Radio commentary, May 8, 2010
Before commenting on the economic news, a brief follow-up to last week’s comments about the 9/11 Truthers. It provoked, if not a flood, more than a trickle of emails and bloggy complaints, about evenly divided between the patronizing and the hostile. Perhaps my favorite was an email from someone signing him or herself a variant on Sky, who counseled me to learn patience, and disclosing that 9/11 is a spiritual matter. Nothing makes me want to scream more than being told to be patient; I hate it, for example, when instead of apologizing for a subway delay, the MTA asks us to “please be patient.” Well, no, I don’t feel like it, actually.
And as for “spiritual,” I’m not sure what that means—I grew up under the influence of the Catholic Church, which has left me with an antipathy towards religion of all kinds, and I take spirituality to be some sort of Religion Lite, but I don’t get how obsessing pointlessly over something that happened almost a decade ago is spiritual. But I have been impressed over the years by how often spirituality is often a mask for dissimulated vanity. Its possessors often seem to think themselves more enlightened than the rest of us benighted materialists. Of course, I think I’m more enlightened than most, but I’m out front about that—no false modesty for me.
Anyway, I’ll drop this topic after this. But aside from the details of the 9/11 obsession—the melting point of steel-type arguments—I really don’t get the political point of it. Is American imperial power just a ruse? A trick by a small cabal of plotters? Or something that permeates the structures of global politics, economics, and culture—even the insides of our minds?
And doesn’t it work with some degree of our own acquiescence, even cooperation? As Michel Foucault famously put it, “fascism [is] in us all, in our heads and in our everyday behavior, the fascism that causes us to love power, to desire the very thing that dominates and exploits us.” I’m not comfortable with that use of “fascism,” but certainly the prevailing order derives a lot of its power from the way we’ve internalized it—something that these sorts of conspiracy stories try to avoid, by externalizing everything into neat little plots. Get rid of the plotters, and presumably everything will sort itself out. Well, Dick Cheney is gone, and things go on pretty much as before, folks. Or do the plotters enjoy seamless and leakless transitions of power?
Ok, onto the mundanities of the dismal science. On Thursday morning, the Bureau of Labor Statistics reported that productivity rose 3.6% in the first quarter of the year. Productivity is a measure of how much output—measured in the form of inflation-adjusted money—workers can create in an hour of labor. Growth in productivity is what makes possible a rising standard of living over time—though it’s no guarantee of that. That depends on how the gains of productivity are distributed. During the troubled years of the 1970s, productivity growth slowed to a crawl in the U.S., which contributed to the stagflation of the time. Then, sometime around 1996, productivity growth accelerated dramatically, and it’s kept growing at a fairly rapid clip ever since. But aside from a few years in the late 1990s, when there were broadly distributed gains in real wages, most of the gains of that productivity acceleration have gone to the upper orders—CEOs, stockholders, venture capitalists, and the like, and not the workers who actually make and do stuff.
Moreover, the productivity acceleration of the late 1990s was driven by high levels of corporate investment in high-tech capital goods. After the dot.com bubble burst in 2000, however, corporations really cut back on their investment. Since then, productivity gains have mainly come from squeezing the workforce harder while keeping a lid on pay. Normally, productivity growth falls in a recession, as output falls faster than employment. Not this time. Productivity stayed strong in the recession and initially accelerated with the economy’s weak recovery. In fact, productivity growth in the second half of 2009 was some of the strongest on record—but employment was falling, and real wages were stagnant. As a consequence of all this, profits held up remarkably well in the recession and have recovered nicely with only a modest upturn in growth.
Can this continue? Corporations remain very tight-fisted about investing in equipment. You can only increase the rate of explotiation so much before you run out of room to squeeze. The whole profit-maximizing strategy of U.S. capital—of starving the public sector, underspending on education, letting the infrastructure rot—doesn’t have the look of long-term sustainability about it. But it must be conceded that this approach has worked pretty well for the U.S. ruling class over the decades. As long as things don’t start flying apart, and as long as the population continues to play along with the game instead of breaking into open rebellion, they have no incentive to change their approach. Maybe the sense that the approach will turn and bite them in the butt someday is just a form of wish-fulfillment. But it does seem like it’s going to bite them in the butt someday. Too bad it will take more than a few pounds of nonelite flesh, too.
But the big crisis on the world scene these days isn’t in the U.S.—it’s in Europe. The EU and the IMF announced a large joint rescue package for Greece—€110 billion, or almost $150 billion. Calling it a rescue package is more than a little misleading—it’s designed to rescue Greece’s creditors from default, and allow the country to keep borrowing in the coming months while it slashes its budget and drives Greece into a deep recession. This is standard IMF medicine—squeeze everyone so that the financial markets can emerge more or less whole.
But despite that pricey package, the markets have been panicking in recent days on fears that it just won’t do the trick. Many participants are rightly asking how Greece can service its debts if its economy is collapsing. Many are also wondering how the crisis can be kept from spreading to other countries on the periphery of Europe—like Portugal and Spain. If a small country like Greece can cause this much trouble for global finance, what would a much bigger one like Spain do? One doesn’t want to think about that.
At one point on Thursday, the Dow Jones Industrial Average was down 1,000 points, or 10%, an enormous hit. Some of that decline may have been the result of hedge funds selling assets to cover sour bets on Europe—meaning that several hundred points of that 1,000 could have been market technicals, and not true economic panic. But there’s plenty of reason for economic panic as well. While I think the U.S. economy is gradually recovering from its two years of crisis, we’re hardly off to the races. There are some serious structural problems that haven’t really been addressed.
And while many market moralists are presenting the Euroopean problem as one of Mediterranean profligacy, there’s a much more fundamental problem with the whole project of European economic unification. As I’ve said here before. putting poorer countries like Greece and even Spain into the same economic zone as Germany is a recipe for disaster. (Here’s what I said in 1998 on the topic [“Europe’s fateful union”]; it holds up pretty well.) Germany is far more productive than just about any other country in the world, and few can prosper in direct competition with it. Aside from their tremendous productivity advantage, German industry has also kept the lid on German wages, making it an even more formidable competitor for countries on the periphery. It’s hard to see how the eurozone can stay intact, really. But who would buy Spanish or Italian bonds if you thought the whole thing was about to fly apart?
Our own economic and financial crisis was in large part a crisis of the whole neoliberal, hypercapitalist model, which has squeezing the working class at the core of it. But so too is the European crisis. The creation of the euro was a very deliberate neoliberalizing strategy for what the European elite saw as a creaky old system that needed a series of hard kicks to wake up to American and Asian competition. They’ve gotten the kicks, but now the recipients are kicking back (not so much in a conscious, political way, though there’s some of that coming out of Greece, but mostly in a financial crisis sort of way). This should be the terminal crisis of neoliberalism, but neoliberalism doesn’t seem to have gotten the message yet.
And now a special update prepared for the KPFA and podcast audiences. On Friday morning, the Bureau of Labor Statistics released the employment report for April. It was surprisingly strong, with hardly a blemish hidden under the surface.
A reminder: the monthly employment report is based on two very large surveys—one of about 300,000 employers, called the establishment or payroll survey, and another of 60,000 households, called, unsurprisingly, the household survey.
The payroll survey showed an increase of 290,000 jobs in April, the best in four years. About a quarter of that gain came from temporary Census jobs, but even allowing for that, there were healthy gains throughout the economy. Most encouraging, perhaps, was a strong gain in manufacturing—its best showing since 1998, and the third-best showing since the factory sector’s strong recovery in 1984. The breadth of gains by industrial sector over the last few months is far more impressive than what we saw in the jobless recoveries of the early 1990s and early 2000s. We’ve now added well over half a million jobs since the December low. Over the previous four months, we’d lost almost that many.
The unemployment rate increased from 9.7% to 9.9%—but even that cloud has a silver lining. (A reminder: to be counted as unemployed you have to be actively looking for work. If you’re not, you’re not counted as unemployed.) The breakdown of the reasons for unemployment in April was interesting. The number of people losing their jobs fell—but apparently enough people were encouraged by the recent improvement in the job market to enter or re-enter the labor force, and start searching for work. And workers are even quitting voluntarily when they don’t yet have another job, another sign of confidence.
I’m not about to strike up “Happy Days Are Here Again,” though. There was no wage growth during the month, which is pretty unusual. And not only is the unemployment rate close to 10%, but long-term unemployment—people who are without work for 27 weeks or more—scored another all-time high in April. The economy is still in a very deep hole, and it’s going to take a long time before we make a dent in these long-term numbers. The improving tone of the job market will reduce what little pressure there is for a public jobs program—but this is exactly wrong, because the chonically jobless need help badly.
Of course, the U.S. economy still suffers some serious structural problems, and there’s a lot of damage still to be repaired. We’ll see in the coming months how well this still-fragile economy reacts to the withdrawal of all the fiscal and monetary stimulus that’s been applied to it. (Parenthetically, though, the next time someone tells you that the stimulus package didn’t work, punch him in the nose.) But longer-term worries aside, it’s good to get some good news out of the monthly employment report for a change.