Is capitalism capable of long term meaningful reform? This is perhaps the most import of issues to address, given that environmental disaster is becoming an inevitability under the present watch of capitalism.
When reading the recent articles in P&I by Michaël Keating on the need for a different approach to understand the impact of technology developments on society than what is provided by traditional economic theory, there may be a need for a broader and perhaps more substantial discussion.
There is little doubt that conventional economic theory treats economic impacts as exogenous and economics as being ontologically defined. As Michael points out it is necessary to think outside the constraints imposed by this way of thinking. If we are to understand the impact on society of economic developments, including the role of technology, we need to understand it in terms of social developments.
It is necessary to step outside the conventional boundaries of thinking if such analysis is to reveal the very basic reasons for the impacts that do eventuate. It is necessary to acknowledge that the existing economic system reflects some very basic principles in terms of how a society functions.
At the risk of creating an immediate retreat by many into the established ways of thinking about this, it is reasonable to suggest that we have to first acknowledge that the impact of technological developments on such issues as equity and equality is determined and constrained within certain boundaries established by the existing society. This does not exclude variations in terms of the degree to which different structures and classes in society may be involved and impact on the benefits of wealth distribution under changing circumstances. However, it does preclude any fundamental change in the underlying principles of the existing socially and historically defined economic system. At this time in history, this means being determined by the fundamental operations of capitalism.
It is interesting that books such as Picketty’s, Capital and Ideology, while substantial in explaining how capitalism has developed over the last 6-7 decades, provides a limiting view on why we have ended up in the current situation. A situation, where amongst other outcomes, productivity is now below what was achieved in the 2-3 decades following WW2 and the distribution of wealth is increaingly favouring the rich.
If we follow the established way of analysing these developments, referred to above, while favouring more equitable social outcomes, we can end up discussing such things as the beneficial role of Keynesian economics. This is often accompanied by the argument that those involved in the democratic socialist parties and developments have failed to achieve a lasting impact for what were no doubt positive outcomes, such as wealth distributing, more equitable education and health services. At least this was the case for a significant proportion of the population, in the developed countries.
These developments relate directly to what happened after WW2. This does require an understanding of the role of Keynesian economics and social democratic parties in facilitating the massive changes in the nature of world economics. This included moving beyond colonialism as the primary means of economic control and influence of other countries to globalisation, one very import aspect of which, when looking at economic planning and control is global value chains.
During the initial phase of the 3-4 decades following the war, marginal and company tax moved from the 20 to 30 percent to 80 and 90 percent in the developed countries, including Australia. For example, in Australia in 1960 the top marginal tax rate was 91% on a single income over $200,000 or $400,000 for a married couple (approximately $1.5m and $3m in today’s terms). On top of this, government debt increased substantially. This change together with a significant increase in government debt funded the massive recovery effort from the destruction from the war following on from a world-wide depression. It should be noted that this recovery was based on principles defined through such things as the Breton Woods meeting in New Hamshire in 1944 and the Marshall Plan.
There is no doubt that the policies that were developed and implemented were under the leadership and control of the victors, led by the USA. This was a very successful period of borrowing from the anticipated wealth of the future to fund the capacity to produce that future. And as Michael Keating points out the productivity growth has not been equalled since.
From the late 70’s and 80’s economic rationalism replaced Kenesian theory and economics resulting in a rapid fall in the tax rates and increasingly inequitable wealth distribution.
All of these changes occurred within and directed by capitalism. A question that needs to be asked when we look at the social democratic parties is “what exactly was their role during the early period following the war?” This is not about being conspiratorial, it is simply as case of critically examining what did happen. If we do ask this question, we can come up with what are simplistic solutions such as the social democratic parties failed to hold their ground and allowed the changes referred to above to take place. If we do this we end up promoting reforming capitalism so that the interests of the population in general are a primary consideration in the role of new developments, such as technology and AI.
However, it is precisely a reformed version of capitalism, during the Keynesian period that provided the grounds for the current situation.
As an alternative way of thinking about and analysing these developments it is worth asking whether capitalism is capable of long term meaningful reform. This is perhaps the most import of issues to address, given that environmental disaster is becoming an inevitability under the present watch of capitalism.
Peter Allitt
Peter Allitt worked within the Victorian Education Department introducing the educational application of computers and information management.
Consulted to multiple private and public organisations across Australia around education, strategic planning, information management and organisational change.