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From: Commentary Subscribers [[email protected]] on behalf of
Becky Dunlop [[email protected]]
Sent: Saturday, January 01, 2011 3:46 PM
To: [email protected]
Subject: Corrected Version of Immanuel Wallerstein's Commentary No. 296
Commentary No. 296, Jan. 1, 2011
"End of the Recession? Who's Kidding Whom?"
The media are telling us that the economic "crisis" is over, and that the
world-economy is once more back to its normal mode of growth and profit. On
December 30, Le Monde summed up this mood in one of its usual brilliant
headlines: "The United States wants to believe in an economic upturn." Exactly,
they "want to believe" it, and not only people in the United States. But is it
so?
First of all, as I have been saying repeatedly, we are not in a recession but
in a depression. Most economists tend to have formal definitions of these
terms, based primarily on rising prices in stock markets. They use these
criteria to demonstrate growth and profit. And politicians in power are happy
to exploit this nonsense. But neither growth nor profit is the appropriate
measures.
There are always some people who are making profit, even in the worst of times.
The question is how many people, and which people? In "good" times, most people
are seeing an improvement in their material situation, even if there are
considerable differences between those at the top and bottom of the economic
ladder. A rising tide raises all ships, as the saying goes, or at least most
ships.
But when the world-economy becomes stagnant, as the world-economy has been
since the 1970s, several things happen. The numbers of people who are not
gainfully employed and therefore receiving an income that is minimally adequate
goes up considerably. And because this is so, countries try to export
unemployment to each other. In addition, politicians tend to try to deprive the
elderly retired persons and the young, pre-working-age persons of income in
order to appease their voters in the usual working-age categories.
That is why, appraising the situation country by country, there are always some
in which the situation looks much better than in most others. But which
countries look better tends to shift with some rapidity, as it has been doing
for the last forty years.
Furthermore, as the stagnation continues, the negative picture grows larger,
which is when the media begin to talk of "crisis" and politicians look for
quick fixes. They call for "austerity," which means cutting pensions and
education and child care even further. They deflate their currencies, if they
can, in order that they reduce momentarily their unemployment rates at the
expense of some other country's employment rates.
Take the problem of government pensions. A small town in Alabama exhausted its
pension fund in 2009. It declared bankruptcy and ceased paying its pensions,
thereby violating state law which required it to do so. As the New York Times
remarked, "It is not just the pensioners who suffer when a pension fund runs
dry. If a city tried to follow the law and pay its pensioners with money from
its annual operating budget, it would probably have to adopt large tax
increases, or make huge service cuts, to come up with the money. Current city
workers could find themselves paying into a pension plan that will not be there
for their own retirements."
But this is the looming problem for every state within the United States who,
by law, must have balanced budgets, which means they cannot resort to borrowing
to meet current budgetary needs. And there is a parallel problem for every
nation within the euro zone who cannot deflate their currencies in order to
meet their budgetary needs, which has meant that their ability to borrow leads
to exorbitant unsustainable costs.
But what, you may ask, about those countries where the economy is said to be
"booming" such as Germany and most particularly, within Germany, Bavaria -
called by some "the planet of the happy." Why then do Bavarians "feel a
malaise" and seem "subdued and uncertain about their economic health"? The New
York Times notes that "Germany's good fortune...is widely viewed (in Bavaria)
as having come at the expense of workers, who for the past decade have
sacrificed wages and benefits to make their employers more competitive....In
fact, part of the prosperity comes from people not getting the social security
they should have."
Well then, at least, there is the good example of the "emerging economies"
which have been showing sustained growth during the last few years - especially
the so-called BRIC countries. Look again. The Chinese government is very
concerned about the loose lending practices of Chinese banks, which seem to be
a bubble, and leading to the threat of inflation. One result is the sharp
increase in layoffs in a country where the safety net for the unemployed seems
to have disappeared. Meanwhile, the new president of Brazil, Dilma Rousseff, is
said to be disturbed by the "overvalued" Brazilian currency amidst what she
sees as the deflating U.S. and Chinese currencies that, together, are
threatening the ability of Brazilian exports to be competitive. And the
governments of Russia, India, and South Africa are all facing rumbling
discontent from large parts of their populations who seemed to have escaped the
benefits of presumed economic growth.
Finally, and not least, there are the sharp rises in the prices of energy,
food, and water. This is the result of a combination of world population growth
and increased percentages of people demanding access. This portends a struggle
for these basic goods, a struggle that could turn deadly. There are two
possible outcomes. One is that large numbers of people will reduce the level of
their demand - most unlikely. The second is that the deadliness of the struggle
results in a reduced world population and thereby fewer shortages - a most
unpleasant Malthusian solution.
As we enter this second decade of the twenty-first century, it seems improbable
that by 2020 we shall look back on this decade as one in which the "crisis" was
relegated to a historical memory. It is not very helpful to "wish to believe"
in a prospect that seems remote. It does not help in trying to figure out what
we should do about it.
by Immanuel Wallerstein
--
Becky Dunlop
Secretary, Fernand Braudel Center
Binghamton University
PO Box 6000
Binghamton NY 13902
http://fbc.binghamton.edu<http://fbc.binghamton.edu/>
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