Crikey has another column from Guy Rundle expounding his theory that the recession in the West (dubbed by some libertarians “the Great Correction") is permanent unless the economic framework is changed (as there is no tool available to policymakers to revive growth in the west under the neoliberal model of globalisation other than letting wages fall to developing world levels, thus inciting some real class warfare - not the nonsense being peddled by demented Fox News pundits about Obama’s proposed tax increases for higher income earners in the US) - The Recovery of 2008 ? What Bloody Recovery ?.
That may well be a more astute judgment about the world than that of the pro forecasters, and more in accord with the notion of materialist economists such as Robert Brenner and David Harvey — that the West is tapped out, and cannot again grow in the neoliberal framework currently imposed on it. In its existing framework, the argument goes, neither free-market nor Keynesian approaches will work. Apply cuts to clear the balance sheet and restore confidence, and the collapse of demand will be so great that the economy will stall — and, something economists never consider, the social unrest from a new wave of poverty will destroy any nascent confidence anyway.
But they also turn on the Keynsians who believe that higher wages and public spending would refloat demand as it did in the postwar period. True, they say, but the aggregate effect, at national and regional levels, will be nothing like you hope. Local industry will not, of course, restart, the money will flow out of the economy to manufacturing sources in the East, and the endlessly promised growth in new sectors — services, etc — won’t eventuate.
Online shopping, automatic checkouts and myriad other automations (of service jobs — hamburger flippers — that it was once assumed would sop up those for whom manufacturing provided employment), narrow the employment base further, and push the poorly educated permanently out of the sphere of work. No public education or training program is in place to make them employable, and individual firms do not need to provide it.
Why is there such a critical assessment of the notion of boom and bust on the street? I suspect it has something to do with the centrepeiece of the “boom" from the ’90s onwards, discretionary consumer spending. In the postwar Keynesian boom, a sense of forward motion was around because people could see not merely consumption but production increasing. Factories reopened after the Depression and the war, cities grew based on rational lending and so on.
In this “boom", people saw not an increase in production, but its dismantling. This occurred as — via franchising, chains, increased advertising presence — consumption spread into every available area of life. Housing became not more affordable but less so, as property prices became dizzyingly unreal, beyond any notion of merely paying for permanent habitation.
In other words, the boom always looked like what it was, a bubble. Its fantastical character was hiding in plain sight. At some level people knew that they were living through an unreality, and that the best thing to do was grab as much sh-t as you can while you can (the English riots were really a repetition of that, done at high speed and in dell’arte style).
Yet even if people were willing to accept this stasis, it is not possible to do so. The Western economy is boxed in. Slash costs? You would need to drive down pay levels, abolish the legally mandated minimum wage and usher in ever greater levels of inequality — effectively restarting large-scale class conflict. Stimulate production? What would be stimulated? What remains of the economic sectors that could grow fresh roots — only low-employment “services", intellectual property rents and the like.
Stimulate consumption? You would deepen the debt reliance of Western economies whose savings levels are zero — and, culturally, simply extend a set of expectations of consumption that cannot be sustained on a mass basis. Indeed it is the near-total reliance on consumption that tells us how late in the day the ’90s/2000s boom-bubble was, how desperate its attempt to fill in the gap. Capitalism has always lived by holding something back — the fruits of people’s labour, and the promise of satisfaction chief among them. For two hundred years, the system has relied on two techniques — violence and ideology — to create compliance. After violence, the system was sold on the notion that a thrifty, modest life was a sign of virtue, that honest work was its own reward.
From the 1870s onward, Western capitalism had a demand crisis, and the modern science of demand creation — advertising, the shopping arcade/mall — dates from this time. Confined initially to a privileged class, such consumption was made general in the 1950s, and then — in the ’90s — was cut loose of any notion of rational accounting. That is surely, a very late, if not a final stage, of system maintenance by demand creation — and what makes the current era interesting is that we are now out the other side of it, and no one knows what to do about it. And everyone knows it.