How the Current Global Economic Crisis Happened

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Clarissa

January 9, 2014

So economists seem to agree on the following: by 1969-1970 the economies of the richest capitalist countries reached the zenith. It wasn’t possible to squeeze anything more from industrial production.

Capitalist societies, however, were not ready to roll back their expectations and accept that the standard of living would stop improving. People wanted to continue living better. And better. And better yet.

In order to mask the impossibility of sustaining the growth, developed countries chose to fake growth. Since they couldn’t make productivity increase, they turned to increasing flows of air. People wanted to feel like their standard of living kept improving. They needed to feel that they kept getting richer and buying more. So credit became even more readily available, ubiquitous, and unlimited. Financiers needed to make greater profits but more money couldn’t be squeezed from making stuff. So they turned to selling air.

These societies managed to kid themselves for a few decades. Eventually, though, the charade became unsustainable and the bubble burst. That was in 2008.

Now we face a choice: keep fooling ourselves and create another bubble or give up the pretense.

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5 responses to “How the Current Global Economic Crisis Happened”

Mike

January 9, 2014

I am not sure which economists believe this, but it appears to be a veneer of neoliberal economic propaganda smeared over what has actually occurred and is occurring. This accounting is at odds with the data. Productivity has actually continued to increase right up to the present moment, somewhere over 100% since 1970 per worker. (Depending on what measure used — some estimates are as low as 70%, some as high as 300%.) It is continuing to increase due to automation and efficiencies due to communications technologies right up to the present day.

Here is a graph of productivity since 1950.

I do believe that most economists who have been infected by neoliberal thought — which is most in the West who continue to want a job — sincerely believe this explanation, but it is a gloss to explain and excuse the redistribution of wealth upward which is actually at odds with the TFP increases over the past three decades.

It just doesn’t match the data, but it does match what the more powerful elements of our society hope that people believe.

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1. David Bellamy
  
  January 9, 2014
  
  Exactly, Mike.
  
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2. bloggerclarissa
  
  January 9, 2014
  
  Oh no, the economists I have been reading hate neo-Liberalism with a fiery passion. It isn’t individual performance of workers that they are discussing but the stagnation in the growth of capital from “productive” or “industrial” economies:
  
  Gills, Barry K. “Going South: Capitalist Crisis, Systemic Crisis, Civilisational Crisis.” Third World Quarterly 31.2
  (2010): 169-84.
  – “The origins of the present global economic crisis, which has affected the old core economies more severely than the rising or emerging economies, may be traced to the 1970s and the capital logic and concomitant global restructuring that expressed the attempt by core capital to circumvent the limits to capital accumulation imposed in the advanced capitalist societies, in order to raise again the rate of profit. This new globalised capital logic took the form of the globalisation of production, the financialisation of capital and the globalization of finance, accompanied by ideologically driven economic doctrines emphasising new extremes of self-regulation and de-regulation of capital and market” (171).
  
  Marxist economists Lopez and Rodriguez say in the End of Cycle:
  
  At the end of the 1960s and the beginnings of the 1970s, the main industrial economies (and especially the US) started showing signs of exhaustion accompanied by significant drops in principal macroeconomic variables. In 1973, the deteriorated effectiveness of industrial economies dropped even further because of the augmented costs of petroleum.
  
  This was published by the independent press created by Spain’s Indignado movement.
  
  I have about 15 more sources which all say the same. And all those economists despise neo-Liberalism.
  
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3. Mike Ballard
  
  January 9, 2014
  
  As you point out, productivity or output per worker during a given amount of time has increased. What hasn’t increased in the USA has been real wages. Real productivity of workers has risen while real wages reached their apex in 1964. Since then, real wages (wages adjusted for inflation) have actually gone down. All of which means that the rate of exploitation per worker has gone up.
  
  The real problem with productivity going up and real wages going down is that all the goods and services being produced need to be sold in order to realise a profit. Granted, as productivity rises, the commodities which issue out onto the market are cheaper when adjusted for inflation; but the fact of the matter remains, they can’t all be absorb i.e. purchased because the market (us, the people who produce goods and services) don’t have the money to buy them. Yes, credit has worked as an income booster for many, many of us. The problem is that we end up debt-slaves to the finance capitalists and if we lose our jobs, we’re truly out of luck and many time out of house and home.
  
  The question is, “What to do with the unemployed?” As the unemployed have more or less given up on forming unions to negotiate for higher wages (they’re are free individuals now), the chance of filling in the market with some real consumers glows more dimly by the day. And guess what: capitalist philanthropists are failing in their duty of care to provide enough charity money to fill the gap.
  
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musteryou

January 9, 2014

Capitalism has to keep expanding or it dies. No competition without expansion, for one wins by gaining more capital than one’s competitiors and forcing them out of the market. Capital enables effective price ways and undercutting. But material resources are dwindling and continue to do so. That means that these resources are not available to be translated into capital via labor power.

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