The Long Downturn | NewAmerica.net Hi all,
I think Billy may have mentioned him before, but I just finished reading Robert Brenner's paper on the underlying causes of the financial meltdown, as posted on New America Foundation: http://www.newamerica.net/publications/policy/the_long_downturn here (PDF, 14pp.) Very sobering, but appears well-researched. Non-ideological, but everybody seems to come in for their fair share of the blame. It really does appear to have been a systemic problem. Worse -- all the recent villains are primarily guilty of (temporarily) covering up the *larger* long-term problem, not inventing it. > But, in the end, the inability of the banks to supply credit was only part of > the story. The deeper problem was that non-financial corporations and > households were in no position to demand it, or qualify for it. Households > had rescued the economy over the previous seven years with their historic > burst of borrowing, consumption, and residential investment. But, confronted > by plummeting home prices and the mountain of debt that they had accumulated, > as well as a sinking labor market, how could they be expected to do anything > but pull back on borrowing and spending and, by choice or necessity, to start > once again to increase their rates of saving? Non-financial businesses had > done little investing or employing, and thus minimal borrowing for purposes > of expansion, throughout the entire business cycle. How could they be > expected to start now, in the face of collapsing household demand making for > plunging profits? The economy entered a downward slide of extraordinary > intensity, in which the signals of the market told private businesses and > households, and thus financiers as well, to pull back as sharply as possible > on spending, borrowing, and lending. This finally answers the question I raised a while ago. This current crisis owes much of its current shape to the malfeasance of both government and corporations, but the reality is that they primarily did what the rest of us not-so-secretly wanted: keep the party going. If they hadn't we'd have been faced with a similar crisis, only earlier -- probably at lower cost, but also without the last decade or three of relative prosperity. Brenner claims the root cause is global overcapacity relative to "true" (versus bubble-driven) demand. Alas, he doesn't offer any solutions, at least here. He may be wrong, but at least he's trying to analyze the system as a whole, something I've seen shockingly few attempt, or even debate. Here's hoping that someone's finally paying attention... -- Ernie P. _______________________________________________ Centroids mailing list: [email protected] http://radicalcentrism.com/mailman/listinfo/centroids_radicalcentrism.com Archives at http://radicalcentrism.org/pipermail/centroids_radicalcentrism.com/
