Many liberal and even radical economists have raised the prospect of a
“double-dip recession.” By the phrase “double-dip,” they refer to a repeat of
the sharp downturn in growth experienced by most countries in 2008-2009. The
possibility of a recurrence, a violent contraction of economic activity, looms
over the global economy as it stumbles and falters away from the shock of three
years ago.
Since the capitalist economy has yet to expel the profound
contradictions that produced the shock, the possibility of another sharp
downturn cannot be ruled out.
However, an even worse outcome likely lurks ahead. Indeed, the economic
diagnosis is so dire that a dramatic downturn might be welcomed in some circles
as a release of the enormous pressures that impinge on the world’s economies.
Such a downturn, destroying real and nominal wealth, consolidating productive
means, and tragically devastating of living standards, might buy capitalism
some breathing room and force policy makers to rethink their road map going
forward.
Clearly, economists and politicians learned little or nothing from the
2008-2009 drama. In spite of the much acclaimed “death” of neo-liberalism
celebrated in the depths of crisis by liberals like Paul Krugman and Robert
Reich, the pre-crisis ideology of market sovereignty, minimal government, and
monetary tune-up still reigns supreme. What policy makers have learned
is to encourage Central Banks to administer a preemptive monetary transfusion
at the first sign of a downturn. While this has yet to stem the bleeding, it
has kept the patient from bleeding to death.
Instead of the feared “double dip” recession, we may instead experience
something far worse: a grinding slowdown, an intractable stagnation, a kind of
economic death from a thousand cuts.
Where the economic watchdogs were caught unawares in 2008, confident
that capitalism would continue to show resilience and growth, policy makers are
wary today of a similar “Lehman” moment, where markets seize, confidence
plunges, and fear grips all economic activity. Thus, the chairman of the
Federal Reserve, Ben Bernanke, stands vigilantly at the gate intently looking
for any economic interloper, though with no guarantee that he has the weapons
to contain it. This vigilance is particularly acute in an election year, when
no economic czar wants to be perceived as influencing the election outcome.
Popular mythology, many economists, and far too many Marxists depict
economic crisis only as a great shock wave that sends economic life into chaos.
Certainly the panic of 1929 implanted that image. But that image is a
caricature of the decade of decline and weak, tentative recovery that cycled
throughout the Great Depression until interrupted by the buildup for the Second
World War.
Today’s crisis mirrors that event in many ways, yet exhibits its own
unique features as well. Some of the differences are especially menacing.
Signs of Decline
The economic decline that I identified and forecast in my January post,
Summing Up/Taking Stock, continues unabated. The slowdown in the growth
of US Gross Domestic Product persisted through the second quarter. Euro-zone
growth has actually turned negative, especially and deeply in the Southern
European region. The collapsing demand in this critical area has slowed the
entire global economy, even the once fast-growing emerging market countries
like China, Brazil, India, and Russia. The prospect of global economic growth
is dim, stagnation likely, retreat very possible.
The key indicators from the capitalist point-of-view—earnings and
productivity—stumbled in the first half of 2012 in the US. The burst of productivity
growth that resulted from the harsh discipline imposed by unemployment, wage
and benefit contraction, and speedup at the crest of the crisis produced an
equally dramatic leap in earnings and the rate of profit. For the capitalist,
this signaled “recovery,” though a recover only for the “swells.” Today the
momentum from that intensification of exploitation has dissipated—profit and
productivity growth is again slowing. The system cannot work for the
capitalists without these measures showing healthy growth and hence systemic
decline becomes an issue again for the capitalist class.
The European front of the global crisis continues to deteriorate, but
at a faster rate. GDP growth is negative through nearly all of the Euro-zone
and debt-mongers continue their aggression against bond interest rates, both
squeezing sovereign debtors and securing ever higher interest payments from
them. The most vulnerable national economies are caught in a vicious scissors’ crisis
between escaping debt and restoring growth.
The Peoples’ Republic of China, the world’s second largest economy, has
been racked by the global slowdown, dragging its growth prospects downward.
Nearly all PRC economic indices are lower than for the same period a year ago.
While domestic consumption is up, it is not at the impressive rate of a year
ago. Nor is it as balanced as in 2011. Further, bad bank debt is up, private
sector profits are down, and credit has slowed.
Other formerly vibrant emerging market economies are also slowing.
Of course the cold economic data mask the human costs of the economic
crisis—a literal death by a thousand cuts. Unemployment, job insecurity,
wage stagnation or decline, benefit cuts and cost increases, housing
foreclosures, family dependencies and a host of other blows are bleeding all
those without wealth and power.
Policy Paralysis
Choking any hope of recovery is the poverty of ideas shared by
virtually all global policy makers. During the Great Depression, and unlike
today, there were three new and radically opposed policy options that emerged
as a response to the capitalist crisis (and imperialist war). First was the
challenge of socialism. Both the isolation from the capitalist market and the
successes of agricultural realignment, industrialization, and planning kept the
sole socialist state, the Soviet Union, immune from crisis and enjoying
unprecedented twentieth-century growth and development. Most notably in Europe,
the appeal of socialism and the attraction of Communist Parties increased
dramatically, especially in politically unstable countries like Italy, Germany,
and Spain.
In response, rabid nationalism, fanatical anti-Communism, and a
corporatist state combined to establish a new form of capitalist rule: fascism.
The driving force behind the rise of fascism—its principle purpose—was
destruction of the Communist left; it was essentially a counter-revolutionary
movement. Fascism’s answer to the economic crisis was militarization, war, a
collective tribal mentality, and the dismantling of the parliamentary system.
It arose in an historic context, a historically unique moment. Though seldom
acknowledged by scholarly accounts, fascism planted deep roots in other
countries with significant working class and peasant left-wing movements, countries like
Poland, Romania, Finland, and Hungary. Equally neglected by historians is the
essential feature of anti-Communism, the feature that generates and animates
fascism wherever it reappears.
Many point to the US New Deal as a third way and a less radical
response to Communism, a moderate and modest social-democratic program that
began as a quasi-corporatist approach (the National Recovery Administration) and morphed into a public
sector-driven welfare and public employment project. That it brought relief to
millions who would have otherwise suffered needlessly is indisputable. That it
did not “solve” the crisis of capitalism is equally indisputable. As with
UK Conservative Party governance of that time, the economy stumbled along until
war and military spending stamped “paid” to the economic crisis.
Today’s ruling elites, political parties, and media pundits have no new
approaches, no new programs to face the increasingly ominous economic
challenges. They combine an embarrassing smugness with a near-religious
devotion to neo-liberal dogma. Even those advocating a tentative growth model
and elements of welfare-state relief are far removed from tackling the severity
and the systemic failures of this crisis. From the austere, fanatical market
disciplinarians like Paul Ryan and Angela Merkel to their more humane,
flexible, and reformist counterparts like Paul Krugman and Francois Hollande,
all share a confidence that private ownership and markets are indispensable to
economic development and growth. All share the belief that the tools are at
hand to steer the global economy back to the course it tracked before 2007;
they simply differ on the tools. Even the mythically idealized New Deal vision
of the state as the helmsman, directing capitalism-with-a-human-face is beyond
the imagination of our contemporary leaders.
Facing a November election in the US, the two parties strive to stoke
their respective bases with the predictable rhetorical flourishes. The
Democrats hope to convince the electorate that the economy is on the road to recovery
or, if voters don’t believe that lie, that it is Republican intransigence that
stands in the way of that recovery. The Republicans, on the other hand, want to
spin the idea that Democratic Party reckless spending stands in the way of
recovery or, if voters don’t believe that lie, that returning to the gold
standard will put capitalism back on the rails!
Answering the bell for the left is the usual motley crew that raise the
specter of fascism and the banner of the lesser-of-two-evils (they try to have
it both ways!). Never mind the lack of a Communist threat to spur fascism;
never mind that last season’s lesser evil transforms into this season’s greater
evil. As the center shifts inexorably to the right over decades of elections,
the institutional left of think tanks, journals, the trade union bureaucracy,
and NGOs knows only one answer: vote Democratic!
In France, citizens are living a déjà
vu moment: Hollande is Barack Obama with a French accent—promising change
and already sowing disappointment. His economic advisers remind the populace of
the deficit crisis at every turn, an omen of even more disappointment ahead.
Only in Greece is there a Communist “threat” and only in Greece is
there really the threat of fascism embodied in the Golden Dawn movement. Greek
Communists—the KKE—present a revolutionary program for Greece’s revival, a
program that is advocated by a mass party and is unique to Europe. ABC—the Anything But Communism left—is
represented in Greece by SYRIZA, a popular alternative that offers the false
option of militant posturing without any revolutionary sacrifice.
The current leadership of Peoples’ China seems determined to dismantle
some of the socialist safeguards that protected the country from the sharp
downturn of 2008-2009. On one hand, they want to invite greater risk by
reducing the state's semi-monopoly of the banking sector. On the other, they rely
heavily upon credit market manipulation rather than careful, balanced planning
to stimulate growth. As a result, there is disorder in investment initiatives:
unfinished projects, waste, duplication, etc. While there has been a decided
shift towards domestic consumption growth, the rate of growth has slowed
noticeably since the first of the year. The recent high-profile symbolic blow
to the Party’s left leaves many concerns about the PRC’s direction and ability
to jump-start the global economy.
In short, the ruling elites throughout the world offer only stale and
proven ineffectual policy solutions. They remain locked in the economic
thinking that dominated the pre-crisis era. Neither the audacity nor the spirit
of experimentation that characterized the Roosevelt administration has yet
emerged, a level of response that might at least take the edge off the human
cost of economic decline. Even the threat of falling off a “fiscal cliff,” as
the Federal Reserve chairman and the independent Congressional Budget Office
warn, brings no new ideas or re-thinking.
Some see this as irrational behavior on the part of rulers, but they
fail to understand that the last few years have been quite kind to elites:
profits rebounded dramatically after 2008-2009. And elites have every reason to
believe, despite the current alarm over earnings, that they will continue to
patch up their profit-making machinery and move forward thanks to the
willingness on the part of the crisis victims to continue sacrificing.
Perhaps they are right, but the masses face a slow death from a
thousand cuts; the vast majority will, as they have over the past four years,
pay an enormous price to guarantee the health and profitability of monopoly
capitalism.
The crisis continues unabated. The only question remaining is who will
pay for the destruction in its wake. Ruling elites demand that working
people—the masses—pay to restore capitalism to a healthy, profit-turning state.
They need no new ideas or new programs to secure that result.
But for the rest of us, we desperately need ideas that will allow us to
escape the crisis and the tyranny of monopoly capital. Socialism would answer
that call.
Zoltan Zigedy
zoltanzigedy@gmail.com
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