[OPE] Recession could be best medicine

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sun Mar 16 2008 - 11:36:13 EDT


"Recession could be best medicine". The best medicine for whom? Ask any doctor, you don't force medicines indiscriminately down somebody's throat without their consent, except possibly fluoride and chloramine in tap water, or in the case of a life-threatening situation. But life-threatening situations should not be too liberally interpreted. The presumption is that recession will cure economic ills, but what basis is there for that idea?

The spectacle is really that while the neoliberals and conservatives hail the efficacy of market allocation based on private initiative, just as soon as there are any signs that the markets threaten to crash, they start to appeal for state intervention with a great deal of handwringing and speechifying; in the end, you never bite the hand that feeds. The state then rewards the money men for their irresponsible policies, by bailing them out with rich helpings from taxpayers' funds. It "cures" the problems of the rich, but it does not cure the economy. 

The metaphor of "medicine" and "cure" neatly abstracts from the differential effects of recession on different social classes. The recession emerges precisely because the costs and benefits of economic growth are very unequally distributed, and the recession has the effect, that those costs and benefits are even more unequally distributed. Equilibrium exists only in a textbook. The reality is that disequilibrium is the life of the market. Marxist phraseology calls this "the uneven development of capitalism". Those in the most marginal economic positions qua work and income, nationally and internationally, typically experience the worst economic effects on their lives from the recession.

If, in the 1930s, governments opted for Keynesian solutions rather than allow wages to fall to a negative number, as von Hayek recommended, it was to avoid social breakdown and proletarian revolution; if unemployment goes over about 25%, civil war becomes a very real possibility. Such Keynesian solutions have less efficacy today, because the state has much less control over total credit extension, and the financial institutions cannot very well stop creating more credit. But that just drives the financial institutions and the state together even more, in the attempt to avert a serious crisis. Which really means that the "free market" rhetoric is just for suckers. 

Ultimately, rampant market deregulation will necessarily produce its dialectical inverse: draconian regulation, to protect capital values. If that scenario doesn't happen now, it is just because the downturn is not yet so serious and because it is difficult to organise any kind of consensus, or assert authority among the different "stakeholders" involved  - it is only a serious crisis which forces the mandate to implement policies that, although they disadvantage some capitalists, save the economic system as a whole.

Frederick Engels commented once to the effect that the controversy between free trade and protectionism (or regulated trade, whatever its particular modalities at a given time), is a theme that runs through the whole history of bourgeois society from its origin in medieval towns. Today's dilemma is no different: the bad results of deregulated trade in commodities, money and capital really require regulation and state intervention to correct them. It just creates an ideological problem, because what justifies free trade here, and regulation there? If it is impossible to remain consistent in this, that is only because the economic contradictions are very real. Among other things, international capital flows are nowadays very difficult to control.

However, once we reframe the dichotomy in class terms, it is obvious that "more freedom for capital" typically translates in "more unfreedom for the working classes". The debate between free trade and protectionism is an internal debate of the bourgeois classes, relevant to trade unions only insofar as particular policies may promote or destroy jobs. The real challenge however is to expand the realm of freedom for workers, regardless of free trade or protectionism. Tony Cliff called this "proletarian self-activity", but that just makes you go blind. What Marx referred to was "independent action" by the workers in the pursuit of their own interests and needs. There is more scope for that, than there ever was before.

If the American Left is currently mesmerized by Barack Obama's pocketful of hope, that is because the American Left is largely a middle class Left. They envy Obama, because he is able to rope in the working class, something they cannot do themselves with their totalitarian dreams, but how does he do it? However, Obama's "socialism" is essentially a bourgeois socialism. In Marx's phrase: "Free trade? For the benefit of the working class! Protectionism? For the benefit of the working class! The bourgeois is bourgeois, for the benefit of the working class".

Improving on Joseph Stiglitz, leftwing economist Bob Pollin argues "Spending on Iraq is also a job killer. Every $1 billion spent on a combination of education, healthcare, energy conservation and infrastructure investments creates between 50 and 100 percent more jobs than the same money going to Iraq. Taking the 2007 Iraq budget of $138 billion, this means that upward of 1 million jobs were lost because the Bush Administration chose the Iraq sinkhole over public investment." http://www.thenation.com/doc/20080331/pollin Bob Pollin's socialism is essentially a "national" socialism, premised on the idea that the US working class is at a level below trade union consciousness. He figures it's "our wealth", and we should spend it better for our own people. 

What he forgets is that American intervention, intended to secure American oil supplies from the Middle East, has also destroyed the economy of Iraq, where the unemployment rate is at 60-70% percent, double what it was during the sanctions regime begun in August 1990. In the Stiglitz/Pollin vision, America's war with Iraq started on 20 March 2003, rather than on 2 August 1990. Just when Clintonomics had balanced the budget, Bush Jr stole the family silver, that is the jeremiad of the American Left. Little does they realize, that this after-the-fact argument actually gives credence to the idea that Americans have no further financial obligations to a foreign country destroyed by their imperial interventions! 

"After-the-fact" apologetics can go a long way. For his part, Mr Wolfowitz argued that Saddam Hussein should have been wiped out in the first Gulf War. But if they didn't do that then, it was for a very good reason, as Dick Cheney admitted: it would create only more local and regional instability, harming business interests. With equal justification, it has been argued the the CIA should never have put Saddam Hussein on the payroll, and that he should not have been supplied with American money, political support and weapons. But again, if that was done, it was done for good reasons. It is just that what happens to serve the interests of international business changes across time - friends become foes, and vice versa.

The hot-air rhetoric of "globalisation" in denial of American imperialism gives rise to the equally woolly rhetorics about "coupling and decoupling", as if the world economy is not an interconnected whole. Parallel to the free trade-protectionism contradiction, there is also the contradiction between nationalism and internationalism. When it is in their own interest, the bourgeois theorists tout "the national interest". When the "national interest" is best served by foreign interventions, they start to talk about "the interests of the international community". 

Thus, for example, it is argued a recession in the United States would be "healthy" because it would curb domestic consumption and increase savings, thereby correcting "distortions" in the world economy which allow the US economy to suck in the world's savings. Well we can all guess at whose expense the saving will be, and who will be doing the consuming. Capitalists laugh all the way to the bank, which, if it is not located in London or New York, basks in the sunshine of Bermuda or the Channel Islands.


Don't you know I still believe
That you will be here
And give me a sign, hit me baby one more time

- Britney Spears

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