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Technical Progress Slows to a Snail’s Pace ...

(May 1981)

From Militant, No. 547, 10 May 1981.
Transcribed by Iain Dalton.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The nineteen eighties began where the 1970s left off. The capitalist world economy is passing through yet another recession.

Industrial production fell at an annual rate of 5% in the second half of 1980. Workers’ consumption has stopped growing as real incomes were cut by rising inflation.

Oil price increases in particular have worsened the “terms of trade” of the advanced capitalist countries. This means prices of imports such as fuel and raw materials that have risen faster than the prices of industrial exported goods to pay for them.

The capitalists have been able, to a certain extent, to restore their battered profit margins by keeping their prices rising ahead of wage costs. Public expenditure has stopped rising at all, as even programmes to cope with rising population are cut back. Exports have stagnated.

Capitalists’ investment in new factories fell slightly in 1980, and in the second half of the year there was a massive run down of stocks of commodities due to tight monetary policies and the prospect of stagnant demand.

Could this develop into a major slump along the lines of 1929-31? Almost certainly not.
 

Stagnating investment

The only basis on which this could happen would be if there were a massive credit crisis throughout the capitalist world. This would force through major bankruptcies of firms currently trading at a loss and unable to obtain credit to tide them over. Stocks would be liquidated on a tremendous scale, production cut, and workers laid off.

Most important, new investment by capitalists in factories and equipment would be slashed – in the USA between 1929 and 1933 it was cut by nearly three-quarters.

Such a credit crisis would be possible. Borrowings, both by the capitalists in the advanced countries and by the ‘third world’ countries are at record levels. But the most likely outcome is that the credit system will weather the storm.

Investment, instead of crashing will continue to stagnate. Between 1963 and 1973 it grew by 6.1%; in 1981, however, it will be at about the same level as in 1973.

But even if there is no crash, this does not mean that a sharp upswing will follow.

The OECD (Organisation of Economic Co-operation and Development) the major capitalist nations, says that the “recovery is expected to be extremely attenuated” (Economic Outlook, December 1980). In plain English: “feeble”.

They expect the capitalist governments to continue their policies of cutting public spending and increasing taxation – policies which they say will cut production by 2% next year. But the hope – and they admit this is optimistic – that there will be no further rise in “real” oil prices (that is, oil prices will not rise faster than prices generally).
 

Waste of resources

This would allow inflation to subside a little (from about 10% now to, say, 8%) and thus consumption would grow a little. Exports should also gain as the spending of oil producing countries catches up with their revenue from oil sales.

But even the OECD cannot manage to produce a forecast of an upturn in investment in 1981. All they can drag up is an end to cuts in stocks. By the first half of 1982 the best they can hope for is that production will be expanding at 3% a year.

Even without a crash there is a monstrous waste of resources involved in stagnation.

Between 1963 and 1973 production in the capitalist world rose by 5.1% a year. Between 1973 and 1981 the average increase will be slightly over 2%.
 

Youth unemployment

If the increase had been maintained at the previous rate of the 1960s and early 1970s, production would have been 25% higher this year than it actually will be.

This is around $2,000 billion, that is, just about exactly the total production of Germany and Japan. This is what is lost by the insane logic of capitalism which dictates that resources should lie idle.

One aspect of this waste of resources is the steady rise of mass unemployment.

The OECD expects that total unemployment in the capitalist world will be about 25½ million by mid-1982, or around 7.5% of the labour force. This is more than double the rate of the 1960s, and half as much again as the seventies.

Young people will be the worst hit, as the OECD’s forecasts show.

Table I shows the OECD predicts horrifying rates for youth unemployment (people under 25) in Canada (14%), USA (15%), Britain (16%), and France (17%). It predicts a catastrophic 30% rate of youth unemployment in Italy.

Not only are millions of workers unemployed, but the productivity of those at work is rising much more slowly than in the past.

Japan, which had the highest growth of productivity between 1963–73 experienced a fall to only 3.8% annual growth between 1973–81. The United States, which had one of the most sluggish annual rises in productivity between 1963–73 (1.9% pa), has seen its productivity fall to a mere 0.2% between 1973 and 1981. As the OECD figures in Table II show, other countries with levels of productivity growth in between Japan and US have all experienced a similar decline from the 1963–73 period to the 1973–81 period.

In none of the major countries is productivity growing much more than half as fast as in the 1960s. Part of the explanation lies in the stagnation itself.

Under-utilised capacity lowers labour productivity, since the capitalists find it very difficult to trim down their labour force. This partly for technical reasons: machines operating slightly more slowly may require the same manning levels, and office staff, sales staff, etc. are still needed.
 

Productivity slowdown

But it is also because of trade union opposition. “Rationalisation”, by closing down the less efficient plants, is aimed at overcoming these “difficulties”.

Moreover, the stagnation of investment means that the stock of capital grows more slowly and new technologies are less rapidly introduced.

In the USA productivity growth has ground to a halt. Since the USA has the technological lead in many sectors, this carries frightening implications for the other countries like Japan, where many of the possibilities of increasing productivity simply by catching up with the USA have been used up.

In the USA a first response to this productivity slowdown was, not surprisingly, to blame the work-force. In particular, the capitalist spokesmen blame the increasing proportion of less experienced women and young workers.
 

Pace of invention

This was soon shown to be quite false. A recent article by a US government economist, Michael Boresky (Challenge, Nov./Dec. 1980), argues that the pace of invention has slowed down.

What he calls “pivotal US inventions” used to come forward every few years:

“Since 1958, however, we have had only two. One of them, optical wave guides, introduced in 1967, is of rather limited importance. The second, the development of the electronic microprocessor in 1970, though of immense importance, is really an extension of the improvements in electronic resistors developed in 1947, and therefore is likely only to revolutionise the electronics industry, rather than originate an entirely new industry.”
 

Post-war developments halted

He produces a table showing “key advances in productivity enhancing technology in the US.”

Boresky’s table lists 25 “pivotal” inventions, usually in the centre of many related or “satellite” inventions. He shows that in the period 1945-65, 18 out of these 25 went through “very intense (rapid and broad) diffusion”, in many cases leading to the development of entirely new industries.

These included crucial developments like the growth of the private-car and truck industries; the application of large-scale machinery and automated processes to civil construction, electricity generation, steel production, and mining. It also included the development of synthetic fibres and the replacement of natural raw materials like rubber, wood, etc., by synthetic substitutes, like plastics, synthetic rubber, fibre glass, etc.

There was also the replacement of piston-powered aircraft by jets and the mechanisation and “chemicalisation” of agriculture. The growth of electronic computers and calculators, and different forms of electronic instrumentation and control also began in this period.

By the 1966–1979 period, however, the number of “pivotal” inventions experiencing “very intense diffusion” had fallen to 8.

Boresky lists no major “pivotal” inventions which will experience “very intense diffusion” in the period from 1980 onwards.
 

Socialist planning

He concludes that not only will many of the technologies have less effect in the 1980s than previously, like the “chemicalisation of agriculture”, but that some of the earlier productivity improvements, like the substitution of gas and oil for coal, will actually be reversed.

Boresky’s view is that even computers will have less effect on productivity in the 1980s than in the 1970s, despite the microchip.

Has mankind reached the limits of its ingenuity? Not at all.

The OECD in a report in 1977 said that in the USA real expenditures on research and development were growing at 12% a year during 1953–64. But between 1971–75 expenditures did not grow at all. This they attributed principally to “a more pessimistic outlook for profits and corporate cash flow” (McCracken Report, p. 148)

Boresky also comes near as a government economist decently can to blaming the short-term profit-grabbing strategy of the capitalists:

“At present, the role of management is overwhelmingly seen as control of cash flow sufficiency and quarter-to-quarter targeting of returns on investment. This is the philosophy promulgated by the business schools in the last 25 years or so.”

As even its own spokesmen admit, capitalism is incapable of either using the resources currently available or of developing the forces of production in the future at anything like the rate possible.

What greater condemnation is there of a social system?

Historically, capitalism played a progressive role in developing industrial production and the world market, although at enormous cost to the working class and the exploited peoples of the world. After the Second World War, because of the political settlement that the great capitalist powers managed to achieve, capitalism was given a new lease of life, particularly in the advanced industrial “West”, Western Europe, North America, and Japan.

Now there is every indication that the development of science, technology, and production is reaching the limits of development in a system dominated by the private ownership of production by a small class of profit-makers, and fettered by the narrow limits and contradictions of rival nation states.

The world is crying out for socialist planning, with democratic control of production by the producers and the world-wide planning of resources and production.

 
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