Sandwichman wrote:
In advance I will christen the first phase of the Obama
administration's economic policy as "the phony war." It will pursue a
moderate, conventional path of "economic stimulus" and it will fail.
Not only is the recession "not over yet," it has hardly begun.
On the heels of year-after-year-after-year of government deficits, one
more "stimulus package" will be like pushing on a string. Unemployment
will continue a relentless upward creep. The only way to stop it will
be through direct measures, not roundabout fiscal ones. That means
either a huge public works program or "work-sharing".
http://www.monthlyreview.org/mrzine/wolff061108.html
Policies to "Avoid" Economic Crises
by Rick Wolff
Recently, economist Joseph Stiglitz called the current crisis
"avoidable." He blamed it on "ideology, special-interest pressure,
populist politics, and sheer incompetence." In tune with the norms of
his profession, he proposed "policies" to fix the problem. Debates over
the worsening economic crisis increasingly turn on which "policies" to
use to stop, reverse and "avoid" them. Conservatives and liberals again
rehash their old debates over their different policies as McCain and
Obama did. The crisis will deepen some more, and then a compromise
policy will emerge from the new President and Congress aimed to "solve
the problem." Instead, we ought to question the very idea of policy;
that questioning would be a real change from past practice.
The problem is this: today's economic crisis was caused by an immense
accumulation of factors, far too many for any policy to manage. Here is
a partial list. Workers' wages stopped rising since the 1970s;
thereafter, they accepted rising loans instead of rising wages as
compensation for their greater work and productivity. Corporate profits
exploded because they got ever more output per worker (via
computerization, etc.) while not paying their workers any more.
Corporations deposited their rising profits in banks who then loaned
part of them back to workers, another part to investors for stock and
then real-estate speculations, and yet another part to businesses for
mergers. Other factors included low taxes, expensive wars, and
resulting US government deficits. Then, too, China's industrialization
flooded the US with inexpensive products as that country accumulated our
massive dollar payments for them. China then lent those dollars back
into the US to finance the government's deficit and further increase
banks' loanable funds. All these very different factors helped build up
the house of credit that has now crashed the entire economy.
Still other factors also shaped the crisis. New mortgage brokerage
practices and credit card promotions induced more debt than borrowers
could afford. Competition among rating companies yielded incorrect
assessments of financial risks of trillions in newly invented financial
instruments (derivatives). This led to staggering global misallocations
of scarce resources. Homebuilders' competition yielded excess
construction. The Federal Reserve increased the money supply and
lowered interest rates to offset the dot.com bubble burst in 2000.
Nor is this list of factors even nearly complete. No policy emerging
from deals between conservative and liberal legislators beset by armies
of lobbyists could ever begin to control or manage the immense diversity
of the causes of the current crisis. Indeed, no policy of any kind --
whether imposed by a dictator, produced by democratic consensus, or
anything in between -- can "fix the problem." No policy ever did.
There are just far too many causes of crises that one can see and list
-- and too many more not yet seen.
The whole idea of policy is bizarre. The "right policy" represents an
absurd claim that this or that law or regulation can somehow undo the
many different factors that cumulatively produced this crisis. Policies
are "magic potions" offered to populations urgently demanding solutions
to real problems. Whether cynically advocated for ulterior motives or
actually believed by the politicians, promoters, and professors
themselves, policy is the secular cousin of religion.
These days, the conservative policy amounts, as usual, to "let the
private economy solve the problems" and "minimize state intervention
because it only makes matters worse." Conservatives protect the
freedoms of private enterprise, market transactions, and the wealthy
from state regulations and controls and from taxes. The liberals'
policy, also as usual, wants the state to limit corporate behavior,
control and shape market transactions, and tilt the tax system more
toward benefiting middle and lower income groups.
Both policies can no more overcome this economic crisis than they
overcame past crises. Historically, both conservative and liberal
policies fail at least as often as they succeed. Which outcome happens
depends on all the factors shaping them and not on the policy a
government pursues. Yet, both sides endlessly claim otherwise in
desperate efforts at self-justification. Each side trots out its basic
philosophy -- dressed up as "a policy to achieve solutions."
Conservatives and liberals keep debating. Today's crisis simply
provides an urgent sort of context for the old debate to continue. Each
side hopes to win converts by suggesting that its approach will "solve
the economic crisis" while the other's approach will make it worse.
Thus the liberals displaced the conservatives in the depths of the Great
Depression, the reverse happened in the recession of the 1970s, and the
liberals may now regain dominance. In no instance were adopted policies
successful in solving the crises in any enduring way. The unevenness
and instability of capitalism as a system soon brought another crisis
crashing down on our economy and society.
The basic conservative message holds that the current economic crisis is
NOT connected to the underlying economic system. The crisis does NOT
emerge from the structure of the corporate system of production. It is
NOT connected to the fact that corporate boards of directors,
responsible to the minority that owns most of their shares, make all the
key economic decisions while the enterprise's employees and the vast
majority of the citizenry have to live with the consequences. The very
undemocratic nature of the capitalist system of production is NOT
related to crisis in the conservative view. The basic liberal message
likewise disconnects today's crisis from the capitalist production
system. Rather, each side insists that all crises would have been and
would now be "avoidable" if only the right policy were in place.
Conservatives and liberals share more than a careful avoidance of
connecting the crisis to the underlying capitalist system. They are
also complicit in blocking those who do argue for that connection from
making their case in politics, the media, or the schools. While
conservative and liberal policies do little to solve crises, the debate
between them has largely succeeded in excluding anti-capitalist analyses
of economic crises from public discussion. Perhaps that exclusion --
rather than solving crises -- is the function of those endlessly
rehashed policy debates between liberals and conservatives.
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