Ed,
At 08:50 23/11/2008 -0500, you wrote:
Here we go again, Keith. From stuff I've seen in the media recently, an
increasing number of consumers are very concerned about being able to pay
their rent and feed their kids.
No parent(s) these days need ever be without a roof over their heads or not
be able to feed themselves and their children unless they spend their
income on something else beforehand. Even in a severe economic depression
nobody has been forced to starve or sleep in the streets for the past 100
years in the developed world. All developed governments could easily feed
and house all the poor,
Status goods are the last thing on their minds
You've missed my point. A real economic recovery is going to require at
least the same spending power as was evident, say, six months ago before
everything went over a cliff. There's going to have to be some real
incentive way beyond Keynesian drip-feed to get spending power up again.
Besides, a great deal of the former spending power was inflationary. It was
either fuelled by credit cards, or by false house values (themselves
inflated by easy wholesale money from the investment banks, in turn fuelled
by pseudo-money in the form of paper derivatives).
--- well, except for poor teenagers, who'll do anything, even kill, to
get somebody's ipod. It's not classic Keynesianism that's needed, nor
the bailout of General Motors, but a lot could be done by putting people
to work on fixing up our cities and helping people to open and maintain
useful small businesses.
I agree. If I were Obama I would spend $500 billion, let us say, on
establishing a brand new set of banks -- say about 20 of them in America.
They would be subject to two conditions only: (a) they could only lend to
individual entrepreneurs or to businesses employing up to 20 people; (b)
they could only lend up to the limit of their assets (that is, a 100%
reserve ratio).
By useful I mean corner stores and shops that people can easily walk to
instead of having to drive to the nearest ultra-huge big box. We've had
two corner stores shut down in our neighborhood recently, and it's made a
huge difference when it comes to simply buying some milk or a loaf of
bread. One reason for the shut down is that a huge big box has opened
within easy driving distance. Another is theft --- kids holding up the
store so that they can buy an ipod or another consumer gadget or for
money to buy some food. One of the storekeepers decided to just plain
quit because running the store became just too dangerous.#
Yes, we have had the same here. We had a wonderful cluster of seven shops
that 15 years ago supplied everything we needed on a daily basis. Everybody
round here complains that they've shut down, but they themselves have been
responsible for this because they've shopped for their main bulk of goods
at a supermarket elsewhere. It's part of a complex socio-economic
revolution that affects all developed societies whether with left-, right-
or centre-governments. You can't blame anything or anyone except the small
minority who have innovative minds which causes the whole machine to rumble
forwards (even if only in fits and starts!).
Ed
----- Original Message -----
From: <mailto:[EMAIL PROTECTED]>Keith Hudson
To: <mailto:[email protected]>[email protected]
Sent: Sunday, November 23, 2008 4:12 AM
Subject: [Futurework] Consumer-led recovery, not infrastructure
Keynesianism won't work in the Western world for one major reason.
Economic growth (or recovery in the present case) has always been driven
by status aspirations by the rich and the middle class first -- and there
is no new tranche of suitable consumer goods awaiting their attention at
the moment. We only have embellishments of the consumer goods that were
invented in the 1920s and 30s. (Even the one big exception -- "serious"
modern art is now tumbling as a manifestation of high status and
worthwhile investment .)
Instead, a great many of the nouveau riche and their financial
institutions have already been disembowelled by the financial crisis. The
middle class generally will not at all be responsive to the idea that if
they spend now they are going to be more heavily taxed later if normal
economic throughput is resumed.
There is already evidence that some sort of world-wide initiative -- such
as a new Bretton Woods agreement on trade -- a sort of super-Doha round by
the WTO -- is not on the cards in the immediate future. What we have seen
so far are attempts at (or discussion about) recovery plans at
regionally-sized chunks only -- in America, the European Union and China
-- and these are likely to intensify as protectionist devices -- the devil
take the hindmost -- unless some miracle occurs at an international level.
Government-led infrastructure spending won't succeed in America or the
European Union for the reason given in my first paragraph -- that is, that
the vast majority of their populations is already satiated by the present
tranche of consumer goods and there is nothing new that people are going
to work hard and save hard for. Better railways and roads might help
recovery in China because two-thirds of its population outside of the
coastal provinces still have very little by way of adequate consumer
goods. Indeed, one third of China (around 400 million people) still live
in the direst poverty. However, even in China the prospects are not good.
Scores of millions of factory workers who previously sent back much of
their earnings to their families in the rural interior -- the major
redistributive machine of China's recent recovery -- are now having to
return to poverty conditions themselves as their places of work close down
in their thousands.
The only new tranche of consumer goods that I can foresee on the horizon
are not strictly goods but services. These are in health and education.
And these will be motivated by an even more powerful instinct than
status-seeking -- individual survival -- and that of his/her 0.90 child
(the average in the developed world).
Health and education are already being served by the two disciplines that
appeal to the brightest young scientific minds -- genetics and neurology
-- just as the consumer goods of the last century were the product of
geniuses in engineering and physics of the preceding century.
But how long will it be before a sufficient number of precise services
will be deliverable? They are likely to be less capital intensive than the
present crop of consumer goods and, because of the Internet, they will be
marketed more efficiently and rapidly than anything heretofore. But we are
still in the early days of these technologies and we simply don't know
what form their goods are going to be and when they are going to be
marketable. However, they will be sold to the rich and the middle class
first before proceeding southwards and it's only in this way that any sort
of economy recovery can proceed.
And will governments have any role in this recovery? Hardly. Governments
always lag behind new developments. Infrastructure spending is always
shaped by the consequences of consumer spending and doesn't precede it.
Besides, a high proportion of research in neurology and genetics is
already being financed by private endowments rather than governments. Once
the first few products start taking shape then business will dive in first
to develop them in order to take advantage of the initially high profit
margins -- and thus re-investment potential -- that will be available.
Goodness knows, business needs this fillip because, apart from the
temporary fling of the now-extinct investment banks, most manufacturing
and commerce were getting by with only the flimsiest of profit margins
even during recent years of "prosperity".
All this is probably a generation away as the present recession grinds on
into a depression, but that's only my guess. I would be delighted if I'm
proved wrong.
Keith Hudson, Bath, England, <www.evolutionary-economics.org>,
<<http://www.amazon.com/dp/1906557020/>http://www.amazon.com/dp/1906557020<http://www.amazon.com/dp/1906557020/>/>
----------
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Keith Hudson, Bath, England, <www.evolutionary-economics.org>,
<<http://www.amazon.com/dp/1906557020/>http://www.amazon.com/dp/1906557020<http://www.amazon.com/dp/1906557020/>/> _______________________________________________
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