So far as the world economy is concerned, the sky — as our dear friendAndrew Kopkind used to say, is dark with chickens coming to roost. As CounterPunchgoes to press, capital is massing its resources in a determined effort tohold Brazil together and get Fernando Enrique Cardosa reinstalled as president,after which point he can impose enough austerity to suit the bankers’ schedules.
And as the world economy cools, CounterPunch’s predictions about thefragility of the boom are being resoundingly confirmed. The air is startingto seep out of the great speculative bubble, and with it subside the hedgefunds like Longterm Capital Resources, the newly emerging markets and thehopes and dreams of those who had been arguing that the business cycle wasdead.
In terms of the main indices of economic dynamism — the growth of output,of productivity and investment, the economy of the 1990s has been the worstof the postwar epoch, inferior even to the stagnant 1970s and 1980s, andnot remotely comparable to the boom decades if the 1950s and 1960s. Indeed,Robert Brenner of UCLA, who draw a stark picture of world economic “fundamentalsin the July/August issue of New Left Review, “The Economics of GlobalTurbulence”, points out, the growth of output per hour and also thegrowth of hourly wages has, since 1973, been worse than in any period duringthe last century, including the Great Depression and, on average, has notimproved in the 1990s.
To put some numbers on the famous “fundamentals”: Between 1950and 1973 labor productivity growth in the private, non-farm sector was 2.7per cent a year. From 1990 to 1996 it was 0.7 per cent. In 1997 workers’hourly wages were 12 per cent lower than in 1973 and exactly the same asin 1965.
To be sure, the jubilation of financiers, industrialists and their acolytesin the business press has not been entirely irrational. After a long periodof depressed returns, corporate profitability, especially in manufacturing,did increase spectacularly in the 1990s. With the increased profits camethe stock market boom, albeit at a tempo increasingly out of sync with reality.As always with bull markets, the children of Dr Pangloss rushed out excitedessays, arguing that we were now in a “New Age” or “ThirdWave” economy, that there was no reason why the elevator should evergo down.
But the boom came at the expense of the working people and also of America’sleading competitors. Between 1987 and 1997 real hourly wages here for productionworkers fell by more than 5 per cent and the US dollar was devalued by some40-60 per cent against the Japanese yen and the German mark. Our goods thusbecame world beaters on the international markets.
But this state of affairs, which provoked ecstasy on Wall Street andin the speeches of Team Clinton, full of self-congratulation about “growingthe economy”, could not last long. The economies of Germany and Japanwent into crisis because of the sag in exports consequent upon US competition.The US dollar duly began to rise, thus shaving down the American advantage.And as the US economy began to grow rapidly in the one glorious year of1997, US wages at last began to rise.
By the middle of 1998, a snapshot of the fundamentals showed the predictableconsequence. With their competitiveness now falling as a result of risingwages and also the rising US dollar, US producers’ profit rates began togo down. The stock market would not take long to reflect this changed situation.
Ironically, the very success of the United States in imposing its neo-liberalmodel of the rest of the world has played no small role in inducing thecurrent downward lurch in economies round the globe. Neoliberalism spellsout as slashed social spending, balancing budgets, tight credit. So, countryafter country lashed into austerity by the International Monetary Fund andother US-dominated institutions, have seen their own internal markets shrivelin consequence. Their only option has therefore been to export or die, andso they have, flooding the oversupplied world markets and forcing down prices.The crises in Asia and Russia have been the direct result of this internationalovercapacity in manufacturing and oil.
And so, homeward fly the chickens. The desperate export drives put pressureon US manufactures’ prices and profits. And the Russian collapse slashedinto the profits of big US banks. Collapses in Latin America cast anotherdark shadow. With the stock market in tumult, consumers here will ease upon their gallant spending, which has been propelling the economy forward.
Now what? So fervent have been the neoliberals in their preachments andin their presumed victories that it will take an immense effort in mentalself-abasement and reappraisal, — probably beyond their limited powers– to make them realize the folly of their doctrines, which have yieldedonly the bitter fruit of a world depression, already lacerating major portionsof the globe. Can they abandon the totems of balanced budgets, reduced governmentspending, high interest rates and financial deregulation?
We have now reached a moment in which there is no good news on the agendaanywhere in the world. Chipmunk chatter about the “fundamentals”no longer suffices. The received wisdom was wrong. Look at one more figure.Between 1989 and 1995 US government spending increased in real terms byonly 0.1 per cent. Clinton would do well to get that number up off the floor,and to realize that ex-bond traders like Robert Rubin have a very limitednotion of what “fundamentals” can mean to ordinary people, whodon’t see the Nineties in quite the terms as have him and his Wall Streetfriends. CP