Conditions for a new long wave of economic development: revisiting the low road / high road scenarios

Grassroots and commons-based productive movements must of course continue their efforts, and the negative orientation towards more and more inequality (and surveillance/repression), and biospheric destruction are largely unchecked. However, it is also important not to be blind to real adaptations that are effectively occurring within the dominant system.

In 2010, I wrote an editorial in which I expressed my pessimism about the ability of capitalism to create a next long wave based on its integration of green and p2p models. Paul Mason has also eloquently expressed this in his last book on PostCapitalism, where he examines the Kondratieff long waves in depth, and comes to the conclusion that the new wave is stalled, and may not come about, leading to the necessity of post capitalist strategies and scenarios.

The crux of the debate is of course whether capitalism, which has been based on expelling ‘negative social and environmental externalities’ from its logic of value and profit, could actually internalize them, and still operate profitably. As a system, I still believe this is a fundamental structural impossibility, but that doesn’t mean that people operating within the system are not trying, and that this may lead to various hybrid adaptations. Capitalism has a long history of adapting to radical challenges.

So a successful new long wave would have to abide by the following conditions:

(the parts in italics come from an earlier assessment I wrote in 2009 ; they should be updated, but are still valid)

1) a new form of energy (f.e. the UK domination was based on coal, the US domination was based on oil); in the beginning of a new wave, the newly dominant power has particular privileged access to a cheap domestic supply, which funds its dominance; when that cheap supply dries up, a (inflationary) crisis ensues, which forces that power outwards, to look for new supplies in the rest of the world. This results in both dynamic globalization, but also in the awakening of a new periphery. Because the last phase is linked to globalization and the control of external energy supplies, it is also strongly correlated to military overstretch, which is a crucial factor in weakening the dominance of the main player.

2) some radical technological innovations (no more than 3 according to the authors); The 3 last ones: 1830: Steam and railways • 1870: Heavy engineering • 1920: Automotive and mass production –

3) a new ‘hyper-productive’ way to ‘exploit the territory’; This is where land use comes in. In the last period: industrial agriculture and the ‘Green Revolution’ where responsible for a hyper-productive agriculture. This latter phase of a long wave cycle is also marked by hyper-exploitation of existing land base. The example of the dust bowl in the American mid-West is an example. This leads to new methods of land-use that can be used to develop new types of land for the next up cycle.

4) an appropriate financial system: the new public companies, New Deal type investments (such as the Marshall Plan) in the growth cycle phase, morphing into the parasitic investments of casino capitalism in the second phase. Importantly, Badalian and Krovorotov note that each new financial system was more socialized than the previous one, for example the joint stock company allowing a multitude of shareholders to invest. In the growth phase, the newly expanded financial means fund the large infrastructural investments needed to create the new integrated accumulation engine; in the declining phase, the financial system overshoots the capabilities of the productive economy, becomes separated from it, and starts investing in parasitic investments. At that point financial capital tends to be disruptive to production to maintain capitalization.

5) a particular social contract. Here also, we can see waves of more intensive ‘socialization’. For example, the Fordist social contract created the mass consumer in the first phase, based on social peace with labour, while in the second parasitic phase, the part going to worker’s was drastically reduced, but replaced by a systemic indebtedness, leading to the current Sudden System Shock.

6) As we mentioned above, each wave has been dominated by a particular great political power as well, and in the second phase of expansion, a new periphery is awakened, creating the seeds for a future wave of dominance by new players.

It is very clear that the conditions that made the success of the last long wave, are no longer operational:

1) The era of abundant fossil fuels is coming to an end; after Peak Oil, oil is bound to become more and more expensive, making oil-based production uneconomical. Nuclear Power is no real replacement for this, as its own raw material is equally subject to depletion.

2) The era of mass production, based on the car, requires a too heavy environmental burden to be sustainable.

3) Industrial agriculture destroys the very soils that it uses and is mainly based on depletable petroleum-derivates, while being unsustainably energy-intensive.

4) The financial system is broken and the $10 trillion bailout drains productive investments towards unproductive parasitic investments. Similarly to a losing gambler in a casino, existing players will tend to play for higher and higher stakes hoping to undo their inevitable defeat, thereby destroying valuable means that could be used for the productive economy.

5) The Fordist social contract, broken in the 80s, has led to the increased weakening of the Western middle class and a generalized precarity, which no longer functions after the Sudden System Shock of 2008.

6) The old dominant power, the U.S. can no longer afford its dominance, and has awakened the periphery. The powers that see the opportunity to compete are looking for new societal structures that help them emerge. They cannot rely on the strategies of the dying long wave to achieve these goals, but must invent new ones.

It also seem clear that the seeds of the new system are present:

1) The technology for renewable energy has been developed, but needs at least $150b annual investments in the U.S. alone, in order to become economical. A Green New Deal would jumpstart the new energy era. The wasteful heavy energy usage of the fossil fuel era will need to be replaced by smart precision-based energy usage. Solar energy will be the backbone of renewables but can be supplemented by other forms.

2) The era of mass production is ready to be replaced by more local production in small series, based on developments such as flexible and rapid prototyping based manufacturing, mass customization, personal fabrication and additive fabrication, multi-purpose machinery. This flexible system of manufacturing is faster, cheaper, more adaptive, more compatible with the solar and renewable energy, can only thrive by deepening participative engagement, thus requiring the re-awakening of production intelligence and personal initiative that were discouraged by the various forms of the industrial system, including the systems based on central planning.

3) Post-industrial organic agriculture has already proven more productive than destructive industrial agriculture, but needs to be generalized; land use needs to be re-expanded within cities where vertical agriculture can be developed more intensively. This form of agriculture uses diversity as its backbone and works with the most sophisticated feedback cycles of nature. It saves also human labour time.

4) The seeds of the new financial system, based on increased socialization towards civil society, have been developed in the last few decades: 1) sovereign wealth funds re-insert the public good in investment decisions; 2) Islamic banking and similar mechanisms avoids the hyper-leveraging that destroyed the Wall Street system; 3) microfinance broadens entrepreneurship and financing to the ‘base of the pyramid’; 4) crowdfunding mechanisms, social lending and various credit commons approaches expand the availability of credit; 5) flow money approaches through a circulation charge to discourage parasitic investments

5) The periphery of newly emergent countries has been awakened and will in all likelihood lead to a dominance of the East-Asian region. However, opportunities for other emergent players are still open, providing they find the appropriate local integration of the productive resources of the new long wave. In this context, we can see the emerging success of Brazil, while Russia has its enormous landmass as immense and under-exploited productive resource.

It seems to me however, that there is definitely an acceleration of the adaptation to the new potential, and I would like to give some examples

First of all, the big multinational companies have started moving beyond greenwashing and towards more sustainable and circular production and consumption models. Ikea is an example here . In his latest book, Thriving in the New Economy, John Thackara also outlines this example but gives a warning: even if they achieve a 50% reduction of wood use for their current production, their determination to grow would still mean more wood usage in the future. But nevertheless, that there is this shift in practice is undeniable.

A new organizational paradigm of work is emerging and growing. This shift is described by Frederic Laloux in his book on Re-Inventing Organizations, where he describes the actual practice of ‘Teal’ organizations, which use horizontalism and a commitment to meaningful work, as practiced by a whole array of old and new businesses. There is also a shift towards fair use economies based on shared knowledge commons (1/6th of GDP in the US) and sharing economy models ($600b as calculated by PWC). This is the ‘p2p-commons’ part of the adaptation.

3) Distributed energy. The price has fallen tremendously and usage is skyrocketing. This is not only done by grassroots consumer coops, but there is a documented shift in for example the policies of many US states and urban areas, in the context of climate change strategies. China is committed to a major systemic shift based on reducing carbon and using renewables. For the clear sinners like the former governments in Australia and Canada, there are many examples of regions and states where the shift in mentality has occured.

Here are the areas of adaptation where I see more problems:

What is the status of a potential shift to eco-agriculture ? This seems a weak point, despite the many local grassroots initiatives, but I haven’t studied this adequately. We can see a shift in the wrong direction for example in Africa, where the Gates Foundation has nominated former Monsanto officials to push a widespread shift towards toxic agriculture and a full-scale attack on community lands.

The dominance of the financial sector seems largely unchallenged, though there are various shift to green capital, impact bonds etc … Grassroot shifts through the new capacities of crowdfunding, social lending etc are however having an impact by allowing many smaller initiatives to go in the right direction.

Of course, for a new wave to occur, not only do these various factors need to interoperate in a new system, but it has to prove to capital that it is profitable and then, with the help of state policies, there has to be a massive shift of investment towards the new paradigm.

Clearly , that is not happening, but what we can see is that some of the factors are maturing within the old system.

Grassroots and commons-based productive movements must of course continue their efforts, and the negative orientation towards more and more inequality (and surveillance/repression), and biospheric destruction are largely unchecked. However, it is also important not to be blind to real adaptations that are effectively occurring within the dominant system.