The debt machine

But Jackson points out that declining EROI is unlikely in itself to be the sole driving factor in this broader trend of declining economic growth, which will also be intimately related to a combination of supply and demand issues within the economy.

Among those issues is that to keep growth growing, industrial economies have sought to financialise their economies, even more so as they deal with rising costs of material production. The idea is to increase “liquidity”, spending power, by essentially creating more cheap money — which in simplified terms means flooding the economy with credit. This temporarily lubricates spending power in the economy, but at the cost of expanding levels of debt.

“This has tended to stimulate speculative investment at the expense of productive investment in the real economy,” says Jackson. It also means that the global economy is increasingly unstable, with growth hinging very much on the expansion of debt whose repayability is in question.

And that has meant that this concurrent structure of economic growth has inevitably benefited a tiny rich minority, who sit at the helm of this parasitical financial system — while the vast majority of the world’s poor have seen little or negligible benefits.

What Jackson then shows is that the neoliberal story of growth that has accompanied these processes in recent decades has seen a dramatic increase in structural inequality.

Gutting the poor, working and middle classes

From 1980 to 2014, average income growth in the US was only 1.4%, already quite low overall.

“But the striking part of the story was the reversal in the fortunes of the poorest and richest as beneficiaries of that growth,” observes Jackson.

The bottom 50% of Americans saw their income grow “at a meagre 0.6%, only half the average rate of growth of the economy as a whole. Meanwhile, the incomes of the richest 5% “grew at 1.7% per annum, significantly above the average income growth.” Increasingly, the super-rich benefited from the tepid growth being squeezed out of the planet:

“The average growth rate of the top 0.001% of the population was over 6%, allowing them to increase their post-tax earnings by a factor of seven over the last three decades. The poorest 5% saw their post-tax incomes fall in real terms over the same period.”

This sharp rise in inequality illustrates how the poor, working and middle classes have been gutted — with even reasonably well-off working professionals experiencing an overall unprecedented decline in their purchasing power.

Faced with such diminishing returns, powerful economic producers and shareholders have “systematically protected profit by depressing the rewards to labour.” This has been exacerbated by governments pushing forward fiscal austerity, deregulation, privatisation and liberalisation along with “loose monetary policy”:

“The outcome for many ordinary workers has been punitive. As social conditions deteriorated, the threat to democratic stability has become palpable.”

Rather than rising inequality being an inevitable result of a decline in the growth rate, Jackson argues that rising social-financial instability and inequality result directly from “trying to protect the growth rate in the face of an underlying decline in productivity, by privileging the interests of the owners of capital over the interests of those employed in wage labour in the economy.”

In other words, trying to keep the growth machine growing when the machine itself is running out of steam is precisely the problem — the challenge is to move into a new economic model entirely.

Wither the Singularity?

Having demonstrated an alarming correlation between efforts to accelerate growth at all costs and the systemic deepening of economic inequalities, Jackson goes on to show that an effort by business and government to adapt to the reality of a post-growth economy may hold the best prospects for more equal and prosperous economies of a different kind.

The problem with business-as-usual, he points out, is that it is based on assumptions for which the evidence is rather thin.

The idea is that productivity growth will return, driven chiefly by technological breakthroughs either in low carbon technologies, or in “increased automation, robotisation, artificial intelligence” — or by some combination of both.

In other words, technology, at some point, will save the day. The most explicit variation of this circulating today is the idea of the Singularity — which is when artificial intelligence (AI) reaches a level of super-intelligence that will drive exponential, runaway technological growth, that in turn will solve all our problems.

But in reality, it’s simply not clear that techno-focussed investment strategies alone will actually lead to the hoped for outcomes. The low-carbon revolution is not, as yet, actually taking off. The Paris Agreement still lacks any tangible delivery plans. And it’s not clear that low carbon technologies, even if viable, can simplistically substitute for fossil fuels with the same levels of growth industrial civilisation is accustomed to.

As for AI-driven automation, it is widely recognised that its social consequences might be devastating. It involves essentially replacing workers with technological material assets owned centrally as capital. This means it is not only likely to require increased material inputs and therefore have a higher resource footprint, it is also likely to create “an unequal and increasingly polarised society”:

“There is a real danger that new digital and robot technologies will remove the need for whole sections of the working population, leaving those who don’t actually own the technologies without income and without bargaining power. Meanwhile the owners of these technologies are likely to acquire unprecedented market power, and the conditions for ordinary workers will deteriorate even further.”

Like others, Jackson suggests a Universal Basic Income as a potential mechanism to address this mass disenfranchisement of workers. But there remain serious unanswered questions over how governments committed to austerity in an era of diminishing resource and productivity returns would be able to afford this.

More usefully, Jackson calls on governments, businesses and communities preparing to respond to these issues to begin actively adapting to the underlying drivers of an emerging new economic reality.

Pointing to new research on de-growth and ‘post-growth’ economics, Jackson notes that these approaches increasingly accept that endless “economic growth is neither desirable nor indeed feasible” for the world’s most advanced economies.

If these approaches are not pursued, then we are faced with the probable impacts of business-as-usual: :

“In a growth-obsessed world it is easy to end up overlooking the parts of the economy that matter most to human wellbeing. By understanding and planning for the conditions of the ‘new normal’ associated with low growth rates, it is possible to identify more clearly the features that define a different kind of economy. A simple shift of focus opens out wide new horizons of possibility.”

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