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|We've been through this before|
Read carefully the two quotes below as if they were a Zen koan on the order of "what is the sound of one hand clapping?" or "does a dog have Buddha nature?", and see if you notice the cognitive dissonance they produce.
Consumer spending is not only the key to economic recovery in the short term; it’s also necessary for balanced growth in the long term. If our goal is to repair our damaged economy, we should bank on consumer culture — and that entails a redistribution of income away from profits toward wages, enabled by tax policy and enforced by government spending. James Livingston - New York Times
"For capitalism is abolished root and branch by the bare assumption that it is personal consumption and not enrichment that works as the compelling motive."
Karl Marx - Das Kapital - Vol. II, Ch. IV, p. 123
Meditating on the above, first, on the the need for carefree consumer spending in order to avoid an even deeper recession, and then on the essential capitalist virtues of thrift and capital accumulation, sound fiscal policies and solid currency, I began to get some understanding of where we are and the dangers we may be facing.
We are being urged to drastic cost cutting and thin-lipped austerity in order to manifest the capitalist virtues of thrift and the sacrifice of immediate gratification, with a view to accumulation, which when manifested will paradoxically lead to even greater economic hardship, certainly in the short term... and as Maynard Keynes said, "in the long run, we are all dead".
For some reason, known only to my neurons, the following simile occurred to me:
In cities such as Beirut and Cairo, a sophisticated middle class lives in a liberated, western style in the midst of a deeply conservative, Arab society, where all men, Christian and Muslim alike expect to marry virgins. In consequence, the best plastic surgeons in Europe are charging rich, young, Arab women high fees to perform Hymenorrhaphy or hymenoplasty, the surgical restoration of the hymen. This relatively simple operation is perfectly safe when performed by a skilled professional under hygienic conditions, and is, of course, performed with the patient under anesthetic.
What conservative economists are asking western consumers, the motor of the world's economies, to do right now, is to restore our capitalist "virginity"... but instead of being in the hands of competent surgeons, we are being asked to undergo surgery performed with dull knives by incompetent, butcher-quacks, with dirty hands (politicians etc)... and without anesthetic.
Once this ordeal has been undergone and our "virtue" restored, it is hoped that we, thus painfully re-cherry-ed, will soon return to our former libidinous lubricity.
The question would be: is this trip really necessary?
For many years, people have been getting jobs, owning a home, getting an education, paying their medical bills, all because of easy credit. Now, it seems to me, that having a job, owning a home, getting an education, paying medical bills, are basic human needs that almost all human beings rightfully aspire to, and rightfully demand. The system provided all those things, therefore the system was considered "good".
Now the credit has been shut off and humans no longer can get a job, own a home, get an education and pay the doctor, therefore the system is "no good" and should be changed so that people can return to owning a home, getting an education and paying the doctor.
But what was our system really?
"Personal consumption" and not "enrichment" was the compelling motive that moved the economy, and that according to Karl Marx, who knew a thing or two about it, is not capitalism.
As the quote from Marx at the top of the post indicates, our economy had long ceased to be classic capitalism and had become, what for want of a better word, I would call "consumer socialism". The state printed money and practically gave it away at absurdly low interest and every obstacle to lending it, such as credit worthiness, was removed and people had jobs, owned homes, got an education and paid the doctor.
If we really are going "tighten our belts", there is a very real chance of our entering into a full blown depression similar to the 1930s and we would be well advised to remind ourselves that only two countries avoided the Great Depression of the 1930s, to wit, Hitler's Germany and Stalin's Russia and the United States only climbed out of the depression by entering World War Two and creating a command and control economy with unlimited public debt, severe price controls etc. Thus, during the war the American economy came to resemble those of Nazi Germany and the Soviet Union and after the Second World War, the Cold War soon began, which established the Military-Industrial Complex as a continuation of America's sui generis wartime "corporate state", which was the beginning of America's legendary prosperity.
So now, at the this late date, we are expected to apply classic, capitalist "fundamentals", when history shows us the result?
Like my grandad used to say, "yez payz yer money and yez takes yer cherce".
Happy Thanksgiving to one and all. DS