"John R. Carroll" wrote in message
...

"Ed Huntress" wrote in message
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"F. George McDuffee" wrote in message
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On Sun, 2 Nov 2008 20:41:00 -0500, "Ed Huntress"
wrote:

The question is how you make capitalism work without growth. This is a
very
old question that's been bantered around for at least a century. There
are
current books on the subject if you're interested.

As with many other things I'm way behind in the thinking about this, but
when I was a student, the answer to the question of how you have
capitalism
without growth was, you don't. The g/s/l crowd mostly promotes a form of
socialist birthday cake with capitalist icing on top.
------------------
Continued growth is only a problem when the organizations
involved become fixated on it. There appears to be no intrinsic
reason that Capitalism and/or "the free market" [these are not
the same] can't exist in a mature or static economy.

Without capital growth there isn't enough reason to assume risk, George.
The thought on this is that the system runs down like an unwound watch
when the only return on capital is dividends.

Nobody has ever tried it -- successfully.

Ed, you are showing you age. You whipper snappers don't remember America
pre 1958.
It was at that time that equities and bond yields flipped more or less
permanently.

In the second quarter of 1958, the dividend yield on stocks was 3.9% and
the yield on 10-year Treasuries was 2.9%. Three months later, dividend
yields were down to 3.5% while Treasuries had climbed to match them at
3.5%. The next three months stock prices kept rising and pushed the
dividend yield down to 3.3% while bond prices fell, driving bond yields to
3.8%. The two yields had come close in the past but had always diverged.
In 1958, they reversed their historical positions more or less
permanently.

The period between 1958 and 2008 might only have been an anomaly that is
now correcting as dividend yields revert to past tradition and rise above
bond yields.

I'm aware of that history, John. The "anomaly," though, is also a period
when growth in stock values, which rose from something like 1,000 to 12,000
on the index basis, became the point and dividends on equities became almost
insignificant.

With no growth, trading equities becomes a zero-sum game and everyone wants
bonds, because there's nothing to be gained by investing in equities (except
for gamblers who think they'll win the zero-sum game). Like Japan in the
'70s and '80s, corporations would wind up being financed by debt and will be
vulnerable to bankrupcy with the slightest economic downturn (Japan avoided
this because the big banks held the bonds, and they kept bailing out
troubled companies).


Until 1982, the rate of unemployment (unemployment as a percent of the
civilian labor force) and the median duration of unemployment (in months)
moved up and down together in almost lockstep. Since 1982, however, the
duration of unemployment has increased dramatically relative to changes in
the unemployment rate. 1982 was also the point at which the growth rate of
real compensation began to lag productivity -significantly and
persistently.

Income inequality has risen steadily over the past fifteen to twenty
years. Just how much longer will Americans tolerate these trends?

It isn't clear what you're arguing for here, except some kind of change. If
the change is toward a sustainable no-growth capitalist economy, though, I
don't believe one has ever succeeded.


Thousands of Americans are losing their homes to foreclosures. Congress
has just passed a bill that "bails out Wall Street." The recent failures
and mergers of investment banks have been accompanied by stupifying
bonuses to the very executives responsible for much of the carnage left in
their wake.

Yes, we have trouble. But the question is how to organize a no-growth
economy that works. Another question is whether anyone would want it if you
could.

The trick looks like it must be a case of shifting definitions of "growth"
to another model -- one, for example, in which externalities (CO2 emissions,
and other quality-of-life issues) get a price put on them and they become
part of the gain/loss equations. And it may take more than just physical
externalities.

That soon becomes a planning system in which markets are mostly products of
policy. Again, Japan had some of that, when MITI was directing economic
growth in specific sectors. It didn't work.

--
Ed Huntress