Indeed. Although somber, it is refreshing to read a historical recap
of the events leading to the current crisis. The present is not a
repeat of the past precisely because it has been shaped by the course
of events leading from then to now. The observer doesn't get to cherry
pick a perfected policy toolkit that stands above fundamental
conditions of population, natural resources and historical shifts in
the distribution of the fruits of industry. Ultimately the policy
trickster runs up against human, social and natural resource limits
that are not infinitely flexible to technical innovations. Or at least
not immediately infinitely flexible.
One of the huge (and hugely ironic) irons that the international
capitalist order pulled out of the fire in response to the crisis of
the 1970s was the reintegration of the Soviet Bloc and China into the
world economy. The demise of "actually existing socialism" was thus
one of the components of the survival of actually existing capitalism.
It would be hard to repeat that performance because, to paraphrase
Gertrude Stein's comment on Oakland, this time "there is no there
there."
On 3/25/08, Paul Phillips <[EMAIL PROTECTED]> wrote:
> Tom is quite right to challenge the prevailing view that we are not
> already witnessing many of the manifestations of depression that were
> the hallmark of the depression of the 1930s. (By the way, I wonder why
> no one has mentioned the 'great depression' in Britain after the
> financial crash in 1873 until circa 1896?) Still, that is not my point.
> We will not relive the depression of the 1930s for a number of reasons
> that have been mentioned on this list. But, equally, we will not relive
> the recovery of the '40s, '50 and '60s. The whole discussion of Fed and
> US gov't policy that I see in the financial press and on the media and
> even see on this list seems to me to be an Alice in Wonderland
> dreamscape because it assumes that once we settle the subprime debt
> problem and get the housing market back on course and get consumers
> buying (on the cuff) again, the economy can resume its upward and onward
> course without major deviations from the path of the last half-century.
> Nothing could be more delusionary because it ignores several immutable
> facts:
> global warming, peak oil, peak water, peak food (and other commodities),
> overpopulation, deforestation, etc. etc.
> Let me be more explicit. The 1930s were, as Keynes clearly pointed out,
> a period of insufficient demand, and indeed the whole canon of Keynesian
> thought pushed for supplementing aggregate demand with government
> expenditures, tax cuts, investment incentives, redistributive transfers
> – anything to increase C + I + G + (X-M) in the classic Keynesian
> formulation. But fundamental to this prescription was the underlying
> understanding of insufficient aggregate demand relative to excess
> aggregate supply. Many Marxists, including our Jim, attribute it, at
> least in part, to an 'underconsuption undertow' resulting from an
> increasingly unequal income distribution which robbed the working class
> of the ability to consume. One should also, of course, mention the
> collapse of international demand that resulted when Germany's access to
> borrowed funds to pay Britain and France its war reparations were cut
> off. Certainly, in Canada's case, it was the collapse of export markets
> for our commodities, in particular, grains, which triggered the depression.
> The 2nd World War 'solved' the problem for North America by creating
> excessive aggregate demand ('military Keynesianism') but, what is
> readily apparent, is that this massive increase in aggregate demand
> (gov't expenditures approaching 50% of GNP) was relatively easily met
> with existing resources and capital stocks. That is, there was massive
> excess capacity in both capital and in commodity resources. There was
> some rationing and inflationary pressure but, in general, macroeconomic
> balance was maintained and, when the war was over, capacity was switched
> to consumer products – and to capital goods to restock Europe --with
> relative ease. Productivity increase prompted by the war, unions and the
> 'labour-management accord' meant that for the majority industrial
> workers, income increases were sufficient to absorb the increased output
> of US industry and to the extent it was not, the government expenditure
> on the military for the 'cold war' sufficed. Hence the 'golden age',
> otherwise known as 'mass-production for mass-consumption.'
> However, this was coming to an end in the late 1960s. Though much of the
> analysis of this period stressed the re-emergence of excess capacity or,
> the other side of the coin, falling profits, little attention has since
> been paid to another phenomena that caused considerable comment among
> post-Keynesian economists at the time, the secular rise in real
> commodity prices. Though the increase was fairly widespread, it was the
> rapid jump in oil prices in 1973-4 accredited to OPEC that caught the
> attention of most. Over the next half decade or so the battle between
> capital and labour over who was to absorb the cost of oil rents paid to
> the mid-east oil barons resulted in inflation which again accelerated in
> 1978 with the second oil shock. This necessitated, from capital's point
> of view, the destruction of labour's countervailing power and the
> virtual destruction of the labour movement, at least in the capitalist
> surplus value sector. This was accomplished by monetarism and the severe
> recession of the early 1980s. It is no coincidence or accident that real
> wages have remained stagnant (or declined for the lower waged and
> minimum waged workers) since the mid-1970s. Family wages have increased
> marginally entirely due to increased female participation and longer
> hours worked by both men and women which allowed consumption to increase
> even as income distribution became more and more unequal.
> The '70s seem to me to be a kind of pivotal decade in the post-war
> period. As mentioned real commodity prices began to rise even before the
> OPEC oil crises, real wages peaked and began falling, Bretton Woods was
> abandoned, the unions entered a secular decline in the face of a
> monetarist-neoliberal response to stagflation. At the same time Ehrlich
> published his "Population Bomb" (1968) and the Club of Rome, "The Limits
> of Growth" (1972) which highlighted for the first time since Malthus the
> physical resource limits to economic expansion and population growth.
> Malthus' prediction was countered by colonial expansion opening up the
> food resources of the new world. Ehrlich's and the Meadow's projections
> were countered by North Sea and other non-OPEC oil discoveries, the
> 'green revolution' in agriculture (made possible by the expansion of
> fossil fuel availability) and a renewed expansion of mineral discovery
> and development. This made possible the demand-led recoveries from the
> '81-'83, '91-'94, and 2001-'02 recessions based on easy credit and
> monetary expansion and ridiculously low prices for oil.
> These conditions have changed since 2002. Oil and commodities are no
> longer in elastic supply (ie real commodity prices are rising along with
> resource rents redistributing income from resource poor countries which
> now includes the United States to resource rich countries and regions)
> and the 'green revolution' is failing, in part due to global warming, a
> growing shortage of water, soil degradation, rising resistance to
> pesticides, herbicides, and the rising cost of fossil fuel based fertilizer.
> This implies that we can not expect a Keynesian 'demand side' solution
> to the current slump/crisis nor that we can 'grow' (invest, consume) our
> way out of a recession-depression. It also suggests that any longer term
> solution must involve both a declining population and a major
> redistribution of (a declining) GDP, as well, of course, of a major
> change in our 'style' of living necessary to offset the increase and
> impacts of global warming, never mind of peak oil.
> Any short term 'fix' of credit and consumption expansion will
> immediately run up against rising real energy (and food) costs,
> inflation, rising emissions (and hence climate change) and, even in the
> short run, increased shortages of water (it takes thousands of litres of
> water to produce one litre of ethanol; 3 to 6 barrels of water to
> produce one barrel of synthetic crude, etc.)
> In view of these realities, I think we have to look at a quite different
> family of policies to get us out of the current recession. What is
> perhaps the most disheartening is that in the current presidential
> primary debates, one hears next to nothing from Clinbama indicating even
> an awareness of the problem. (This is not to say that in Canada there is
> any greater awareness. The Harper conservative government has its head
> firmly buried in the sand with its backside facing south.)
>
> Paul Phillips
>
> Sandwichman wrote:
>
> Nothing restores my optimism like a pep talk from "economists" about
> how they've arranged things so there can't be "another depression like
> the 1930s"!
>
> For sure there won't be another depression like the 1930s. There also
> will not be another war like World War I or even World War II. But
> there already is the Iraq War and there already is homelessness,
> "foodbanks" and social economic exclusion. No breadlines? What about
> the ones that have been there throughout the boom years? Are they
> going to abolish those? How long those folks "selling their belongings
> on eBay" will have to wait for a free terminal at the public library
> is another question.
>
>
> --
> Paul Phillips Professor Emertus, Economics University of Manitoba Home
> and Office: 3806 - 36A st., Vernon BC, Canada. ViT 6E9 tel: 1 (250)
> 558-0830 email: [EMAIL PROTECTED]
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Sandwichman
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