imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
latest news
best of news




A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List


IMC Network:

Original Cities africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

The Political Consequences of Stagnation

by Walden Bello Monday, Sep. 20, 2010 at 12:11 AM

My apologies to T. S. Eliot, but September, not April, is the cruelest month. Before 9/11/2001, there was 9/11/1973, when Gen. Pinochet toppled the Allende government in Chile and ushered in a 17-year reign of terror. More recently, on 9/15/2008, Lehman Brothers went bust and torpedoed the global economy, turning what had been a Wall Street crisis into a near-death experience for the global financial system.

Two years later, the global economy remains very fragile. The signs of recovery that desperate policymakers claimed to have detected late in 2009 and early this year have proven to be mirages. In Europe, four million people are unemployed and the austerity programs imposed on highly indebted countries such as Greece, Spain, Italy, and Ireland will add hundreds of thousands more to the dole. Germany is an exception to the dismal rule.

Although technically the United States isn't in recession, recovery is a distant prospect in the world’s biggest economy, which contracted by 2.9 percent in 2009. This is the message of the anemic second-quarter GDP growth rate of 1.6 percent and a real unemployment above the 9.6 percent official rate if one factors in those who have given up looking for work. Firms continue to refrain from investing, banks continue not to lend, and consumers continue to refuse to spend. And the absence of a new stimulus program, as the impact of the 7 billion Washington injected into the economy in 2009 peters out, virtually ensures that the much-feared double-dip recession will become a reality.

That the American consumer does not spend has implications not only for the U.S. economy, but for the global economy. The debt-fuelled spending of Americans was the motor of the pre-crisis globalized economy, and nobody else has stepped in to replace them since the crisis began. Consumer spending in China, fuelled by a government stimulus of 5 billion, has temporarily reversed contractionary trends in that country and East Asia. It has also had some impact in Africa and Latin America. But it has not been strong enough to pull the United States and Europe from stagnation. Moreover, in the absence of a new stimulus package in China, a relapse into low growth, stagnation, or recession is very real in East Asia.

To Cut or to Stimulate

Meanwhile, the debate in western policy circles has divided into two camps. One group sees the threat of government default as a bigger problem than stagnation and refuses to countenance any more stimulus spending. The other thinks stagnation is the greater threat and demands more stimulus to counter it. At the G20 meeting in Toronto in June, the two sides collided. Germany’s Angela Merkel advocated tightening, pointing to the threat of a default by Germany’s debt-laden satellite economies in southern Europe, particularly Greece. President Obama, on the other hand, facing an intractably high unemployment rate, wanted to continue expansionary policies, though he lacked the political clout to sustain them.

To the pro-spending people, the anti-deficit people don’t have much of an argument. At a time when deflation is the big threat, fear of government spending stoking inflation is misplaced. The idea of burdening future generations with debt is odd since the best way to benefit tomorrow’s citizens is to ensure that they inherit healthy, growing economies. Deficit spending now is the means to achieve this growth. Moreover, government default is not a real threat for countries that borrow in currencies they control, like the United States, since, as a last option, they can repay their debts simply by having their central bank print more money.

Perhaps the most vocal pro-stimulus advocate is Paul Krugman, the Nobel laureate, who has become the bête noire of many on the right. For Krugman, the problem was that the original stimulus was not big enough. Yet how big is the extra stimulus needed, and what other anti-stagnation measures can the government take? On these questions Krugman betrays some unease, perhaps realizing that traditional Keynesianism has its limits: “Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.” The stark alternative to more aggressive deficit spending is “permanent stagnation and high unemployment,” says Krugman.

Krugman may have reason on his side, but reason has taken a backseat to ideology, interests, and politics. Despite high rates of unemployment, the anti-big government, anti-deficit forces have the initiative in three key Western countries: in Britain, where the Conservatives won on a platform of reducing government; in Germany, where the image of spendthrift Greeks and Spaniards financed with loans from hardworking Germans became the powerful horse Merkel’s party rode to maintain power; and in the United States.

The Obama Debacle

The anti-deficit perspective has gained ascendancy in the United States despite high unemployment for a number of reasons for this. First of all, the anti-deficit stand appeals to the anti-big government sentiments of the American middle class. Second, Wall Street has opportunistically embraced anti-deficit policies to derail Washington’s efforts to regulate it. Big government is the problem, it screams, not the big banks. Third and not to be underestimated is the reemergence of the ideological influence of doctrinaire neoliberals, including those who, as Martin Wolf puts it, “believe a deep slump would purge past excesses, and so lead to healthier economies and societies.” Fourth, the anti-spending economics has a mass base, the tea party movement. In contrast, the stimulus position is advocated by progressive intellectuals without a base or whose potential base has become disillusioned with Obama.

Still, the triumph of the hawks was not foreordained. According to Anatole Kaletsky, the economic commentator of the Times of London and someone not exactly sympathetic to the progressive point of view, the ascendancy of the anti-deficit forces stems from a major tactical mistake on the part of Obama coupled with the progressives’ failure to offer a convincing narrative for the crisis. The blunder was Obama’s taking responsibility for the crisis in a gesture of bipartisanship, in contrast to Ronald Reagan and Margaret Thatcher, who “refused to take any blame for the economic hardships.” Reagan and Thatcher devoted “the early years of their government to convincing voters that economic disaster was entirely the responsibility of previous left-wing governments, militant unions, and liberal progressive elites.”

But even more problematic, says Kaletsky, was the Obama narrative, which was a contradictory one that put the blame on greedy bankers while maintaining that the banks were too big to fail. “With banks recovering from the crisis more profitably and quickly than voters had been led to expect,” he argues in his book Capitalism 4.0, “politicians of all parties have been branded by public sentiment as stooges of the very bankers they tried to blame.” Indeed, the Democrats’ finance reform package that recently passed in Congress can only reinforce this public perception of their being coopted or intimidated by the very people they denounce. It lacks provisions with teeth : a Glass-Steagall type of provision preventing commercial banks from doubling as investment banks; the banning of trading in derivatives, which Warren Buffett called “weapons of mass destruction;” a global financial transactions tax or Tobin Tax; and a strong lid on executive pay, bonuses, and stock options.

For Kaletsky, Obama should have portrayed the economic crisis as one created “by the polarized and oversimplified philosophy of market fundamentalism, not by bankers’ and regulators’ personality flaws. By offering such a systemic account of the crisis, politicians could capture the public imagination with a post-crisis narrative than the lynching of greedy bankers — and ultimately more dramatic.” But with aides like Treasury Secretary Tim Geithner and National Economic Council Director Larry Summers, neither of whom had broken completely with neoliberalism, such a systemic account was simply not in the cards.

Toward a Progressive Strategy

The right wing has the momentum now and will probably win big in the U.S. elections in November. They will tie Obama and the Democrats so firmly to the crisis that people will forget it exploded during the reign of market fundamentalist George Bush. But with their primeval market economics, the fiscal hawks and tea partiers are unlikely to provide an alternative to what they have caricatured as Obama’s “socialism.” Allowing the economy to implode in order to be ideologically correct will invite an even greater repudiation from an economically insecure population.

But progressives should not take comfort from the dead end offered by tea party economics. They should try to understand what has led to the failure of Obama’s pallid Keynesianism. Beyond the tactical mistake of taking responsibility for the crisis and the failure to advance an aggressive anti-neoliberal narrative to explain it, the central problem that has plagued Obama and his team is their failure to offer an inspiring alternative to neoliberalism.

The technical elements of a progressive solution to the crisis have been thrashed out by Keynesian and other progressive economists: a much bigger stimulus, tighter regulation of the banks, loose monetary policies, higher taxes on the rich, rebuilding the national infrastructure, an industrial policy promoting green industries, controls on speculative capital flows, controls on outward bound foreign investment, a global currency, and a new global central bank.

The Obama administration has tried to enact some of these measures. But owing to its eagerness for bipartisanship, the ties of some of its prominent people to the economic elites, and the failure of key technocrats like Summers and Geithner to break with the neoliberal paradigm, it failed to present them as elements of a broader program of social reform aimed at democratizing control and management of the economy.

For progressives, the lesson to be derived from the stalling of Obamanomics is that technocratic management is not enough. Keynesian moves must be part of a broader vision and program. This strategy must have three key thrusts: democratic decision-making at all levels of the economy, from the enterprise to macroeconomic planning; second, greater equality in the distribution of wealth and income to make up for lower growth rates dictated by economic and environmental constraints; and third, a more cooperative, as opposed to competitive ethic, in production, distribution, and consumption.

Moreover, such a program cannot simply be dished out from above by a technocratic elite, as has been the fashion in this administration, one of whose greatest mistakes was to allow the mass movement that brought it to power to wither away. The people must be enlisted in the construction of the new economy, and here progressives have a lot to learn from the Tea Party movement that they must inevitably compete against in a life-and-death struggle for grassroots America.

Nature Abhors a Vacuum

Krugman predicts that the likely electoral results in November “will paralyze policy for years to come.” But nature abhors a vacuum, and the common failure of both market fundamentalists and technocratic Keynesians so far to address the fears of the unemployed, the about-to-be unemployed, and the vast numbers of economically insecure people will most likely produce social forces that would tackle their fears and problems head-on.

A failure of the left to innovatively fill this space will inevitably spawn a reinvigorated right with fewer apprehensions about state intervention, one that could combine technocratic Keynesian initiatives with a populist but reactionary social and cultural program.There is a term for such a regime: fascist. As Roger Bootle, author of The Trouble with Markets, reminds us, millions of Germans were disillusioned with the free market and capitalism during the Great Depression. But with the failure of the left to provide a viable alternative, they became vulnerable to the rhetoric of a party that, once it came to power, combined Keynesian pump-priming measures that brought unemployment down to 3 percent with a devastating counterrevolutionary social and cultural program.

Fascism in the United States? It’s not as far-fetched as you might think.

Report this post as:

Listed below are the 10 latest comments of 1 posted about this article.
These comments are anonymously submitted by the website visitors.
what? Mho Monday, Sep. 20, 2010 at 7:24 AM

Local News

Change Links September 2018 posted S02 10:22PM

More Scandals Rock Southern California Nuke Plant San Onofre A30 11:09PM

Site Outage Friday A30 3:49PM

Change Links August 2018 A14 1:56AM

Setback for Developer of SC Farm Land A12 11:09PM

More problems at Shutdown San Onofre Nuke J29 10:40PM

Change Links 2018 July posted J09 8:27PM

More Pix: "Families Belong Together," Pasadena J02 7:16PM

"Families Belong Together" March, Pasadena J02 7:08PM

Short Report on the Families Belong Together Protest in Los Angeles J30 11:26PM

Summer 2018 National Immigrant Solidarity Network News Alert! J11 6:58AM

Watch the Debate: Excluded Candidates for Governor of California M31 5:20AM

Change Links June 2018 posted M28 7:41AM

The Montrose Peace Vigil at 12 Years M22 8:01PM

Unity Archive Project M21 9:42AM

Dianne Feinstein's Promotion of War, Secret Animal Abuse, Military Profiteering, Censorshi M17 10:22PM

CA Senate Bill 1303 would require an independent coroner rather than being part of police M10 9:08PM

Three years after OC snitch scandal, no charges filed against sheriffs deputies M10 8:57PM

California police agencies violate Brown Act (open meetings) M02 8:31PM

Insane Company Wants To Send Nuke Plant Waste To New Mexico A29 11:47PM

Change Links May 2018 A27 8:40AM

Worker-Owned Car Wash on Vermont Closed A27 5:37AM


lausd whistle blower A11 6:58AM

Website Upgrade A10 10:02AM

Help KCET and UCLA identify 60s-70s Chicano images A04 8:02PM

UCLA Luskin: Casting Youth Justice in a Different Light A02 6:58PM

Change Links April 2018 A01 6:27PM

More Local News...

Other/Breaking News

Paraphysique de psychosomatique S22 6:58AM

Chuck Grassley: Women Abusing, Animal Murdering, Illegal War Supporting Criminal S22 2:58AM

Finance Capitalism and the Digital Economy S21 4:45PM

Muselières syndicales, muselières patronales S21 7:19AM

Jeff Bezos, Amazon, The Washington Post, Whole Foods, Etc S21 2:50AM

Why Choose Nut Milk Over Cows' Milk S21 1:01AM

Antrhopocène, le grand effondrement S19 9:53AM

Abolir l'économie S18 11:18AM

The Dictatorship of Corporations S17 5:26PM

18 Lethal Consequences Of Hunting S17 3:13PM

Paraphysique de l'outplacement déontologue S15 6:51AM

Shopping du bashing S14 8:42AM

After Lehman Brothers, Experts Say Global Financial Crisis Can Happen Again S13 8:28PM

“Animaniacs in Concert!” Starring Voice Legend Rob Paulsen S12 9:30PM

Probabilités de fin d'humanité S12 6:49AM

Florida Area of Migrant Farmworkers Denied Right to Construct Health Clinic near NaplesCIW S11 2:57AM

Steer clear of work morality! S09 12:10PM

The Shortwave Report 09/07/18 Listen Globally! S06 11:23PM

August 2018 Honduras Coup update S06 12:28PM

Brett Kavanaugh Filled The 5th Circuit With Execution Judges S06 6:14AM

Augusta Georgia Woman Gets 5 Year Prison Sentence for Writing About Russians Crime Acts S05 8:29AM

Paraphysique de contextualité S05 8:29AM

Crisis Regulation in Global Capitalism S03 3:39PM

Ex-voto de réification S03 10:24AM

Please Oppose Warmonger, Execution and Torture Supporting Bush Operative Brett Kavanaugh A31 10:45PM

Paraphysique d'exploitation occultation A31 10:24PM

Ryan Zinke Is Charging Taxpayers For A Trophy Hunters' Council A31 2:10PM

Is the Financial Crash 2.0 Coming? A31 10:07AM

More Breaking News...
© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy