"July 2021" and the precautionary motive

Reviewing the last three weeks here at EconCrit. First, the preliminaries:

• I can't respect people who prefer to profit from economic decline rather than prevent it (30 June 2021);
  
• What matters is that we prevent the decline (1 July 2021).
  

I point out that slow economic growth can kill a civilization (2 July). Then, in the best short summary I've ever written, I identify the overriding economic problem of our time (3 July). Also, I present the rise and decline of civilizations as an economic cycle, and attribute decline to "bad economic policy" (4 July).

We adopt A.J. Toynbee's terminology for the end of a civilization's growth, but reject his view of causation: Toynbee considers economic factors to be incidental. They are central (6 July).

We consider civilization as described by Carroll Quigley and find some similarity to the work of Toynbee, but prefer Quigley's "instrument of expansion" to Toynbee's causal analysis (8 July).

We then look at how the instrument of expansion fails: "In modern terms," Quigley says, "we say that the rate of investment decreases." Remarkably, Quigley finds that declining investment harms the growth of civilization. His focus is the civilization, not the economy (10 July).

Next we consider the details of investment as Quigley sees them, and find that he agrees with Keynes that the problem lies with the idea that "supply creates its own demand". Say's law. Supply doesn't create its own demand when saving is not fully invested. For Keynes, this is an imbalance that drives economic decline. For Quigley, it drives the decline of civilization (14 July).

For me, it drives both.

Finally we consider Keynes the economist. We know that Keynes, as the creator of macroeconomics, was a big-picture thinker. Repeatedly, we find him concerned with the troubles of civilization. He spoke of our "dying civilization". He treated the Dark Ages as the recession phase of a massive economic cycle. And he said that the Say's law problem -- the imbalance between saving and investment -- was a problem that could wipe out our economic system, leaving us in a new Dark Age (19 July).

 

If you're familiar with Keynes, you may not know that Quigley explains the decline of civilization by using the same idea that Keynes used (chapter three: "a wealthy community will have to discover much ampler opportunities for investment if the saving propensities of its wealthier members are to be compatible with the employment of its poorer members") to explain the decline of output and employment during the Great Depression.

If you're familiar with Quigley's The Evolution of Civilization but not with Keynes, you may not realize that Quigley's idea (pages 139-140: "Traditionally, this reappearance of savings as purchasing power in the market occurred through investment") was almost certainly borrowed from Keynes.

If you are familiar with Quigley's Tragedy and Hope, you might be surprised to learn that Quigley's argument about saving and investment, in Evolution, is the same as Keynes's argument about Say's law.

I accept the idea of "stages of civilization" (where civilizations tend to fit a general pattern) because Arnold J Toynbee presented almost endless evidence of it.

But Carroll Quigley offers a better explanation of the cause of civilizations' decline: that our economic system cannot produce, and consume all that it produces, "unless it also invests (that is, expands)."

Quigley's explanation is one that I already accept, as Keynes offered it to explain the cause of the Great Depression.

 

Not every wiggle in economic performance brings with it the threat of a new Dark Age, obviously. But when a series of wiggles suggests it, it would be unwise to dismiss the suggestion.

I put the start of such a series of wiggles at around 1960, when we came to depend more on credit than on money that doesn't cost interest when you use it. With the growth of debt and finance, the cost of interest puts growing downward pressure on profit and on the standard of living.

Keynes, however, who focused on the big picture, puts the start of the series of problematic wiggles around 1870. The wiggles were still problematic 50 years later in 1919, when he wrote about it.

Ten years after 1919, the Great Depression hit. We like to think we "recovered" from that. Okay. Maybe the Great Depression and the Great Recession were "recession phase" events of consecutive debt supercycles. 

Or maybe they were two "early warning" wiggles of the next dark age. Dunno. But if the cycle of civilization is an economic cycle, then if we act early enough the dark age can be prevented. 

If we don't, it can't.