In [6096] Antonio wrote: > I am thinking that the answer to this question might be useful for how we > think about the causes and the possible ways out-of/into the crisis. Well, let's begin by looking at what has been already tried to forestall and then recover from the crisis: a) 'tax cuts': although every taxpayer received a nominal refund check from the US government, Bush's tax cut was explicitly motivated as a 'supply-side' tax cut with the intention of stimulating investment and aggregate supply. Only a few weeks ago, the administration was claiming that the 'jury is still out' on whether the tax cut promoted economic growth sufficiently. However, more recently even administration official are recognizing it has not had the desired affect. Why didn't the tax cut work as planned? Perhaps it was due in part to the implicit assumption of Say's Law by the policy-makers. Yet, expect Bush to propose a new round of S-side tax cuts. b) in anticipation of what the crisis might mean to working-class households, Congress passed legislation preventing consumers from declaring bankruptcy as a way of evading credit card debt. OTOH, Congress has passed legislation that offers large corporations in some key sectors (e.g. airlines) financial assistance to forestall the possibility of those firms 'going under'. c) Federal Reserve cuts in interest rates intended to stimulate borrowing, investment, and aggregate supply. Yet, even the Fed has noted repeatedly that the interest rate cuts have not worked in the manner anticipated. Why not? Well ... why would firms increase borrowing even at lower interest rates if they already have unsold inventory, excess capacity, and poor expectations of profitability? It appears that the Fed, like 'the classics', assumed Say's Law. d) More recently (post-9/11), we have seen the emergence of what some have called 'military Keynesianism'. For firms which are defense contractors, this increase in government spending is good news. Other firms could be expected to benefit by the 'multiplier effect'. What effect this will have on levels of consumption spending, disposable income, and the size of the industrial reserve army is unclear (at least to me) at this point. It also appears that the US government (Democrats and Republicans alike) have recognized that d) will require a budget deficit. One thing is painfully obvious -- all talk about what to do with the budget 'surplus' has ended. What will be the consequences of a renewed budget deficit? Obviously, all those groups that could have benefited by 'the surplus' are negatively affected (when was the last time you heard discussion about health care reform?). How will this affect investment? Recall the numbers that Fred cited about firm indebtedness. Yet, if there is increased borrowing by the government won't this lead to an increase in the demand for loanable funds and thereby increased interest rates? Yet, firms are ill able at present to handle a higher debt burden. OTOH, d) might lead to other benefits for US firms -- e.g. lower costs for raw materials. Yet, even if that was to happen, it might very well take a long time before US capitalists could see these benefits. The expansion of the US economy in the 1990's was fueled, in part, by the expectation by US firms that new markets would be opened around the world. Yet, even the most ardent fans of the 'failure of communism' must now admit that projections about demand in China, Eastern Europe and (especially!) the nations that were formerly part of the USSR were *greatly* exaggerated. Nor is there any indication that this situation will change any time soon. Nor is there any indication, given the world-wide nature of the crisis, to expect US-produced exports to increase rapidly. Indeed, the strengthening of regional trade unions (e.g. the European Union) might make commodity exports more difficult and and the on-going shift towards 'outsourcing' by US-based corporations weaken domestic employment and lower GDP. To connect this to the issue that Fred raised: for firm profitability to increase, how will the state attempt to lower the debt burden of US firms? My guess is that the government will offer more and more 'bailouts' to US corporations and thereby transform private debt into public debt (recall the earlier discussion with Gary). Is it too early to believe that this will lead to a renewed round of austerity measures by the government? In New York, we have already been told by the Governor and Mayor to expect layoffs of government workers and cutbacks in government services. Yet, if this happens on the national level, won't this weaken employment, consumption, and demand? Again there is the issue of Say's Law. An additional strategy to overcome the crisis (that unfortunately we already observed in the 1980's) is a (renewed) 'concessions movement'. I.e. firms will plead poverty with their workers and unions (and if they are losing enough money might even be willing to 'open the books') and demand 'give-backs' (e.g. lower wages, decreased benefits, increased 'co-payment' by workers for benefits). At present, the trade union movement is not in a very good position to fight these demands (especially given the upsurge in patriotism by their membership). De-regulation will, most assuredly, be part of Bush's plan to stimulate the economy (and the Democrats, I believe, will basically give him what he wants). This might mean, for instance, mining and oil drilling in national parks as a means of increasing national 'self-sufficiency'. I expect that there will also be a renewed push to open more nuclear power plants for the same reason. What can the working class do to effectively fight off these attacks? Unfortunately, working-class solidarity and militancy are in short supply these days. Indeed, the US working class seems in a more weakened and more divided position than at any time in recent memory (a major increased division is the increase in hostility towards foreign-born workers especially from the Middle East and Muslims in general). So long as that is the case, then the 'crisis' will be overcome in a manner dictated by capital and the state. Or have I missed something? In solidarity, Jerry
This archive was generated by hypermail 2b30 : Fri Nov 02 2001 - 00:00:04 EST