[lbo-talk] sobering bulletin by McNally: Like We Said, It's a Global Slump
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Like We Said, It's a Global Slump David McNally

I have never accepted the postmodernist contention that contemporary
capitalism is all about smoke and mirrors. The notion that ideology
and illusion make the system go round strikes me as another mode of
reductionism – this one based on culture rather than, say, economics.
But it must be said that, at first blush, the mainstream business
media certainly offers some sustenance for the smoke and mirrors

Consider, for instance, new data showing that as of November the slump
in U.S. housing prices had surpassed that of the 1930s. For 53
consecutive months American home prices have fallen. What's more,
their 26 per cent drop on average since 2006 *exceeds* the home price
meltdown of the first five years of the Great Depression (see
here<http://www.reuters.com/article/idUSTRE70961E20110111> ).

None of this seems to faze the vast majority of business commentators,
who display a manic ability to shrug off such facts in favour of any
uptick they can find in some economic indicator or other. This is then
quickly trumpeted as proof that the long-awaited recovery is underway
and that all will soon be right with global capitalism.

So it was that on Monday Jim O'Neill, chairman of Goldman Sachs Asset
Management, proclaimed in the *Financial
“This will be the year of the U.S. comeback.” This followed on the
heels of numerous claims in the same vein that dotted my daily
newspaper last week, including one headed “The recovery is on.”
Unemployment On The Rise

Then came the latest – and devastating – jobs data for the U.S. and
the illusion was shattered (more on that below). On cue, the scramble
for a new fix of “confidence” was promptly resumed.

It helps, of course, that the business media have no idea what really
makes the economy tick. They slavishly report a hodgepodge of
undigested data linked to declarations by economists and financial
consultants who utterly failed to see either the financial crisis or
the recession coming. What drives the operation is pure and simple
feel-goodism. “The United States,” noted an insightful headline in the
French daily *Le Monde* (December 30) “wants to believe in an economic
upturn.” Indeed it does. But wishing don't make it so.

So, let's take a step back and look at a few facts. Then we'll even
entertain a bit of analysis.

Note that it's not only the housing sector that refuses to exhibit
signs of recovery. So does the all important job market.

The December job creation figures for the U.S. were dismal: 103,000
jobs generated, notwithstanding bold predictions mere days earlier of
job growth at twice that rate. Now, let's put this in some context.

Simply to restore the jobs lost during the recession (nearly nine
million) and those required by population growth during the same
period (nearly three million) would require a boom that produced jobs
at *twice* the December rate for 142 months, or nearly 12 years. That,
I repeat, is at twice the recent rate of job creation. If by some
magic we were to more than triple the recent job creation rate (to
321,000 net new jobs per month), it would still take five years to get
back to pre-recession levels (see
). Global Austerity

Of course, nothing like this is going to happen. The euro zone is
drowning in waves of cuts to social spending (welcome to the new age
of austerity) that drive up unemployment and dampen down economic
activity. Japan remains mired in a slump that has persisted for 15
years. And China, on the heels of an extraordinary stimulus program in
2009-10, is now throttling back in order to subdue inflation and
obvious bubbles in stock and real estate markets. In short, there is
no dynamic engine capable of pulling the world economy behind it.

Expect, then, no major change in the official unemployment rate (9.4
per cent in the U.S.), which remains more than twice as high as it was
in 2007. The real jobless rate, of course, is considerably higher.
Include those who have become so discouraged that they didn't look for
a job last month, and those working part-time hours because they
cannot find full-time work, and we get a combined unemployment and
underemployment rate of 17 per cent, or about 27 million U.S. workers.
For African-Americans and Latinos the real jobless rate is around 25
per cent, depression levels by any historical measure.

No amount of manic optimism is going to change this. Only real
resistance to corporate power and corporate policies can do so –
something I'll return to in future blogs. •

David McNally teaches political science at York University, Toronto
and is the author of the recently published book, *Global Slump: The
Economics and Politics of Crisis and


In tyrannos

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