[OPE] Recovery? More Gramscian musings

The OECD forecasts show a third-quarter return to annualized
quarter-on-quarter growth in the United States of 1.6 percent,
1.1 percent in Japan, and 0.3 percent in the 16-country euro zone,
led by its two largest economies, Germany and France.
http://www.reuters.com/article/newsOne/idUSTRE5821Z420090903?pageNumber=2&virtualBrandChannel=0

US house prices will fall just 3 percent more before stabilizing,
or 33 percent from the peak in mid-2006, based on the median forecast.
Thirteen economists, or about a third of the 41 polled, said the trough
has already been reached while 27 of them said the bottom would be
hit within a year. Just one said it would take up to two years.
http://www.reuters.com/article/newsOne/idUSTRE5803J920090903

This refers not really to a recovery so much but to where the lowest
point in economic activity is thought to be.

The propertied US middle class has quite significant reserves (savings) but
they aren't spending them, that's the problem, they're very cautious.
Previously house prices rose so fast you could capitalize on it, but since
that time US property values have fallen, on average by about a third, in
Europe less. Within the next half year, the US real estate market will start
to recover, there will be somewhat higher output growth, and unemployment
will start to climb slowly out of the trough. The US is set to recover real
GDP
growth faster than the EU and Japan, and probably the USD will
rise somewhat against the euro.

However in the medium term (several years) real GDP growth (net output
growth) will remain rather weak or sluggish in the Triad, a trend which
becomes even more marked if you take the "non-productive" components out of
the GDP aggregate - I think, roughly speaking, in the medium term, we're
talking on average about half the growth of the previous era in the Triad,
and a doubling of the official unemployment rate. In good part that's
because a whole chunk of credit money, and the income generated by it, has
disappeared, and governments are in no position to reflate the economy
(notwithstanding odes to Keynes), they maintain a more conservative stance.
You can still have an expansion of bank credit, but that involves mainly the
financial institutions, states and a rather small group of rich people, not
the
whole working population.

What that means is simply that there is a fraction of the workforce for whom
there is no recovery because they can't get work or any steady income; their
jobs and incomes depended on the availability of a margin of plentiful cheap
credit. The rich were hit quite hard, they might have lost a third of their
financial assets, but they can recover a lot of that as soon as stock market
activity picks up again and through judicious financial management. But for
a lot of ordinary workers worldwide, there is no recovery in sight. Plus,
the credit crunch will rumble on for some time because there are a lot more
bad debts in the system, money that cannot be repaid - a fraction of the
population, but not all, lived essentially on unsustainable debts.

What's most interesting intellectually about this recession so far is how
far off the forecasts and analyses - left and right - were from the reality,
even among highly respected authorities - their empiricist models and their
idealist, unresearched theories were quite inadequate in coping with such
large economic fluctuations, and explaining them. There are few good
theories about how the economy really "works" anymore.

In October last year we discussed the concept of market confidence.
The most fearful thing that was learnt in this recession was that very large
numbers of people who actually have good money to engage in trade, can just
stop trading within a very short space of time, and then if people don't
trade, there is no market; and if there is no market, you can't do business,
simple as that. And so, reporting bad economic news has become bad for
business, because it erodes market confidence. The effect of that is that
people who do not sing the praises of the market, are looked upon even more
unfavorably than before, it's sort of like either you are in favour of the
market or you are not, if you're not with us you are against us.

But to assess the social implications of the recession, really you need to
put things in a longer time-frame. If e.g. real wages are curbed or even
fall, in part due to a durable increase in unemployment, then there are
limited possibilities for significant market expansion: integrating more
people in markets (e.g. East Asia), facilitating upward job mobility, or
rich people spending more, or governments spending significantly more, or
exports etc. In the Triad countries, you only have as a main possibility
rich people spending more - but the problem there is that they will not
necessarily spend money at home, they might spend it in another country - or
increased exports. So then you need more globalisation and neoliberalism,
not less. That is why economists are so enthusiastic about China and warn
against protectionism. The main problem with exports to the BRICs or other
emerging markets is that although large numbers of people are becoming
integrated in markets, their incomes are vastly below those of the Triad,
and therefore there are real limits to what you can export to them.

The main limit globally is actually capitalist competition itself, since
each country tries to reduce its costs and increase its earnings, resulting
in sluggish growth mostly. The main exceptions have been in "emerging
markets" where the state exerts its power to direct a development strategy
using tax revenue and its capacity to borrow, in flat contradiction to the
neoliberal ethos. In these cases, the polity is able, for whatever reason,
to assert the general interest over private interests.

The other main limit consists of disintegrating social
structures - integrating people into markets, or more fully integrate them,
means they have to give up traditional rights and obligations, and that they
have to accept very large disparities in income and wealth in their country.
Effectively they are being asked to cooperate in a scheme which is just not
in their own immediate interest. Then if you cannot stabilize social systems
and ensure a profitable system of property rights, then you can jump up and
down all you like, but there will in fact be little market expansion.

Rosa Luxemburg has quite an interesting insight: "Imperialism is the
political expression of the accumulation of capital in its competitive
struggle for what remains still open of the non-capitalist environment." The
point there is that the environment - internal or external - is
non-capitalist, and that to make it capitalist, you have to do all sorts of
things which have nothing to do with economics, but with the ability to get
people to cooperate and compete in a capitalist way, which is more a
political and cultural matter, a matter of social relations. The main
ideological force here is not solid economic theory but pop
propaganda.

Initially for example, the US bourgeoisie thought that Islam was
an enemy of capitalism, but now they've realised much more you can
actually co-opt the Islamic world, even although it remains a difficult
project...

Jurriaan

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Received on Thu Sep 3 16:27:01 2009