On Fri, 5 Dec 1997, Doug Henwood wrote:
> I asked this question on Post-Keynesian thought a year or so ago, and got
> no satisfactory answers. With the strong U.S. employment report released
> this morning - payroll growth of over 400,000, a drop in the unemployment
> rate to 4.6% (the lowest in 24 years), and real wage growth approaching 2%
> - I'll try it again. Most Keynesians, regardless of whatever modifier you
> want to use, would have predicted several years ago that a policy mix based
> on deficit reduction and sustained high real interest rates would provoke
> stagnation, and not what we've seen over the last 3-4 years. Why have
> things turned out the way they have?
I'll take a shot at this. I apologize in advance for the lengthy posting,
but I've been thinking about this for awhile, and wanted to share some
thoughts. My argument would be that (1) we're at the peak
of the business cycle, like in early 1989, when everything seems rosy; (2)
that real interest rates (defined as short-term rates minus GDP growth
minus inflation) are actually quite low, and certainly lower than the
1979-85 period; and (3) America is reaping the benefits of ex-hegemony.
The first should be obvious: real wages also crept up significantly in the
late Eighties, only to resume their swan dive in the early Nineties. No
real mystery there. I suspect, too, that American real
wages are so low, that other countries are using us as a labor-intensive
export-platform zone, i.e. Japan's auto transplants, LG and Hyundai's
chip fabs, as well as the foreign direct investments of numerous
Euro-multis. Foreign firms employed 15% of the workers in our industrial
base in 1992, I think, and overseas firms also employ a lot of people in
services and finance; the total effect must be pretty significant. If
nothing else, this has provided shelter for many US workers amidst the
global storms of the 1990s.
The second is also pretty obvious; for all his rentier
hauteur, Greenspan has put the stability of the system above the claims of
the rentiers, and drove short rates to negative, i.e. liquidity-raising
levels, from 1991-93. Since then, there's been some tightening, but real
short rates have stayed pretty close to zero -- not enough to power a
boom, but also not tight enough to strangle the economy. Relatively cheap
and easy money also created the preconditions for the Wall Street bubble,
the Mexican bubble, and the Southeast Asian bubble, as hot money was
teleported around the world, seeking the highest possible speculative
return, and spawning property and stock speculations galore. Now these
latter are coming undone in Asia, and the virus will inevitably spread to
the Wall Street bourse in the near future.
The third is more interesting, however. I know this sounds absolutely
crazy, given the propensity of us radicals (and anyone who considers
Keynesianism to be even a remotely good thing is a radical, in the
current reactionary context) to constantly accentuate the doom and gloom,
but I really do think we're at the end of the Long Depression, and that
we're going to see significantly higher growth rates worldwide over the
next twenty-five years; call it a Kondratiev upswing, call it a Mandel
surge or whatever, but it's pretty clear that information technology,
software, telecoms, multimedia, biotech, aerospace, and the medical
industry are going to be the growth poles of the early 21st century. Most
of these industries are indeed overrepresented in the USA, where our
rentier accumulation structure has allowed our ruling-class to trash the
industrial base and invest in selected global niche markets (like our
movie and media industries, for example, or the Northwest software
industry) ahead of the European and Japanese competition, who were busy
catching up with us, and then later bailing out themselves or their
semi-peripheries, instead of forging new markets.
Put another way, the US has experienced a "soft" Depression,
rather like that of the UK during the Thirties, when unemployment and the
drop in output were far greater in the US and Germany; still, the UK
retained some fundamentally uncompetitive policies and structures, and was
rapidly outdistanced in the postwar period. Basically, in the Eighties we
didn't invest in the industries of the future, but instead the financial
services of the future, so the Depression didn't hit us as hard. At the
same time, our Imperial cultural hegemony and sophisticated relations of
production (at least in the service sector) generated the success of firms
like Hewlett-Packard, Microsoft and Intel, not to mention enterprises like
the NBA and the NFL -- American cable TV is really a gigantic educational
project, designed to produce a hard-working, consumer-driven, and flexible
consumer consciousness, which is ideally suited to the small-lot,
high-volume work-teams of transnational capitalism. Right now, these
work-teams are being forcibly radicalized by downsizing, benefit-cutting
and the rape of the welfare state; the seeds are being sown for a major
cultural and political shift back to the Left throughout the US (and
indeed Europe). The defeat of fast track for MAI, the resurgence of labor,
and the general discrediting of neoliberalism amidst stock crashes and the
gargantuan Asian meltdown augur a serious change in the political climate;
suddenly, even the Economist has to admit that Government intervention in
the economy is a good thing, after all. A few years of prosperity would
embolden workers everywhere to start pushing for higher wages and
redistribution, which would then kick the expansion into a genuine
multidecade boom. It happened in the 1950s; it could happen again,
though it'll take some political organization to make it happen.
In a nutshell: the next accelerated long wave of accumulation is indeed
starting here in America, but certainly won't end there. We are due for a
recession in the near future, but after that, I'd bet an abundant pile of
euros that the world-system kicks into high gear, with the Visegrad region
and parts of Southeast Asia as the tiger economies of 2000-2020. In a
soundbite: a major stock crash followed by much Leftie rousing of
the rabble, followed by rampant prosperity for a whole bunch of people,
and not just the rich.
-- Dennis
