It is irritating to the point of absurdity to read or listen to economists and journalists dealing with economic issues, especially in political economy and macro-economics, trying to predict the future as though they have a crystal ball. Are economic predictions, even those made with the aid of computer models, any more credible than 'psychic' predictions, or should governments, business, labor unions, and academics do some serious reflection about how to create a social and economic safety net for the next great depression? Economic predictions of the next recession or the next mega growth trend in a national, regional, or global scale notwithstanding, there are theoretical and empirical indicators that lend themselves to analysts trying to assess how and why the next recessionary or expansionary cycle in the market economy would evolve.
We do know some structural features about capitalism as it has evolved since the Renaissance when it was in its embryonic phase under mercantile capitalism spurred on by conversion from subsistence to commercial agriculture and long-distance trade. One of structural feature is that capitalism entails perpetual quest for expansion; but that does not mean endless economic growth as its apologists try convince the public ever since Adam Smith. While the market economy strengthens the capitalist class, it does not mean a steady line of upward progress for the rest of society. or wealth of nations; on the contrary, social equality and social justice along with uneven international economic growth and development are sacrificed for capitalism to function.
Rooted in capital accumulation and social hierarchy, the capitalist system operates in small and larger cycles of expansion and contraction, small expansionary cycles that may last 3-6 years, followed by contraction that may last 2-3 years - economic cycles may last longer and should not be identified strictly with business cycles, though the two are not necessarily mutually exclusive. There are larger expansionary cycles as in the 1880s, followed by contraction of the 1890s - 1920s followed by the 1930s. Within the expansionary cycles there are small downturns just as within the contracting cycles there are mini expansions. There are also mega expansionary and recessionary cycles that last for many decades, if not more than a century.
Variables that impact expansion and contraction are mainly found in the market itself that has the capacity to absorb what is produced. The state also has a catalytic role, for without its intervention through central banks and fiscal policy, as well as advocating for international market expansion, capitalism cannot survive, especially in today's world of welfare capitalism in some countries, quasi-statism in others, and a mix of both in others. The state has always been the key player in the market economy that has never wanted state intervention except when it came to serving its interests in expansion or rescue.
Besides social polarization inherent in the market economy, uneven geographic development and asymmetrical (unfair) trade relationships between the strong national economies and the weaker ones, combined with capital concentration in the core (strongest) capitalist countries, while the the weaker ones suffer chronic balance of payments deficits results in cyclical crises. As the world becomes more integrated economically under the market economy, social inequality rises owing to super concentration of capital in a small percentage of the world's socioeconomic elites that prevail over governments catering to the market economy. Studies indicate, including those of the UN and World Bank, that from 1970 until 2010, poverty has been rising on a world scale along with geographic and social inequality, largely owing to the slow decline of the middle class in the Western World. Will the rise in poverty and downward social mobility of the middle class, especially in Western nations precipitate the next major contraction and does it signal economic and political problems that will only be resolved through widespread social unrest?
With the help of computers, it is possible to see that after the sluggish growth decade of the 2010s, we may have a more robust decade of the 2020s. This will be helped by massive developments not only in technology, renewable energy and biotech industries. The more thorough exploitation of untapped resources in underdeveloped areas, especially Africa where China among the other Great Powers, is heavily focused may help with the next expansionary cycle of the 2020s. The so-called green technologies may also provide some stimulus, although much of this is mostly a very thin public relations veneer behind which rest corporate interests and governments trying to appease the public that economic exploitation will not come at the expense of the ecosystem and the large masses of the population.
The Malthusian theorists continue to argue that the problem of poverty - rising during contracting cycles - rests with 'too many people, too few goods and services', so if we curb population growth and consumerism...well, the problem will be solved because there will be enough for everybody. On the surface, the theory seems to make some sense, largely because people immediately associate it with the size of the family and the income it earns as analogous to support the family. If the family has sufficient income to live well for three members, all is well and good, but if there are six children, there is a problem. So is this what is wrong with the world, it has too many people and not sufficient resources, or is it a problem of distribution of those resources?
If population were to remain frozen for the next two decades, would the world avoid a possible great depression in 2030s; even if population were to drop by one billion, and resources across the board were to rise by 20% would the capitalist economy avoid a major contracting cycle under the model of massive capital concentration, uneven economic development, speculative, parasitic and corrupt banking and corporate practices, a state fiscal structure intended to buttress finance capital? Finally, if poverty rises during contracting cycles, why has much of the Western World experienced downward social mobility in the past four decades amid a period of economic growth?
Even if the state were to do everything that finance and corporate capital requested, short of allowing people to die of starvation in the streets, is it theoretically possible that the market economy can avoid economic contractions in the future, and a major one in the 2030s? It is not true that the major cause of the depressions of the 1890s and 1930s rested with governments caving in to capitalists in the previous decades, only to come back and impose some sense of rationalism on the market economy so it does not self-destruct?
It is not my intention to engage in historicist logic, but if the political economy continues on its present course of massive capital concentration and downward social mobility, the chances of a great depression in 2030s, perhaps a decade later, is inevitable. It is true that there are social and regulatory safety mechanisms that exist today to protect both the economy and society from the type of depression that took place in the 18890s and 1930s. However, as much in the US as well as as across Europe those safety and regulatory mechanisms have been eroding in the last three decades, making the economy and society much more vulnerable.
Predatory by nature, capitalism needs regulatory mechanisms along with perpetual injections of capital transfers through the fiscal system - money collected from the bottom social classes - in order to survive. Any other scenario would mark its demise, not because of any external threats, but owing to self-destructive tendencies. I have no crystal ball that tells me we are headed for a great depression on the one-hundred year anniversary of the 1930s tragedy. All I have is the record of the past and current trends indicating that there is a very good possibility of a major economic contraction on a world scale with very serious social and political consequences if it takes place.
We do know some structural features about capitalism as it has evolved since the Renaissance when it was in its embryonic phase under mercantile capitalism spurred on by conversion from subsistence to commercial agriculture and long-distance trade. One of structural feature is that capitalism entails perpetual quest for expansion; but that does not mean endless economic growth as its apologists try convince the public ever since Adam Smith. While the market economy strengthens the capitalist class, it does not mean a steady line of upward progress for the rest of society. or wealth of nations; on the contrary, social equality and social justice along with uneven international economic growth and development are sacrificed for capitalism to function.
Rooted in capital accumulation and social hierarchy, the capitalist system operates in small and larger cycles of expansion and contraction, small expansionary cycles that may last 3-6 years, followed by contraction that may last 2-3 years - economic cycles may last longer and should not be identified strictly with business cycles, though the two are not necessarily mutually exclusive. There are larger expansionary cycles as in the 1880s, followed by contraction of the 1890s - 1920s followed by the 1930s. Within the expansionary cycles there are small downturns just as within the contracting cycles there are mini expansions. There are also mega expansionary and recessionary cycles that last for many decades, if not more than a century.
Variables that impact expansion and contraction are mainly found in the market itself that has the capacity to absorb what is produced. The state also has a catalytic role, for without its intervention through central banks and fiscal policy, as well as advocating for international market expansion, capitalism cannot survive, especially in today's world of welfare capitalism in some countries, quasi-statism in others, and a mix of both in others. The state has always been the key player in the market economy that has never wanted state intervention except when it came to serving its interests in expansion or rescue.
Besides social polarization inherent in the market economy, uneven geographic development and asymmetrical (unfair) trade relationships between the strong national economies and the weaker ones, combined with capital concentration in the core (strongest) capitalist countries, while the the weaker ones suffer chronic balance of payments deficits results in cyclical crises. As the world becomes more integrated economically under the market economy, social inequality rises owing to super concentration of capital in a small percentage of the world's socioeconomic elites that prevail over governments catering to the market economy. Studies indicate, including those of the UN and World Bank, that from 1970 until 2010, poverty has been rising on a world scale along with geographic and social inequality, largely owing to the slow decline of the middle class in the Western World. Will the rise in poverty and downward social mobility of the middle class, especially in Western nations precipitate the next major contraction and does it signal economic and political problems that will only be resolved through widespread social unrest?
With the help of computers, it is possible to see that after the sluggish growth decade of the 2010s, we may have a more robust decade of the 2020s. This will be helped by massive developments not only in technology, renewable energy and biotech industries. The more thorough exploitation of untapped resources in underdeveloped areas, especially Africa where China among the other Great Powers, is heavily focused may help with the next expansionary cycle of the 2020s. The so-called green technologies may also provide some stimulus, although much of this is mostly a very thin public relations veneer behind which rest corporate interests and governments trying to appease the public that economic exploitation will not come at the expense of the ecosystem and the large masses of the population.
The Malthusian theorists continue to argue that the problem of poverty - rising during contracting cycles - rests with 'too many people, too few goods and services', so if we curb population growth and consumerism...well, the problem will be solved because there will be enough for everybody. On the surface, the theory seems to make some sense, largely because people immediately associate it with the size of the family and the income it earns as analogous to support the family. If the family has sufficient income to live well for three members, all is well and good, but if there are six children, there is a problem. So is this what is wrong with the world, it has too many people and not sufficient resources, or is it a problem of distribution of those resources?
If population were to remain frozen for the next two decades, would the world avoid a possible great depression in 2030s; even if population were to drop by one billion, and resources across the board were to rise by 20% would the capitalist economy avoid a major contracting cycle under the model of massive capital concentration, uneven economic development, speculative, parasitic and corrupt banking and corporate practices, a state fiscal structure intended to buttress finance capital? Finally, if poverty rises during contracting cycles, why has much of the Western World experienced downward social mobility in the past four decades amid a period of economic growth?
Even if the state were to do everything that finance and corporate capital requested, short of allowing people to die of starvation in the streets, is it theoretically possible that the market economy can avoid economic contractions in the future, and a major one in the 2030s? It is not true that the major cause of the depressions of the 1890s and 1930s rested with governments caving in to capitalists in the previous decades, only to come back and impose some sense of rationalism on the market economy so it does not self-destruct?
It is not my intention to engage in historicist logic, but if the political economy continues on its present course of massive capital concentration and downward social mobility, the chances of a great depression in 2030s, perhaps a decade later, is inevitable. It is true that there are social and regulatory safety mechanisms that exist today to protect both the economy and society from the type of depression that took place in the 18890s and 1930s. However, as much in the US as well as as across Europe those safety and regulatory mechanisms have been eroding in the last three decades, making the economy and society much more vulnerable.
Predatory by nature, capitalism needs regulatory mechanisms along with perpetual injections of capital transfers through the fiscal system - money collected from the bottom social classes - in order to survive. Any other scenario would mark its demise, not because of any external threats, but owing to self-destructive tendencies. I have no crystal ball that tells me we are headed for a great depression on the one-hundred year anniversary of the 1930s tragedy. All I have is the record of the past and current trends indicating that there is a very good possibility of a major economic contraction on a world scale with very serious social and political consequences if it takes place.
2 comments:
Logic, tells us "we were in a Great Depression in 2007,and 2008, when unemployment hit 12%. The same amount as in 1930's”.
Usually, I require a dictionary to understand your meaning. Often not then can I understand your meaning. Guess I am not the only one out there. But one phrase tells it as it is, big words and all. Guess I can understand one 25 cents word, per sentence.
It is “Predatory by nature, capitalism needs regulatory mechanisms along with perpetual injections of capital transfers through the fiscal system - money collected from the bottom social classes - in order to survive.”
That is the hidden humiliating fact of capitalism. It keeps the populous quiet, their actions restricted. That is what the economy of “Enough” tries to expose. And merchants would be better off by placing articles within the financial reach of all.
That according to the US Government the Dept. of Labor, only 30% of the American work force are paid a Livable wage. That means the government conversely says at least 70% of workers and their family do not make a rate to cover the basic needs of utilities, rent, insurances, healthy food, transportation to work, friends and health care, repairs, gifts for loved ones, clothes etc.
Contemplative people, in the area of ending poverty think the rate of “none decent wages” is higher than the government confesses it is. But using the disclosed amount of 70% making less than the need, That, is out of nearly 308 million Americans around 218 million of people are in poverty. This includes the disabled, and welfare families. The government divulges to 40 million in bad economic times, where by its own count its closer to at least 220 million’s even in good times.
The economy of Enough, calls for a step beyond Predatory Capitalism. Enough, calls for full influx of funds, covering the basic need from bosses or owners first if they can afford such. If Mom and pops cannot afford such- the government would make up the difference. The economy is person made. It can be re-written so the weakest among us makes a decent wage, all can be above the real poverty level, and afford minor repairs, without falling six month behind on their other basics.
It will take us at the bottom to say NO. No more great profits off of our backs instead of those elite at the top taking 1200% proceeds off of movie popcorn, or 500% of printers ink cartages , they take not what the market will bear, but what is fair, making over 150% turnover on any item should be illegal.
The reward in Enough is knowing those at the ground end of the fiscal ladder can pay their bills. They can purchase higher quality items. The millionaires, will still exist, they will have say 10% less, and they will be only after the most vulnerable of us, have paid our monthly bills in full. Ending human lack, takes better sharing of funds, and a change in attitude. It takes living the golden rule of paying our workers what we want to be paid.
An economy of Enough, is what most people thinks happens. So, it’s time to put into motion what most thinks is already there. That every working person will be paid Enough, or 1.4 times the monthly rent each week.
I enjoyed the article. However, I think your time frame needs adjusted. I believe we will be in a world depression within 4 years. The fundamentals for a sustainable economy in the U.S. are completely off. The U.S. will have a bond crisis and a sovereign debt crisis within a few years. The only reason it hasn't happened yet is other countries are making the same monetary policy mistakes (Britain and Japan are the two latest) as the U.S. The EU has actually decided against some of the inflationary policies that other economies are pursuing. It is true that to an extent that due to corrupt, politically connected capitalism that the Core countries have exploited many others. However, I think this is becoming a thing of the past. China, India, Brazil, South Korea, Singapore, Hong Kong, Thailand, and even Vietnam are all growing rapidly while the West is declining. Also, the U.S. wealth is all bookkeeping. Most economists ignorantly use GDP as the upmost measure of a country's economic status. Therefore, the U.S. would be the largest economy in the world (by country, but 2nd to the EU). However, this ignores that fact that CONSUMPTION is 70% of the U.S. economy. The U.S. has run massive trade deficits for decades. Almost nothing of any importance is made in the USA any longer. The only reason this has lasted is due to the U.S. Dollar's position as the world's reserve currency. Countries around the world have large stockpiles of U.S. dollars used for international transactions. When this is eventually replaced there will be a huge flood of dollars back in to the U.S. and everyday Americans will suffer greatly from hyperinflation. My humble advice is to invest in gold (physical bullion, not paper notes) and silver for wealth preservation. The central banks around the world as well as China, India, and Russia are stockpiling as much as they can while their talking heads are out preaching that we are in the midst of an economic recovery in order to buy them more time. In the end all of the ECB, Federal Reserve, and other central bankers will do is say that the coming crash could not have been foreseen by anyone, but I guarantee that those very same people will be protected.
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