Thursday, November 13, 2008

A Long-Term Trend Toward The Depletion of Fiscal-Macroeconomic Slack in the World Economy? (Continued)

Assessing the Evidence, Considering the Consequences and Finding Explanations
Since the 1970s there has been a clear trend toward falling, stagnating and by some measures, even negative economic growth; falling saving rates; rising debt, both public and private; and tightened public finances, with budget cuts and tax raises both increasingly difficult, compared with the case in previous decades. The result is a vicious cycle that keeps those debts growing, while the weight of these debt burdens contributes to continued economic stagnation.

In short, the signs indicate that their fiscal-macroeconomic slack is decreasing as a proportion of their overall (and more slowly growing) resources, and their recent behavior reflects this, particular in a reticence about launching major new initiatives in recent decades (and indeed, a retreat from responsibility in at least some areas) that gave rise to much talk of "the decline of the state" (less fashionable than a few years ago, though the fundamentals of the discourse have changed little). It also bodes poorly for the likelihood of today's states taking preventive approaches to problems or to handle them when they are small, before they become impossible to ignore but much more costly to deal with. (In an area like global warming, the deficiencies of such an approach should be obvious.)

Examining the data, it becomes apparent that the 1970s represent a turning point, economic growth rates dropping sharply after that time, a development strongly related to the rapid growth of debt, relative to income, that also occurred during those years.33 Of course, it is the case that the exceptional growth of the 1950s and 1960s was tied to the rebuilding of Europe and Asia following the Second World War, a one-time event; the subsequent abandonment of the Bretton Woods monetary system, no longer viable after that recovery; and the disruption associated with the "energy crisis" of that decade.

Nonetheless, these have generally not been viewed as fully accounting for the change, and numerous explanations above and beyond these enjoy some currency. Mancur Olson famously proposed that the stability of industrial societies after the 1940s created opportunities for the emergence of "distributional coalitions"-interest groups-which have used public power to benefit themselves at the expense of overall economic efficiency.34 Given that monetarist thinking remains widespread, it is not surprising that many others blame central bankers for instituting what they see as "excessively" anti-inflationary monetary policies, while others have pointed to the growing weight of the service sector, with its comparatively slow productivity growth, as a factor.

However, others have noted that this pattern coincides with a shift toward neoliberal economic policies, making possible economic globalization in the (neoliberal) form in which we now know it (with its undeniable, massive increase of the complexity of economic life). They have even argued that the more regulated, "mixed" economies of the mid-century were simply more effective at "delivering the goods" than the policies of more recent years.35

The establishment of causality is more problematic. Historically, the literature has focused on the national impacts of national policies and their impacts, rather than more global studies.36 For instance, while it has often been noted that the elevation of trade barriers is a standard feature of successful industrialization, while their lowering has been characteristic of periods of "deindustrialization," little thought has been given as to what this means for the global economy as a whole. Even where these developments are problematic-and not all observers argue that this is the case with phenomena like deindustrialization-the liberal argument tends to run that local and temporary problems are the price paid for global and long-run benefit; that the cure would be worse than the disease, the pain surely greater under an alternative policy; even, as Margaret Thatcher famously put it, that "There Is No Alternative."37 Finally, the recent criticisms of neoliberal globalization that did take a broader, more international view have tended to focus on its social and ecological costs, quite apart from its economic costs, with rigorous analysis of the diminution of growth as such comparatively rare.

Nonetheless, enough work has been done in this and related areas for these critiques to at least point to some plausible connections between these policies, and the economic trends of the last three decades.

Wage-Productivity Gaps
Economist Ravi Batra has pointed to the expansion of wage-productivity gaps as a major obstacle for economic growth. The reason is that the drop in wages suppresses consumption, which can only be sustained by the accumulation of debt. At the same time, the weakness of consumption discourages investment in expanded production, and encourages its diversion into speculative channels-the buying and selling of assets rather than goods and services-which in turn negatively impacts financial stability and growth (the consequences of which Batra finds in the weakened economic performance of many advanced economies, the U.S. in particular).38 Neoliberalism and neoliberal globalization, by withdrawing government support for labor, weakening controls on investment flows (and with it, the mobility of capital), and intensifying international competition, has clearly contributed to such a situation, epitomized in what some have taken to calling "the China price."39

The intensified competition and financialization discussed above have also contributed to a more general "short-termism," by which is meant the short time horizon of company managers prioritizing a short-term outlook over a long-term one, a tendency commonly connected with the increased influence that a swollen and unconstrained financial sector has attained over non-financial corporations (NFCs). However, the phenomena itself has been little studied in any serious way, because of the bias in the field in favor of examining the ways in which markets are efficient rather than inefficient, though there is now a small, but growing, academic literature on the subject.40

A widely noted addition to that literature in 2005 confirmed the tendency of corporate executives to favor "smooth earnings" and short-term stock prices over value, and a readiness to do this not only by way of accounting, but actions sacrificing research and development, maintenance, and other such essentials to achieve the desired results.41 Economist James Crotty has also made a compelling case that financialization has led to an emphasis on sustaining stock prices and fighting hostile takeovers (dependent on debt-financed stock buys and special dividends) at the expense of capital accumulation and innovation, and with increasing indebtedness as a result (as well as continuous cost-cutting pressures of the kind discussed by Batra, with their effects).42 It may also be the case that business responds in such a situation by deploying the resources that go to areas like R & D in different ways, one analyst arguing that the energy sector has reacted to the competitive pressures it faces by emphasizing "conservative innovations able to pay off in the short term" rather than "system-shattering" research.43

Long-range growth and innovation aside, the drive "toward leaner operations and ever-shorter time horizons" comes at the expense of the robustness and reliability of a business's operations, and it is at least plausible that this imposes other costs on the larger economy in which it operates, comparatively invisible because they are externalized from the business's own balance sheet.44 Utility companies offer a useful example. In the U.S. following deregulation, electricity companies pursued a gamut of cost-cutting measures, some of these at the price of grid reliability. While the issue has been little studied at the macroeconomic level, there is evidence that the damage done to the U.S. economy as a whole in this way may far exceed any savings it gains at that level.45

Ecological Damage and Resource Depletion
Finally, it is arguable that the new international business environment has contributed to the failure to address the depletion and pollution of natural resources by restraining government policy in this area and helping "reward" those states most willing to absorb such damage with growth (again, as in the case of China). While the tendency has been to write in terms of a trade-off between economic growth and ecology, the reality is that damage to the latter must inevitably diminish the former.

Economic expansion has, despite marked increases in resource efficiency, historically relied on expanded resource use, and the evidence has long been that such expansion has long breached its limits. An oft-cited estimate by the World Wildlife Fund in 1999 was that the world economy is now consuming resources equivalent to those of 1.2 earths, a figure that had risen to 1.4 earths by 2008, and is on track to reach the level of two earths by the mid-2030s.46 While GDP does not register such costs in a comprehensive way, it nonetheless registers some of the effects in slower or negative growth, and even though the global picture of the economic impact of these patterns is sketchy, in the 1990s the Asian Development Bank estimated that the economic costs of environmental degradation ranged from 1-9 percent of a country's gross economic product.47 According to that analysis, China alone suffered an 8 percent loss in the form of damage to its agriculture, production and natural resources from air and water pollution alone. Additionally, resource shortages are quickly felt in the form of slower growth, the most dramatic instance of which was perhaps the cost of rising energy prices in recent years, following the failure of the world's economies to move beyond fossil fuels after the high prices and short supplies of the 1973-1986 period.48

Neoliberalism and Public Finances
In addition to the broad economic consequences sketched above, it is worth noting that neoliberal globalization has also impacted public finances in more direct ways. Besides considering economic growth and the distance between current tax levels and the theoretical limits of capability as issues to keep in mind when considering the prospects for increased taxation, Christopher Hood raised a third point, namely the particular taxing options open to states. Neoliberalism and globalization have restricted the scope not only for tariffs (once an important revenue source for many states), but taxes on capital, marginal income and corporate taxes.49 While arguments have often been advanced that states can successfully reject the neoliberal path, globalization is more likely to harm than help such efforts.50

The result has been more regressive taxation, not only in the downward revision of many of these rates, but a greater dependence on "salary taxes," which affect lower- and middle-income taxpayers most, and increasingly, flat taxes well.51 Given widening inequality, soft job markets and wages that may be stagnant or even falling in their actual purchasing power (with all the consequences this has for consumption, and growth), this increasingly confines taxation to a smaller part of the overall tax base, and makes simple tax-to-GDP ratios (already problematic given GDP's failings as a measure of wealth) an underestimation of the strain on the system.52 Such situations consequently translate into greater difficulty increasing revenue, even during acknowledged national emergencies.53

There are at least the rudiments for making the case that the policies identified with neoliberal globalization (the reduction of labor protections, deregulated financial flows, etc.) are, by way of their impacts on consumption and investment, closely connected with the current tendency toward maladaptive investments in complexity (in their delivering slowing economic growth), and along with it, the (relative) erosion of fiscal-macroeconomic slack that recent decades have witnessed (as indicated by falling savings, the growth of public and private debt, and the tightening of government finances). Tentative as any argument along these lines necessarily is at this point, at the very least it can suggest future directions for research, and in turn, possible paths toward ameliorating the problems with which policy-makers have grappled with such clear lack of success since the 1970s.

1 Gene I. Rochlin, Trapped in the Net: The Unanticipated Consequences of Computerization (Princeton, New Jersey: Princeton University Press, 1999), p. 213.
2 Joseph Tainter, The Collapse of Complex Societies (New York: Cambridge University Press, 1988) 91-126, 209-216. According to his definition, complexity refers to "asymmetric relationships that reflect organization and restraint" between the parts of a system. Important characteristics of complex systems include large numbers of densely interconnected, highly interdependent components and nonlinear functioning.
3 For instance, internal-combustion vehicles solved a transportation problem, but had maladaptive effects in the form of pollution and a dependence on scarce fossil fuel resources. Murray Gell-Mann, "Complex Adaptive Systems," in Complexity, G. Cowan, D. Pines, and D. Meltzer, eds., (Cambridge, Massachusetts: Perseus Books, 1994), p. 22.
4 Seth L. Loyal, quoted in John Horgan, The End of Science (Reading, MA: Addison-Wesley, 1996), p. 288.
5 Philosopher Nicholas Rescher suggests four broad categories: formulaic complexity; compositional complexity; structural complexity; and functional complexity. These refer, respectively, to the volume of information needed to describe or produce a system, or resolve a given problem; the number or variety of elements within a system; the number, variety and elaborateness of relationships between those elements; and the number, variety and intricacy of a system's functioning. Nicholas Rescher, Complexity: A Philosophical Overview (New Brunswick, N.J.: Transaction Publishers, 1998), p. 9. These various types of complexity, however, while theoretically separable, tend to run together in practice; in every respect, a space shuttle is a far more complex machine than the Wright Brothers' Flyer.
6 Nader Elhefnawy, "Societal Complexity and Diminishing Returns in Security," International Security 29.1 (Summer 2004), pp. 155-156.
7 It may be reasonable to speak in terms of ecological-natural resource lack, but where economic production is concerned, this is very hard to disentangle from the technological base exploiting those resources.
8 It should be kept in mind that WTO numbers tend to be lower than those compiled by other institutions, such as the World Bank, and in particular the International Monetary Fund. The 2008 edition of the World Bank’s World Development Indicators offers the following data for the latter part of this period: a 2.9 percent a year growth rate for the years 1990-2000, 3 percent for 2000-2006. WB, Indicators 2008 (Washington D.C.: World Bank, 2008), p. 200. The International Monetary Fund’s World Economic Outlook 2006 offers a still higher 3.4 percent a year for the 1988-1997 period, and 4.1 percent for 1998-2007. IMF, Outlook 2006, p. 177.
9 World Bank, Indicators 2008, p. 195. This change is reflected in the indications of their shares in the figures for the total value of world merchandise exports, fuel and other mining products (and iron and steel) rising 17 percent annually for the years 2000-2006. The result was that where fuel represented just 10.2 percent of the value of world merchandise trade in 2000, it accounted for 15 percent in 2006. WTO, "World Merchandise Exports," in International Trade Statistics 2007 (Geneva: World Trade Organization, 2008), Table II.1, p. 43. The figures for 2000 were derived from the 2001 edition of the same annual.
10 For a discussion of this reconsideration of the estimates, see "A Less Fiery Dragon?" The Economist, Nov. 29, 2007. Accessed at A forty percent downward revision in China's 2007 GDP means a five percent downward adjustment of global GDP.
11 Alan Freeman, cited in Heikki Patomaki, The Political Economy of Global Security: War, Future Crises and Changes in Global Governance (New York: Routledge, 2008), p. 103. A pre-publication version of Freeman's relevant paper can be found in "Globalization: economic stagnation and divergence," Jan. 20 2008. Accessed at
This is all without considering the likelihood that the current figures are exaggerated by the understatement of inflation. Of course, inflation estimates were a factor in previous economic calculations, but because of the changes in the techniques used to estimate inflation (particularly innovations like "hedonics"), it seems plausible that recent figures reflect more distortion than the available estimates of earlier performance. Kevin Phillips, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (New York: Viking, 2008), pp. 80-89.
12 Clifford Cobb, Ted Halstead, and Jonathan Rowe, "If the GDP Is Up, Why Is America Down?" Atlantic Monthly 276.4 (Oct. 1995), pp. 59-78; and Jonathan Rowe and Judith Silverstein, "The GDP Myth: Why 'Growth' Isn't Always a Good Thing," Washington Monthly 31.3 (Mar. 1999), pp. 17-21.
13 Redefining Progress, "Genuine Progress Indicator: 1998 Executive Summary." Accessed at; Redefining Progress, "Redefining Progress' Genuine Progress Indicator (GPI) Rose Slightly in 2000-Alternative Economic Measure Remains $23,947 Per Capita Below The GDP," media release, Dec. 26, 2001. Accessed at For the most recent available estimate, which has U.S. per capita GPI at $15,000 in 2005 (roughly where it was in 1978), see Dr. John Talberth, Clifford Cobb and Noah Slattery, The Genuine Progress Indicator 2006: A Tool for Sustainable Development (Oakland, CA: Redefining Progress, 2007). Accessed at
14 Indeed, this assessment suggests GDP growth has become increasingly divorced from meaningful economic progress. Talberth et. al., pp. 18-19.
15 "A sustained 1 percentage point increase in per capita output growth in industrial countries would over time lead to an almost 1 percent of GDP increase in the national saving rate." International Monetary Fund, World Economic Outlook, Sep. 2005, p. 98.
16 The OECD has reported falling households savings in every member country for which data was available between 1990 and 2004, save France and Norway. No aggregate figures were published, but there were national figures. The U.S. net savings rate fell from 7 to 0.8 percent; Germany from 13.9 to 11.1 percent; Japan from 13.9 to 5.1percent. OECD, Factbook 2005, p. 37. For an analysis of the drop in the developed world between the 1960s and early 1990s, see Brian Bosworth, Savings and Investment in a Global Economy. Washington D.C.: Brookings, 1993. pp. 55-62. He also offered an update of his analysis, which indicated the continuation of the trend, in "United States Saving in a Global Context," Senate testimony, Apr. 6, 2006. Accessed at For U.S. data, see Bosworth, testimony, "U.S. Net Savings and Investment by Sector, 1960-2005," Table 1.
17 IMF, World Outlook, pp. 93-97. The observation should be qualified, however, by noting that the aging of a population places a downward pressure on national savings. IMF, p. 99. One study indicated that, in line with what economists call the "life cycle model," changes in savings rates in the developed world correlated with such demographic changes. Bosworth, Savings, pp. 62-66. The work of Burtless, however, argues that "other changes in the environment swamped whatever effects were caused by the demographic cycle" in the case of the advanced economies after the 1960s. See Gary Burtless, "Demographic Shocks and Global Factor Flows: Discussion," conference paper, 2001, p. 276. Accessed at For data on various regions, see Bosworth, testimony, "Gross Saving as Share of Regional GNI, Selected Years and Regions," Table 2b.
18 Where gross capital formation as a share of regional GNI fell in the U.S. from 19.7 percent in the 1980-9 period, to 17.3 percent in 1990-4, and rebounded to 18.7 in 2000-04, in Europe's case it fell from 21.7 percent in the 1980s to 19.9 in the 2000-04 period. The figures for Japan in the two time frames were 28.7 to 24.1 percent, respectively. See Bosworth, testimony, "Gross Capital Formation as Share of Regional GNI, Selected Regions and Years," Table 2c.
19 Canadian Ministry of Finance, "G7 government net financial liabilities," Table 58. By contrast, central government debt burdens were shrinking, roughly constant or growing more slowly in the decades of faster growth prior to this period. The U.S. Federal debt notably shrank from 121.6 to 32.5 percent of GDP between 1946 and 1980, despite the regularity of modest deficits in the 1960s and 1970s. Elhefnawy, "National," pp. 127-128. For a more international view, see the 2007 International Fiscal Reference Tables, Tables 56 and 57. Accessed at
20 Notably, the share of corporate and mortgage-related debt in the total figure rose from roughly 25 to 44 percent of the total figure during that time frame, another indicator of the importance of private debt accumulation. Securities Industry and Financial Markets Association, "Outstanding Level of Public & Private Bond Market Debt: 1985-2006 Q1," Apr. 1, 2003. Accessed at
21 J. Kyle Bass, Hayman Advisors, letter, Oct. 14, 2008. Accessed at
22 Federal Reserve, Consumer Credit August 2008, Federal Reserve Statistical Release, Nov. 7 2008. Accessed at
23 This is, of course, without considering the complications arising from the internationalization of this debt, which in some cases (such as the volume of foreign-held U.S. debt) may be unprecedented. Peter Drucker, Brent Schlender, "Peter Drucker Sets Us Straight," Fortune, Jan. 12 2004, pp. 115-118. There is also the vulnerability to a rise in interest rates that goes along with bearing a heavy debt burden to think of. See Gerald J. Swanson, Swanson, America the Broke: How the Reckless Spending of the White House and Congress are Bankrupting Our Country and Destroying Our Children's Future (New York: Currency, 2004).
24 World Bank, World Development Report 1997: The State in a Changing
(Oxford University Press, 1997), pp. 1-2.
25 Canadian Department of Finance, "G7 general government total tax and non-tax receipts," International Fiscal Reference Tables, Table 54, September 2008. Accessed at
26 Christopher Hood, "The Tax State in the Information Age," in T.V. Paul, John A. Hall and G. John Ikenberry, eds., The Nation-State in Question (Princeton, N.J.: Princeton University, 2003), p. 216.
27 Nader Elhefnawy, "National Mobilization: An Option in Future Conflicts?" Parameters 34.3 (Autumn 2004), pp. 127-130.
28 It was recently estimated that illegal evasion deprives the U.S. Treasury of $300 billion a year. Robert J. Samuelson, "The Price of Democracy," Newsweek, May 17, 2004.
29 Canadian Ministry of Finance, "G7 government net outlays," Table 55.
30 OECD, "Education at a Glance-OECD Indicators 1998," November 23, 1998, Barry Bosworth, "Prospects for Savings and Investment in Industrial Countries," Brookings Discussion Papers 113 (Washington D.C.: Brookings, 1995). OECD, Economic Outlook 69 (June 2001), p. 182. The modest success in achieving reductions is reflective of the large and rising share of mandatory spending in national budgets (like debt service). IMF, World Economic Outlook, May 2000, p. 173.
31 The data indicates an improvement in the fiscal picture after 2005, again, correlating with the reported acceleration of growth in the same time frame.
32 Dennis Cauchon, "Taxpayers on the Hook for $59 trillion," USA Today, May 28, 2007. Accessed at
33 The per capita global economic growth, extrapolated from the same WTO data series noted above, came to roughly 3 percent a year for the years 1950-1973. After 1973 it has been in the area of 1.3 percent a year, less than half as much.
34 Mancur Olson, The Rise and Decline of Nations (New Haven: Yale University Press, 1982). Jonathan Rauch expanded on this idea, including the redistributive effects of litigation in Demosclerosis: The Silent Killer of American Government (New York: Times Books, 1994).
35 John Ralston Saul, The Collapse of Globalism: and the Reinvention of the World (Woodstock: Overlook Press, 2005); Gerald Epstein, ed., Financialization and the World Economy (Cheltenham, UK: Edward Elger, 2005). Also see Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago: University of Chiacgo Press, 1995), pp. 3-55; Patomaki, who has connected the movement to and from free trade with the upswings and downswings of economic long waves, in Patomaki, pp. 100-123.
36 Heikki Patomaki noted that "relatively few economists have actually studied long-term global trends in any systematic fashion." Patomaki, p. 102.
37 As an example, see Robert Rowthorn and Ramana Ramaswamy, "Deindustrialization-Its Causes and Implications," Economic Issues 10 (Washington D.C.: International Monetary Fund, 1997).
38 See Ravi Batra, Greenspan's Fraud (New York: Palgrave Macmillan, 2005), pp. 142-167. The expansion of the financial sector relative to the rest of the economy in the U.S. has been noted by many critics with alarm. Finance and insurance went from comprising 11 percent of U.S. GDP in 1987 to 14 percent in 1986; real estate from 14 percent to 16 percent during the same time frame. For a critique of the trend, see Phillips, Bad Money, pp. 29-119.
39 Alexandra Harney, The China Price: The True Cost of Chinese Competitive Advantage (New York: Penguin, 2008).
40 For a discussion of this, see Angela Black and Patricia Fraser, "Stock market short-termism-an international perspective," Journal of Multinational Financial Management 12.2 (April 2002), pp. 135-158.
41 The study found that 78 percent would sacrifice value for smooth earnings, that 80 percent would sacrifice R & D and maintenance to achieve this end, and that 55 percent were willing to delay a project at the expense of value for the same purposes. John R. Graham, Campbell R. Harvey, and Shivaram Rajgopal, "The Economic Implications of Corporate Financial Reporting," Journal of Accounting and Economics 40 (2005), pp. 3–73.
42 James Crotty, "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era," Policy Economic Research Institute, Research Brief (Jul. 2003); Crotty, "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and ‘Modern’ Financial Markets on Nonfinancial Corporations in the Neoliberal Era," in Epstein, ed., Financialization, pp. 77-107. It may also be that leanness itself poorly positions a company for expansion, recent research indicating that slack in its capacity may be essential for business growth at the entrepreneurial level as well. See Theresa M. Welbourne, Heidi M. Neck, G. Dale Meyer, "Human Resource Slack and Venture Growth," conference paper. Accessed at
43 For the case of the energy industry, see Marshall Goldberg, "Federal Energy Subsidies: Not All Technologies Are Created Equal," Renewable Energy Policy Project, Research Report, July 2000, p. 2. This area is particularly relevant, because where some sectors of technological R & D may be offering diminishing returns to investment, this appears to be one where chronic underinvestment has been the norm. See Robert M. Margolis and Daniel M. Kammen, "Underinvestment: The Energy Technology and R & D Policy Challenge," Science 285 (Jul. 1999), pp. 690-692; Margolis and Kammen, "Energy R & D Innovation: Challenges and Opportunities for Technology and Climate Policy," in Stephen Schneider, Armin Rosencranz, and John-O Niles, eds., A Reader in Climate Change Policy (Washington D.C.: Island Press, 2001). More broadly, such a tendency may at least partially account for the diminishing marginal returns on technological investment some observers have identified in recent decades, with information technology discussed as a lone exception. Michael O'Hanlon, Technological Change and the Future of Warfare (Washington D.C.: Brookings Institution Press, 2000), p. 194; W. Brian Arthur, "Increasing Returns and the New World of Business," Harvard Business Review, 74.4 (Jul.-Aug. 1996), pp. 100-109. However, Robert J. Gordon has noted the limits of the contributions computers and the Internet have made to the global economy, and Roland Spant has written about the macroeconomic effects of the rapid depreciation of IT. Robert J. Gordon, "Does the 'New Economy' Measure up to the Great Inventions of the Past?" Journal of Economic Perspectives 14.4 (Fall 2000), pp. 49-74; Roland Spant, "Why Net Domestic Product should replace Gross Domestic Product as a Measure of Economic Growth," International Productivity Monitor 7 (Fall 2003), pp. 39-43. Accessed at Part of the problem may also lie in poor decision-making at the adoption end of the process as well. Rochlin, Trapped, pp. 29-34.
44 Nader Elhefnawy, "Societal Complexity," p. 166.
45 One assessment is that grid unreliability cost the U.S. economy $120 billion in 2001 alone. George F. McClure, "Electric Power Transmission Reliability Not Keeping Pace with Conservation Efforts," Today's Engineer Online, Feb. 2005. Accessed at For an assessment of the economic costs of a single recent U.S. blackout (the August 2003 blackout in the northeastern United States), see Electricity Consumers Resource Council, "The Economic Effects of the August 2003 Blackout," Feb. 9, 2004. Accessed at
46 Worldwatch Institute, ed., Vital Signs, 2003: The Trends That Are Shaping Our Future (New York: W.W. Norton & Co., 2003), pp. 44-45. Also see Rob Costanza, "Natural Capital, Ecosystem Services," Nature (May 1997), pp. 253-254. For the more recent data, see the World Wildlife Fund Living Planet Report 2008,
47 One estimate has these at eight percent of GDP in some Asian nations. S. Tahir Qadri, ed., Asian Environmental Outlook 2001 (Manila, Philippines: Asian Development Bank, 2001), p. 11.
48 The comparative experience of the U.S. and Western Europe in this area since that time provides strong evidence of the bankruptcy of "free market" energy policy. Elhefnawy, "Toward a Long-Range Energy Security Policy, Parameters 36.1 (Spring 2006), pp. 101-114; "The Impending Oil Shock," Survival 50.2 (April 2008), pp. 37-66; Elhefnawy, Amy Myers Jaffe and Michael T. Klare, "'The Impending Oil Shock': An Exchange," Survival 50.4 (August 2008), pp. 61-82.
49 Hood, p. 217. Not surprisingly, while polls in democratic countries indicate a general sentiment that corporations and the wealthy are under-taxed, the taxes of these groups have generally been lowered rather than raised. Ibid., p. 218.
50 Rudra Sil, "Globalization, The State and Industrial Relations: Common Challenges, Divergent Transitions," in The Nation-State in Question, p. 285.
51 Allan Sloan, "Why Your Tax Cut Doesn't Add Up," Newsweek, Apr. 12, 2004, pp. 41-46. Social Security is not levied on income above a specified, annually adjusted level-$94,200 in 2006.
52 It cannot be assumed that elevated incomes in the upper quintiles during periods of skewed income distribution will compensate either in the area of savings or overall tax collection, as promised by proponents of Federal tax cuts in the U.S. in the 1980s. The result was instead the dramatic increase in the national debt during those years. Charles Kindleberger, World Economic Primacy: 1500-1990 (Oxford University Press, 1996), p. 179.
53 Ibid., p. 100. The point is demonstrated by the frequency with which such situations figure in portraits of societal collapse. For more on that tendency, see Carlo Cipolla, ed., The Economic Decline of Empires (London: Meuthen, 1970).

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