Well said, Arthur.
Japan's effort - which we seem to be following - led to a dozen years of stagnation. I rather think the same thing will happen with us. It would be better to allow the crash, take care of those who need it, then begin the long road back to a thriving economy (and of course another crash). Harry ******************************* Harry Pollard Henry George School of Los Angeles Box 655 Tujunga CA 91042 (818) 352-4141 ******************************* From: [email protected] [mailto:[email protected]] On Behalf Of [email protected] Sent: Sunday, November 23, 2008 2:07 PM To: [email protected]; [email protected] Subject: Re: [Futurework] Consumer-led recovery, not infrastructure I don't see how the economy can go through a much needed de-leveraging and at the same time break into a new growth phase. I think the fever has to run its course before the chicken broth of fiscal stimulus is given. arthur _____ From: [email protected] on behalf of Keith Hudson Sent: Sun 11/23/2008 4:12 AM To: [email protected] 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.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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