pro-corporate intervention the system is stopped from collapsing, but at ever greater cost which one day will simply be too large. Corporate-capitalism will be doomed, sooner or later. We need to start planning for that future now, as the Wessex regionalists do.

The strongest of all advise I could give you is to keeping planning and make it as holistic and as true to principles and circumstances as possible. The enemy of regionalism, decentralism and realistic planning for the future is the idea of a globalised, consumerist, export-driven economy. When most individuals care more about their ipads and similar gadgets than their community, their region, dignified work and the ability to own their own real property and when economic thinking focuses on growth and exports, as if how much we export to the world is more important than what we produce for ourselves, instead of focusing on what is really needed and desired for strong families, communities and regions as well as what the dignity of man requires; then regionalism and decentralism will be doomed from the start.

David Robins said...

I wouldn't normally read the MoS at all. I happened to be in a Glastonbury caff the Monday after, where it was the only reading material.

Carson is an interesting example of the Left/Right blurring now going on, which could do with some analysis as a phenomenon in its own right.

The financial crisis has thrown up contradictions that many find hard to handle, especially the taxpayer bailouts for "free enterprise" banks deemed too big to fail. Economics is now shamelessly political and a knowledge of Adam Smith or Milton Friedman seems less useful than a knowledge of Karl Marx in understanding what is really happening.

Rather than simply a labour theory of value, we may need an energy theory of value, labour being a subset of energy and a reflection of available food supply. This would allow resource constraints to be integrated in a way that Marx failed to do.