Bulletins and News Discussion from November 11th to November 17th, 2024 - Chapo? Like, the President-elect of Mozambique? - COTW: Mozambique

Ok fuck you all, I volunteered to read it and this is what I picked out to answer you

TL;DR both china and the US are destined for low growth in the medium future. This means the US is already cooked since high debt-to-GDP in a low growth context means HIGH DEBT and the collapse of public deficit driven growth. China also in trouble since a transition to consumption-driven investment also collapses just later. So communism is the answer with state-directed investment displacing capitalist directed investment as the only plausible solution as the rate of return on investment plunges to zero.

It’s the declining rate of profit argument from Marx, but matching it to observations of the actually existing Chinese and US economies and projections about worker productivity and population growth.

For the US:

If the U.S. labor force stops growing and the labor productivity growth rate reaches about 1 percent, then the U.S. economic growth rate will slow down to about 1 percent by mid-century. In that case, if the financial capitalists continue to demand a real interest rate of 1 percent or more, then any positive primary deficit will lead to indefinite growth of the government debt to GDP ratio.

In reality, before government debt approaches two or three times the GDP (not to say infinity), the U.S. government may be forced to implement a fiscal austerity program, leading to economic crisis and social catastrophe. Alternatively, a failure to restrain the growth of government debt to GDP ratio could eventually lead to a financial crisis resulting from surging interest rates, the collapse of the dollar, or a combination of both, as domestic and foreign capitalists dump U.S. treasury securities when they lose confidence in U.S. capitalism.

That is to say, there is an assumption baked into US public debt that the US will grow at a healthy rate into the future meaning debt today isn’t that big a deal.

But, they argue, due to lowered rate of profit (“productivity”) on investment AND due to probable population decline or stagnation, the economy will not grow strongly in the future and is in fact likely to experience very low growth, they estimate about 1% in GDP growth per year.

Meaning US public debt is a big problem since, in the absence of strong growth in GDP, the only way to handle the debt is either to inflate it away which will wreck the economy or to engage in hard austerity, which will wreck the economy.

US is cooked.

For China

China’s population and labor force have already peaked and are projected to decline at an accelerating pace in the coming decades.

Several studies about the future prospects of China’s economic growth have concluded that China’s annual economic growth rate is likely to slow to about 2 percent by the late 2030s.

The analysis in the previous section has demonstrated that the Chinese economy will face a huge dilemma in the coming decades. Given its current economic structure, China’s economy heavily depends on investment for surplus absorption. If China were to maintain its current investment level relative to GDP, the incremental output-capital ratio would fall toward zero, and private capitalist investment eventually would collapse. However, if China were to make a downward adjustment of its investment level, it immediately would subtract from the disposable capitalist surplus and destabilize the economy.

Could some other factors replace private capitalist investment and help absorb most of the disposable capitalist surplus? In the Chinese context, both capitalists and worker-households have high saving rates. If capitalists and worker-households can increase their consumption propensity, higher household consumption can help absorb some of the capitalist surplus.

Could China use larger government deficits to offset the decline of investment and stabilize the capitalist surplus? In the section on U.S. debt, we have shown that with a future economic growth rate of 1 percent, U.S. government debt would be on an unsustainable path. As China’s labor force is projected to decline rapidly, the Chinese economy is likely to experience zero or negative growth by the mid-twenty-first century. With zero or negative economic growth, any government deficit will translate into an indefinite growth of the government debt to GDP ratio, and only a fiscal balance or surplus could stabilize the debt to GDP ratio.

Thus, at best, increases in capitalist and worker-household consumption may help absorb a small fraction of the disposable capitalist surplus.

When the political conditions are ripe, a progressive government could use state sector investment to raise aggregate demand to a level that is consistent with full employment. This would strengthen the power of the working class to demand higher labor income at the expense of capitalist profit. Moreover, a progressive government could increase taxes on the capitalists in order to finance programs that would help enhance working-class well-being and restore ecological sustainability. These measures gradually would help eliminate the disposable capitalist surplus.

They basically argue against a consumption-driven economy arguing that over the longer term this doesn’t move the needle.

Instead they argue that full communism, state directed investment targeting full employment and the elimination of dependency upon capitalist investment, is required since the surplus collapse inevitably means the capitalist mode of production stops working.