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We have seen the enemy, and he is us. Oliver Hazard Perry, of course, had first used the line “we have met the enemy, and he is ours” during the War of 1812 after a shocking and wonderful defeat of the British Navy by the shores of Lake Erie. The other has become more famous, if only due its more satiric and nihilistic viewpoint at home in recent generations. The enemy, in the modern formulation, is rampaging capitalism destroying the environment (the parody phrase born from a cartoon celebrating instead the original Earth Day in 1970).

But what happens if - or when, according to Marxists - capitalism no longer rampages? This question appears at first glance something new, akin to also believing the phrase “end-stage capitalism” has for the first time effortlessly reached widespread use especially among today’s younger crowds. For these, it had been effortlessly accepted because the narrative does more easily fit the times.

The boom in name only.

Well before the COVID-recession of 2020, the disconnect had grown immense. There had been those, mostly in positions of authority and influence seeking to hold onto positions of authority and influence, who vehemently argued from one side of their mouth the great boom of ourtime was already underway. And then out the other fell the litany of inconsistencies which, when viewed more clearly and honestly, thoroughly refuted any such idea.

Jay Powell’s embrace of the unemployment rate, for example, only led him and the entire Federal Reserve staff into the abyss of their inflation “puzzle” which resulted instead in the whole thing just being dropped (official policy no longer seeks to maximize employment because, going back curiously to 2008, they can’t seem to figure out what that actually means). There’s no confusion in any labor market supported by a truly booming state.

This is where inflation comes into it. No one really wants constantly rising consumer prices, even as there’s been quite upfront cheerleading for this going back many years. It’s not really about consumer prices except in that a sustained, broad-based increase in them would tell us something important about the hidden, underlying state of economic affairs we can’t readily observe via any means.

If the boom is actually booming in fact rather than just the words of the politically-attuned.

Statistics only advance the argument so far, and, contrary to popular imagination, this problem has repeated throughout modern economic history; in this country as well as others. History is circular rather than linear.

That holds true for “end-stage capitalism”, accepted as true from the far left as well as among a great many settled in the middle of contemporary thoughts. In the late 1930’s, for one, Dr. Alvin Hansen (America’s Keynes, he was called) came up with his secular stagnation thesis on the grounds that FDR’s recovery was no recovery whatsoever. He got that part right.

By 1938, when Hansen formalized his theory, an entire decade had passed under which the whole world had ended up going in the wrong direction. No matter what massive “stimulus” had been attempted, including gross experimentation across an impressive range of radical new approaches, the end result was the same nonetheless (as declared consistently by continuously low bond yields). Economic growth what felt like a fading, distant memory.

As a result, Hansen predicted, the world would have to come to terms with a very different future from the one which had animated our republic from its very first founding. Published in March 1939, his Economic Progress and Declining Population Growth actually emphasized a great deal more than demographics.

“Thus, with the prospect of actual contraction confronting us, already we are in the midst of a drastic decline in the rate of population growth. Whatever the future decades may bring, this present fact is already upon us; and it behooves us as economists to take cognizance of the significance of this revolutionary change in our economic life.”

Perhaps more surprising still, Hansen was hardly the first to suggest what we still call the Industrial Revolution was ostensibly an isolated case of almost accidental benefits. While Marx had preached his thoughts distilled by that phrase “end-stage capitalism”, other even classically liberal economists had at times grown suspicious themselves.

Before Hansen there had been any number of very mainstream commentators espousing similar views all grouped curiously around the decade of the 1880’s. In response to them, in 1891, economist David Ames Wells sought to reassure his legion of followers that the “disturbances” of the prior few decades – known then and now as the Long Depression – wasn’t a categorical endpoint in the otherwise upward slope of economic and social progress.

In 1873, for reasons nearly twenty years later no one had satisfactorily identified, it sure had seemed as if someone had flipped a switch.

“The existence of a most curious and, in many respects, unprecedented disturbance and depression of trade, commerce, and industry…has prevailed with fluctuations of intensity up to the present time (1889), is an economic and social phenomenon that has been everywhere recognized. Its most noteworthy peculiarity has been its universality…”

Yet, Wells had to recognize the very human tendency to, first, fear the worst before, second, coming home, as it were, to believing our enemy must be ourselves. In the preface to his work Recent Economic Changes and Their Effect on the Production and Distribution of Wealth and Well-Being of Society, Wells writes still another passage which, like the above taken from his same work, is easily at home in the 2010’s and now 2020’s:

“Out of these changes will probably come further disturbances, which to many thoughtful and conservative minds seem full of menace of a mustering of the barbarians from within rather than as of old from without, for an attack on the whole present organization of society, and even the permanency of civilization itself.”

It is the simple trade-off underlying these periods of rapid growth which end up rewriting a whole lot more than the economy; the entire system, all aspects of society, end up being redrawn and a whole lot better for it.

But – and this is the key – during the redrawing period itself hardly anyone cares or frets upon their future place in it. Why would they? During truly booming times the focus is optimistically on the boom and how it provides universally; perhaps too much so in that it becomes taken for granted how it must continue forever onward. Only when it stops, as it actually does sporadically, do “we” all stop and take a look around to take account of just how much things have changed.

And then our natural insecurities collectively kick in.

Therefore, when the rate of change in economic growth is high, political and social stability of a kind conducive to high rates of economic growth reigns. Once that first rate of change slows, as in the Long Depression and again during the Great Depression, the rate of change in politics and society surges into the vacuum.

When any economic system stops working for more than a little while, it’s very easy to fall into the presumption that it has stopped altogether; especially if unaware of the precedence. 

It is that upward slope which has repeatedly redrawn itself because, so far, anyway, the boundaries of capitalism continue to be pushed further outward than prior generations of humans – very much satisfied by their modern place – could have ever dreamed. Another famed 19th century economist, Henry George, was likewise eternally optimistic if still alerted to the dangers of his current surroundings.

“The incentives of progress are the desires inherent in human nature – the desire to gratify the wants of the animal nature, the wants of the intellectual nature, and the wants of the sympathetic nature – desires that, short of infinity, can never be satisfied, as they grow by what they feed on.”

Yes, and a statement to which David Ames wholeheartedly agreed. Writing his own take, Ames noted, “if everybody was content with his situation…the state of the world would be that of torpor, or even worse, for society is so constituted that it can not for any length of time remain stationary, and, if, it does not continually advance, it is sure to retrograde.”

Globalization and gross economic cooperation, for example, might suddenly find each one not just out of favor but increasingly impossible as the world appears to spin backward on itself.

When Alvin Hansen took up the topic in the 1930’s, he identified diminishing frontiers in land, innovation, and baby-making as responsible. America, in particular, had completed its journey westward leaving no more new lands to settle, invest, and harvest. The granted technologies of the later Industrial Revolution, communication and transportation, were no longer youthful adoptions that had at one time supplied seemingly boundless opportunities. And no one wanted to raise (as many) children.

To start with, there had been considerable truth to the starting point before his thinking (again, notice the high degree of familiarity here):

“This is the essence of secular stagnation-sick recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment.”

But yet, Henry George like David Ames each was rather long run optimistic unlike Alvin Hansen. While the former pair acknowledged (extensively) the deep problems by then universally agreed upon, these weren’t simply accepted as insurmountable endpoints. In fact, Ames, in particular, his entire work was dedicated to refuting the ideas that even almost two decades of regular “disturbances” hadn’t really altered the course of human progress.

Merely delayed, if quite painfully.

Hansen like Marx, really, instead argued how nations needed to prepare for the endtimes (so to speak); and he, also like Marx, was all wrong. Though Hansen still achieved acclaim at least in championing the adoption of John Maynard Keynes’ ideas to the US and Canada, he did so under the labor of his grand secular stagnation theory completely ignored and forgotten. The later boom did boom, and when it did a generation of Baby Boomers followed.

It was only dug up around 2014 when Economist Larry Summers bucked the conventional (central bank-driven) consensus himself so as to recognize how “something” had changed around 2008 leaving the global economy without its prior growth rate. Calling the 2010’s one for secular stagnation, among its proposed root causes is, yet again, innovation (productivity, in the modern parlance) as well as babies.

At least on that last count, that’s also true. Late in April 2021, the Census Bureau announced the results of last year’s decennial census. Their efforts showed that the resident population had gained 22,703,743, or 7.4%, between the 2010 census and the latest one.  This was the lowest rate of expansion since…the 1930s.

While Summers like Hansen had been right about the reduced rate of change in population, which cause from effect? Hansen, anyway, had been mistaken in his other identified targets (especially innovation), too. As it turned out, the American economy didn’t actually need new land to develop.

And innovation hadn’t truly suffered as much as had been imagined (at least by Alvin Hansen in 1938). Even though the number of patents issued for automobile and airplane industries had peaked in the 1920’s and 1910’s, respectively, this hadn’t represented a permanent detour in the economically-beneficial adoption and penetration of either. To the contrary, the only thing which had slowed each was the Great Depression itself; once it ended, innovations of the past flourished as would others which had come about during that downturn.

The machinery of exchange, to borrow Henry George’s later phrase, continues to want to turn at each moment. Humans may only be satisfied very briefly despite having conquered the biggest of challenges, only to turn around looking forward at the next “insurmountable” obstacle.

In one of the most devastating contemporary critiques of Hansen’s stagnation doctrine, George Terborgh writes in The Bogey of Economic Maturity (1945):

“Capital formation is not a polite game in which replacements meekly and decorously await, like dutiful heirs, the natural death of existing assets.  It is a ruthless and cutthroat struggle in which new capital goods rob the function of the old.”

Capitalism, like human nature, does not by itself stand still. Like a nervous, impatient coalminer with a lit stick of dynamite in hand, there’s an obvious eagerness to getting onward to the next discovery if only to find it before someone else cashes it in.  

No, if there are these historical detours – and they are very well-documented – it must be something from outside preventing the natural course of adoption and exploitation. Even babies are tied statistically to economic growth rather than the other way around (adjusting for lifestyle factors).

In a very important sense, you should take comfort from the fact economic history has for us these examples, including, despite mountains of incalculable pain, the happy endings which do result over the longer run. The funny thing is that modern economic policies have been designed – particularly those developed by Keynes and sold to America by Hansen – to limit any such pain.

That’s why, ever since 2008, we’ve been searching for inflation as our signal that, like those of the past, the world’s economy has indeed finally emerged triumphantly from its latest period of seemingly endless darkness. But it hasn’t; it didn’t before 2020 and, despite recent CPI numbers and the like, there isn’t any sign it is about to. On the contrary, there are any number of growing indications (yields, to start) there’s more trouble ahead first (the aftermath of irresponsible pandemic reactions).

There absolutely is light at the end of this historical tunnel, if only it can be reached before the inward-facing “menace of a mustering of the barbarians from within” score one too many victories first. 

Jeffrey Snider is the Head of Global Research at Alhambra Partners. 

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