The power cannot be transmitted to every corner of the vehicle. There are two keys to understanding this disconnect.
The first key is the “fallacy of synthesis”: micro rationality synthesizes macro irrationality. Every enterprise’s decision to reduce labor remuneration, replace manual labor with machines, and outsource labor to platforms is a rational one; But when all enterprises do this at the same time, the result is a systematic collapse of the share of labor remuneration: consumption cannot absorb output, domestic demand is insufficient, surplus and internal competition are flying together. This is what Keynes called the ‘paradox of frugality’, and also the opposite of Kalecki’s famous saying – ‘Workers spend what they get, capitalists get what they spend’ – workers cannot get it, and capitalists ultimately cannot spend it either. More than a hundred years ago, Ford raised the daily wage to five dollars, which is often interpreted by later generations as’ if workers cannot afford cars, then car factories have no future ‘- whether this is Ford’s original intention or not, the truth is correct.
The second key is the ‘total illusion’: the sum conceals the composition. The growth of GDP is real in the aggregate sense, but its welfare implications are questionable: the aggregate indicator masks the shrinkage of its constituent elements. A large part of the growth is contributed by sectors that are highly sought after by capital – according to estimates, investments in artificial intelligence and data centers once contributed more than 90% of the economic growth in the United States during a certain period – while the families, communities, labor, and trust that make up the social body are becoming thinner in terms of composition. The more impressive the growth, the more likely it is to be a “muscle gain failure”: weight is increasing but muscles are not growing.
There is another difference from the old pause. To clarify it, we need to first look at how the old pause ended. Allen’s explanation is as follows: after 1800, technological progress accelerated, but in order for new technologies to become output, they had to be installed in new factories, machines, and railways. At that time, the capital stock in Britain could not keep up with the scale required by new technologies – capital was insufficient. Capital scarcity leads to high returns and doubled profit margins; Labor is not scarce, wages remain unchanged. After decades, the stock of capital has finally accumulated to a scale that matches the new technology. At this point, the newly added capital needs to hire people to start working, and the demand for labor has increased. Only then do wages begin to rise with productivity. This is a “self-healing” chain: high profits induce reinvestment, reinvestment expands capital stock, capital stock expands and raises labor demand, and labor demand raises wages. It can be established on two implicit premises: first, profits must be reinvested into production; Secondly, the newly added capital requires labor to complement it – machines in the 19th century were a supplement to labor, and the more machines there were, the more workers were needed.
The new round of pauses has encountered problems on both of these premises. Firstly, what increasingly consumes wages is not profits but ‘rent’. Profit is a temporary excess income in competition, and to maintain it, one must constantly reinvest and expand production, which requires hiring people; Rent “is the continuous income generated after the closure of originally open market relationships – some call it” cloud rent “- it relies on network effects and data barriers to sustain itself, without the need for further investment, and will not be eroded by the entry of competitors. Rent can be used for long-term stock repurchases, dividend payments, mergers and acquisitions of peers, and the purchase of various assets – these funds are not without appreciation. When asset prices rise and book wealth increases, the way of appreciation is through the repricing of existing assets, rather than the construction of new factories and positions. The self-healing chain broke in the first loop. Secondly, even if capital reinvests, today’s capital may not necessarily require people. The reason why capital accumulation in the 19th century was able to raise wages was because machines required workers to operate them; The deepening of capital in the era of artificial intelligence – computing power, models, data centers – is precisely aimed at replacing labor. The more capital there is, the fewer people may be needed. The self-healing chain also broke in the third ring.
That’s why we can’t expect the new round of stagnation to end naturally like the old one, relying on “capital accumulation to catch up with technological progress”. The end of the old stagnation is the result of the combined effect of the economy’s own strength and social capacity building; If the new pause is to end, the forces on this side of society must take on a larger share. This is also the reason why this article focuses on society rather than distribution.
Social productivity is a function of social vitality
To truly understand this disease, a more fundamental theoretical perspective is needed: the relationship between social vitality and social productivity.
Why parallel? My understanding is that social productivity is never a simple function of factors such as capital, technology, and labor, but a function of social vitality. Capital depreciates, technology becomes outdated, and only the will to labor, the impulse to create, the determination to bear children, and the habit of mutual assistance in a society are the inexhaustible sources of productivity. Social vitality is not just the transmission shaft connecting the engine and the body, it is itself the second engine.
This is not mysticism, there is empirical evidence. Saxony compared Silicon Valley and Boston’s Route 128: the two cities are on par in terms of technology and capital. In the early days, Route 128 relied on MIT and military orders and even had an advantage, but in the end, Silicon Valley emerged victorious. The boundary is not in technology, but in society – an open talent market, weakened corporate boundaries, intensive informal knowledge exchange, high tolerance for failure, and a professional identity rooted in the community rather than individual enterprises. The competitiveness of Silicon Valley is essentially a form of social competitiveness. The increasing inequality and spatial exclusion in the Bay Area today are eroding the social conditions that once created Silicon Valley. This indicates two things: social muscles are productive assets, not consumption; Social muscles will atrophy and require active maintenance.
From this perspective, if growth cannot nourish vitality, it is consuming the soil itself. The reason why Engels’ pause is a “pause” rather than just an “injustice” is precisely because the stagnation of wages takes away income on the surface, but in reality it is vitality – labor willingness, consumption willingness, and reproductive willingness, which are precisely the seeds of the next round of productivity. So social muscular obesity is not only unfair, but also unsustainable: it can temporarily rely on overdrawn vitality to build growth, but cannot rely on shrinking muscles to sustain the economy of obesity forever.
Diagnosis: Social sarcopenia obesity
By focusing the camera on this side of society, the disease can be diagnosed. In medicine, there is a disease called “sarcopenic obesity”: the patient’s weight may not necessarily decrease, and fat may even accumulate day by day, but the skeletal muscle mass and strength are gradually lost, and it is extremely hidden, often with only one symptom at the earliest – fatigue. An economy in the same state is precisely like this: GDP, profits, capital stock, and other “fat” continue to thicken, while the “muscles” of social organization stock, action ability, and self-development momentum continue to erode. Clinically, it manifests as low fertility, low desire, low participation, and weak mutual assistance – a pervasive social weakness. The reason why “lying flat” and “involution” have become hot words at the same time is that they are no longer individual psychological phenomena, but a social mentality; Social weakness is a clinical manifestation of this social mentality.
Here’s a clear statement: ‘Obesity’ refers to fat, not weight. What is fat? It is inefficient capital stock, asset foam, excess capacity, accumulated debt and “involution” competition, rather than growth itself. Losing weight does not mean losing weight, development remains the top priority. This article opposes not growing the body, but only growing fat without muscle.
In medical diagnosis of sarcopenia, three dimensions are considered: muscle mass, muscle strength, and physical function. When mapped to society, there are also three indicators. One is muscle mass, which refers to the stock of “social forces”: the density and actual operation of community organizations, volunteer service groups, collective organizations, and homeowners’ committees. The second is muscle strength, which refers to the ability to take action: whether collective bargaining can be achieved, whether community discussions can solve problems, and whether workers dare to apply for labor arbitration without worrying about leaving a “stain” on their resume. The third is functionality, which refers to the actual output: fertility rate, coverage of family care and community mutual assistance, social trust, and incidence of neighborhood mutual assistance. A society where three dimensions degrade simultaneously is a society where muscles are being lost. These three indicators are not rhetoric, they can and should be measured – a leading area that only assesses industry indicators and not social indicators will not know that its muscles are losing.
Especially to inquire about the pathological mechanism. The most common cause of muscle atrophy is not removal, but long-term lack of weight-bearing capacity – medically known as disuse atrophy. Social muscles are the same: they are not taken away, but unused. There are four alternatives happening quietly. One is administrative substitution: grassroots governance is becoming increasingly administrative, with the government taking charge and the masses watching, and the government taking care of what society should do. The second is algorithm substitution: interactions such as mutual assistance, walking, and neighborhood exchange in the past “acquaintance society” are increasingly decreasing, and the relationship between people is being replaced by the relationship between people and algorithms. The third is market substitution: buy everything that can be bought, and the community no longer needs it. The fourth is the latest and unique narrative replacement in the era of artificial intelligence: the expectation that “you will be replaced by machines” precedes the willingness of machines to replace human bargaining. Scholars studying the AI industry have found that workers are afraid to make reasonable demands for increased hourly wages and improved conditions due to concerns about being replaced by algorithms; Enterprises package labor-intensive businesses as “pure technology companies” and create the illusion of labor being “replaceable”; The grand narrative of ‘the future of labor is determined by technology and capital’ makes ordinary people believe that they have no need to participate. It’s not machines that take away bargaining power, it’s stories about machines.
The consequences of the four alternatives are the same: social muscles deteriorate day by day due to long-term lack of weight-bearing. This determines that the treatment logic must be reversed: redistribution is the infusion of nutrient solution, which can save lives but cannot regenerate muscles; The only rehabilitation method is to bear weight again and let society use their muscles again.
Lessons from the West and the Trap of Social Shrinkage
The history of the West provides a negative example.
The first step is Engels’ pause itself: during the decades of primitive accumulation, the share of labor was systematically suppressed. Britain later came out of a pause. The explanation of economic historians is that capital accumulation caught up – high profits induced high savings, and by the mid-19th century, capital stock finally matched technological progress, and wages began to increase with productivity. But why can capital accumulation be converted into wages instead of continuing to be converted into profits? This cannot be separated from a whole set of social capacity building: the abolition of the Association Law in 1824, the Trade Union Law in 1871 allowing workers to organize legally, the Factory Law in 1833 and 1847 restricting working hours, the abolition of the Grain Law in 1846 lowering rents for renters, the two reform laws in 1867 and 1884 expanding the right to vote, and the Elementary Education Law in 1870 popularizing education. Capital accumulation provides possibilities, and social capacity building turns possibilities into wages.
The lesson of the second step is more worthy of China’s vigilance. Since the late 1970s, there has been a new round of decoupling between wages and productivity in the West. The reason this time is not that society lacks muscles, but that muscles have been actively removed: taking the United States as an example, union density has dropped from one-third at its peak to about 10% today, collective bargaining coverage has shrunk, community and mutual aid organizations have declined, and financialization has changed the direction of profits: more and more profits are being used to purchase existing assets rather than build new production capacity. These funds are not without appreciation, but the increase is in the price of existing assets, not new factories and jobs; Many large companies in the United States have spent the majority of their net profits on buybacks and dividends over the past few decades, following this path. The main way for the West to bridge the gap is through transfer payments: the initial distribution deteriorates and is offset by taxes and benefits afterwards. This is not without effect – it does indeed stop the pain – but painkillers prevent people from seeking treatment anymore. Redistribution replaces the repair of initial distribution and social organization, masking the loss of social muscles rather than reversing them. To this day, it is the total outbreak of low fertility, low desire, “despair disease,” political polarization, and populism – the shrinking muscles can no longer support the obese economy, and society expresses its sense of weakness through votes.
Interestingly, there is no necessary relationship between shrinkage and welfare levels. The United States, with the thinnest welfare, is the place where the “disease of despair” is most severe; The Nordic countries with the richest welfare actually maintain the highest union density, volunteer participation, and social trust – because welfare there is largely operated through unions, cooperatives, and community organizations, and society has been burdened. As a high-income country, Japan has embarked on another path of decline in the “lost thirty years”: from a once recognized “high vitality” society to the birthplace of a “low desire society” and a “fate free society”. General Secretary Xi Jinping has emphasized the need to avoid blindly “welfare catch-up” and falling into the “middle-income trap” like some Latin American countries, as well as to avoid implementing “pan welfare” policies like some Nordic countries that lead to insufficient social vitality; Economic development and social security are closely related, with small boats sailing in shallow waters and large boats sailing in deep waters. The key point of this passage is precisely the word “vitality”: welfare itself is not a disease, replacing vitality with welfare is the disease.
This trap deserves a parallel name to the ‘middle-income trap’: the social shrinkage trap. It is more hidden and backward than the middle-income trap: the middle-income trap is trapped in “not getting up”, and the social shrinkage trap is trapped in “not being able to hold on”; The former is a trap in the development stage, while the latter can occur at any income stage. Crossing the middle-income trap does not mean crossing the social shrinkage trap – both Japan and the United States are examples. For China, this is a mirror that must be seen: what we need to avoid is not growth stagnation itself, but losing the muscles of society in the process of growth.
Why is China different
Looking at the two steps of the West in the coordinates of China will lead to three judgments.
Firstly, China will not repeat the first step taken by the West. Engels’ pause in primitive accumulation was based on the state’s tacit approval or even indulgence of the decline in the share of labor. In China, “increasing the proportion of residents’ income in national income distribution and increasing the proportion of labor remuneration in initial distribution” has been a consistent requirement since the 17th National Congress. “Two synchronizations” have been included in the 18th National Congress report and the 15th Five Year Plan outline, and “comprehensive rectification of ‘internal competition'” has been included in the 2024 Central Economic Work Conference and the 15th Five Year Plan outline. The national objective function already includes the term labor.
Secondly, the pipeline for “blood transfusion” in China has been established, and the dosage is still increasing. We have built the world’s most populous social security system, historically solved absolute poverty, and the proportion of livelihood expenditures to GDP continues to rise. Although there is still room for further improvement in the level of protection, the direction is already clear.
Thirdly, precisely because of this, China’s real task is not to prevent the West from taking the first step of primitive accumulation to lower the labor share, which has already been excluded from the country’s objective function; But rather to prevent repeating the second step of the West – replacing muscle building with blood transfusions, turning ‘money in place’ into ‘nothing to worry about’; And take the third step that the West has never taken before – synchronously growing muscles during growth. This is the real problem of Chinese path to modernization.
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