Jean-Hervé Lorenzi

Savings, the Ultimate Rare Resource

We have now reached the heart of this book. Having discussed, successively, the serious breakdown of technical progress, the upsets due to ageing, the loss of economic substance in the countries of the OECD, and uncontrolled finance, these themes converge into what creates the balance of the world, the savings accrued by people on every continent and the investments that are the translation of their dreams. Are these savings enough to enable their ambitions to be achieved? We think not, at least not in the way that the balance between investment and savings has materialized in recent decades. Naturally, a new balance will emerge, the expression of the way in which these new constraints will be satisfied. The world will have changed, as will its economic trajectory.

The Irresistible Explosion of Inequalities

Political economy has always been correctly perceived as an intellectually autonomous discipline, independent in its objectives, solely aiming to represent, understand and possibly predict macro- and micro-economic changes in our societies. This has been the primary aim of well-known and lesser-known economists for three centuries. They have striven to answer the question of income distribution, one that occupies a central place in their approach and their analysis. It is necessary to represent this particularly complex subject as being some sort of pseudo-science and repeatedly attest to the either inevitable or unacceptable nature of the current systems of wealth distribution. In practice, some economists legitimize the rewards of capital while others denounce the exploitation and extortion of added value. When approached in this binary fashion, the theory of the redistribution of wealth questions society in moral and political terms before even mentioning its role in the vigour of economic growth. As far as we are concerned, it is thus a matter of rediscovering, through the economists’ train of thought, the basis for a solid analysis of the relationship between the level of inequality and that of growth. This is a regression that will definitely show that everything that appears to be set in stone as the natural order or the clearly expressed collective will, is actually extremely subjective and prey to the greatest uncertainty.

The Impact of Deindustrialization

Most observers consider that the crisis began in 2007 and has experienced many vicissitudes ever since. Some hope it will resolve itself soon, others suggest analyses leading to different economic policy proposals. The only virtual consensus is in the name, ‘financial crisis’. The present authors do not see it that way, however. Of course, finance played a significant role, but it was fundamentally a crisis of the real economy. We believe that the crisis is the result of the massive transfer of business activity, between 1995 and 2005, from the developed countries to those countries which would become known as the emerging nations. This was the unprecedented phenomenon of deindustrialization of the rich countries and submission in the short term to the diktat of the western consumer, who was so greatly tempted by the low cost of consumption and investment. This is the period when it was enviously reported that one hour of Chinese labour cost 40 times less1 than the labour of an American or European having the same qualifications. This miracle needed to be exploited quickly without thinking too much about the consequences, i.e. the price to be paid for supporting the newly unemployed. It would result in an explosion in the costs of social welfare and, above all, the disintegration of the world economy in the face of the brutality of this unprecedented impact.

The Curse of Ageing

Japan is supremely well suited to the aphorism: ‘land of contrasts’. Japanese society has indeed experienced the fastest demographic ageing, due to its low birth rate and the exceptional longevity of its inhabitants. It is hard not to imagine a link between the very real weakening of an economy in the long term — a phase that has already lasted for twenty years — and the demographic impact so perfectly illustrated by Japan. The most surprising aspect of this intriguing development, which may represent both a positive and a negative, is the fact that the economic structure of this country reflects a dual constraint, one conjectural, the other structural. Firstly, there is an income distribution that would be hard to change and that favours capital over labour while blocking any increase in internal demand. Even worse, as the eminent Japanese demographer Shigesato Takahashi reminds us, ‘the decline in the rate of fertility is closely linked to the change in the work force […]. The number of young women in the job market has increased, especially in the service sector. […]

The Illusion of Definancialization

In this world currently under reconstruction, nothing seems more utopian — or more improbable — than the control or restriction of financial activity. It was the dream of the post-crisis years, the idea that political will could be imposed on all of the movers and shakers of the world of finance. The scenario was soon demolished by the weakness of the U.S. government that was incapable of finding any autonomy in relation to Wall Street. Today, the manifestations of the financial industry are without a doubt more complex and more extensive than they have ever been. For this simple reason, through globalization, finance has the ability to intervene, create and use available liquidity to an unprecedented extent. Yet our whole recent economic history has assigned a key role to the creation of liquid assets at a world, regional and national level as well as via the central banks. In fact, the present authors consider that liquidity is the key to the way in which finance has developed, thus showing the extent to which it would be impossible to imagine a world that was definancialized. Remember that the origin of the evil is to be found in the major imbalance in trades which is itself the product of massive transfers of business from the North to the emerging nations. Even if there is an intention to reduce the trade deficits created by the United States, the reality of deindustrialization of the OECD countries will have two consequences in practice.

Avoiding the Major Crisis of the Twenty-First Century

Crises, what crises? They will certainly occur, and no mistake. This view is not restricted to the economists. How is it possible not to think of the philosophers, sociologists, anthropologists and novelists who today, as they did yesterday, hold up to us the mirror of a modernity which, today as yesterday, has its share of shadow and evil? A violent modernity that is as destructive for the collective as it is for the individual. It is not by chance that Alain Touraine writes of ‘the end of societies’.1 They will be unable to survive the end of social life and the destruction of their institutions, the result of a financial capitalism that has broken off all its links to the industrial economy, with institutional, political and even cultural control of its resources. Touraine seeks to know how to escape the ‘chasm’ that is opening up in front of us, in this ‘post-social and post-historic’ era. While Touraine does not stop there, with this terrible discovery of globalization that is out of control — far from it — he opens the way to a new paradigm, he even leads us into an improbable rapprochement with Arjun Appadurai, someone who does not hesitate to stress the intimate, and even incestuous, relationship between globalization and violence.2 There are too many authors to list who are warning us against our contemporary deregulation, some speak of folly, such Ulrich Beck,3 who calls our societies ‘risk manufacturers’ in which fear predominates or Zygmunt Bauman who constantly lists the destruction of our ‘individualistic societies’ and many others.

The Major Breakdown in Technical Progress

A strange destiny awaited the analysis of technical progress as produced by economists two centuries ago. The difficulty in measuring such progress is patent. In the context of an approach from the total factor productivity perspective, it depends on how a given country’s economy grows and the division of its business activities into sectors. Even more important is the fact that technical progress was conceived through the contemplation of a particular history, that of the Industrial Revolution, an expression developed by Adolphe Blanqui.1 An Industrial Revolution represents the passage of a society from one technical system to another, illustrated first and foremost by the original Industrial Revolution that occurred in the late nineteenth century, in which the steam engine, the iron and steel industry and extensive coal-mining defined just such a new technical system. Certain economists subsequently identified other major changes that they considered to be worthy of the definition of ‘Industrial Revolution’.