The headlines in today's New York Times says it all: "Cheap Debt for
Corporation Fails to Spur Economy". The writer, Graham Bowley, goes on to
talk about firms like Microsoft "borrowing vast sums of money for next to
nothing" -- simply because they can -- but not building any factories,
stockpiling their money "until the economy improves".
This shows that large firms know no more than advanced governments do as to
how the industrial economy works -- and how the industrial revolution took
off 18th century and grew so successfully for 200 plus years.
It worked because, one after the other, some hitherto highly expensive
hand-made consumer good, bought only by the richest segment of the
population was able to be made in a factory, and then increasingly
mass-produced and becoming cheaper step by step. In turn, each class of
society underneath the very rich was able, by saving, to own a new item and
thus aspire upwards.
What we now need is a consumer good priced at, say about £10,000,000, that
would appeal to the very rich but capable of being factory-made in due
course priced at, say, $1,000,000 and affordable by the "merely" rich, and
then mass-producible a bit further to be priced at, say £100,000, etc, etc.
And when we have invented this consumer item, we need to find another one.
And then another one, and then another one. Hundreds of them. Because that
is what happened all through the industrial revolution from about
1780-1980. By that time, even the computer was being affordable by
individuals and now, today, even the poorest in the land can afford a
personal computer of equivalent power that a rich individual or a
corporation would have paid £1,000,000 for in 1980 and £10,000,000 in 1970
(and did).
Forty years ago, the brilliant economist, Prof Fred Hirsch of Warwick
University, who tragically died young, pointed out that the choicest
consumer goods, affordable by the very rich, are now in limited supply.
Furthermore, beautiful countryside homes, ocean-going yachts, personal
airplanes, visiting the moon, etc, for one reason or another -- natural,
spatial, logistical (but not financial) -- can't be mass-produced.
There are no more chains of consumer goods except houses (which, because
they're so important, governments and banks have fouled up for the present
by means of arbitrarily playing around with interest rates). We only have
embellishments of the consumer goods that were already invented, or in
mind, a century ago. And they tend to be mass-produced from the start at
cheap prices so there's no aspirational effect. The Great Depression of the
1930s might well have been solvable by Keynesian methods because many
consumer goods had still only reached halfway down the social scale but
governments stuck to a perverted, upside down, notion of the gold standard
and kept the value of money too high.
Today, no matter how much extra money governments throw into the melting
pot, it is either being trapped by the banks (which still have massive
debts to pay off) or is already seeping out as inflation which is affecting
the poorest already as regards heating and food costs. It is not being
saved (from which real investment can flow) because there is no longer a
long chain of consumer goods at different points on the social scale which
can be successively afforded by all classes from the top to the bottom.
The beginning of wisdom is to say that the Industrial Revolution has now
ended for Western Europe and America. We are already being forced into a
no-growth society. Politicians and their controllers, the vast civil
services, won't admit this until we reach there either by a permanent state
of deflation or via hyperinflation. Very possibly one or two (probably
smaller) countries can reach a civilized version of no-growth by means of
self-discipline and austerity. But when we get there in a few years' time
it is to be hoped that governments understand what has happened a great
deal better than they do now, so that we can give some guidance to
countries like China and India when they, start meeting the same problems
that we now have.
Perhaps then, with a new tranche of innovations in mind, we might be able
to contemplate a new economic era before us, this time living within our means.
Keith Hudson, Saltford, England
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