Happy Days are Here Again?
Listening to the mainstream media and the business press, one can only conclude
that we are enjoying the most robust economy in a quarter century. Unemployment
is low by recent standards, and the much touted European and Japanese economies,
while hardly moribund, are sluggish. Some of the leading economic commentators
have concluded that U. S. economic success confirms an older common sense.
If the Fed will stick to fighting inflation and if government balances its
books, steady prosperity is in order.
Europe and Japan have certainly seen undesirable increases in unemployment,
but before we take too much comfort in our jobs picture, we might consider
a few caveats. Most of Europe's unemployed are still doing far better than
the poorest among our job holders, many of whom cannot escape poverty. And
even today our jobs picture remains very spotty. Unemployment rates differ
considerably by state and region.
But there is a larger problem with this new common wisdom. It is incredibly
myopic. One or two years, even spectacular ones, don't a trend make. Extrapolating
from yearly data to long term forecasts about the U. S. economy is like
trying to predict the outcome of a football game from the first two possessions.
Sure, in the memorable cliche of politicians, many citizens are better off
than they were five years ago. Unfortunately, there is an apples and oranges
comparison here. U. S. capitalism remains a very cyclical economic system,
and most workers are always better off at the end of the up cycle than at
previous points. Those who wish to demonstrate our arrival in a new capitalist
era are best served by comparing the overall performance of our economy
during this cycle with its behavior in previous cycles.
Economic historians chart ten major economic expansions since World War
II. Summarizing a range of data on these periods, Doug Henwood recently
suggested that by almost every one of the measures (including rate of job
growth, earnings, GDP growth, productivity increases, investments, and even
profits) the current upward cycle "stacks up as mediocre to poor."
Of course, the new celebrants of our corporate markets may well reply that
this boom still isn't complete. Reports of its wimpish character may be
a bit premature. True enough. Nonetheless, the inadequate performance in
such key areas as investment and productivity growth provide very little
reason for anticipating a boom so long and potent that it will eclipse previous
Rather than celebrating our successes or pointing with glee to European
and Japanese failures, it might be better to examine some of the problems
all these economies share. The Europeans have been engaged in a two-decade
task of creating a trade and financial union. German financial authorities
have been imposing exceptionally strong deflationary pressures on all members,
and wage and labor guarantees within the union have been far weaker than
originally promised. Europe as a block has also faced increasing competitive
pressure from low-wage states throughout the world. In consequence, it finds
it increasingly difficult to create new high-wage jobs. Recent political
changes, especially in Germany and France, may place more pressure on governments
to stimulate jobs by shortening the work week, but these initiatives face
fierce employer resistance. They will be difficult to achieve as long as
business is free to move capital at will.
Japan succeeds as an export kingpin by forcing inordinately high levels
of savings on its workers, managers, and even owners. It buttresses this
strategy through arcane techniques of excluding much foreign competition.
Speculative investment and inadequate domestic demand have plunged Japan
into recession. Its protectionism contributes to an unbalanced international
The recent growth in U.S. jobs has been more attributable to a continual
ratcheting down of wage rates, relaxed monetary policy, and high levels
of consumer debt. But consumer debt can't grow forever. In addition, as
Lester Thurow of MIT points out in The Nation, the emergence of the
European Union as a huge capital market will place greater constraints on
U. S. monetary policy. In the past, the United States could cut interest
rates without much concern about the effects on the value of the dollar.
We were the only large capital market in town. A United Europe and a new
Euro currency changes all of that. If the U.S. keeps rates low and continues
to run a large trade deficit, capital will eventually flee our markets for
If there is a lesson in these scenarios, it is that much more than tinkering
with monetary policy will be needed to sustain prosperity. Fundamentally,
capitalism is a complex set of institutional, cultural, and legal relations
between those who own the firms and those who produce the goods and services.
An old order in which workers had some say in wages through unions ( the
U.S. case ) or a healthy social safety net and some voice in corporate affairs
(Western Europe), or the protections of a largely benevolent patriarchy
(in Japan) has been collapsing through both internal and external pressures.
The business press may celebrate an unbridled corporate power all its wishes,
but there is little reason to suggest that the rebirth of capitalism in
its more primitive forms can sustain our prosperity or freedom. In the thirties,
governments had to intervene to create jobs and encourage unions that would
at least allow worker wages to keep pace with productivity increases. Such
initiatives need to be played out on an international stage today. Competition
between massive trade blocks based on reducing wages and imports is a recipe
for world recession or worse. Absent a politics and a process that gives
workers a broader say and stake in the new order, both domestically and
internationally, we will be lucky to enjoy even our current anemic booms
John Buell lives in Southwest Harbor, Maine and writes on labor and environmental
issues. He is co-author, with Tom DeLuca, of Sustainable Democracy: Individuality
and the Politics of the Environment (Sage). He invites comments via
e mail at: email@example.com
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