Wallowing Along – On Purpose?
from Peter Radford
I didn’t comment on last week’s miserable GDP report because (a) it was so mediocre, and (b) it was right in line with where I have been saying we would be. In other words there was no real news. We are adrift. Rudderless, leaderless, and out of ideas our elites – political, business, and academic – appear to have talked and argued themselves into a total full stop. The rest of us will have to make do while they indulge themselves in more of their futile and useless hand wringing.
The numbers speak for themselves.
GDP grew at a 1.5% pace last quarter. That’s around half what we would expect in a normal ‘good’ quarter, and nowhere near enough to make much dent in unemployment. Indeed at the current rate it is quite possible that unemployment will tick up slightly later in the year as businesses tighten up for a weak 2013. At this juncture the only reason that unemployment may dip as the year progresses is because more people drop out of the workforce. This is hardly a success.
The core of our problem remains in personal consumption. It rose at that same 1.5% pace and provides inadequate reason for businesses to hire or invest in the near term. We have a massive and ongoing demand problem the solution to which is clear, but politically infeasible. We need to ramp up government spending and encourage a bout of inflation in the 3% – 4% range. Since we will get neither we are doomed to wallow some more.
I have a had a number of recent conversations during which it is more than clear that the value of stimulus is completely lost on people. On the contrary the alternative of greater austerity seems to ring true to the ears of most. So when we suggest that stimulus is politically infeasible what we are calling into question is the ability of our leadership to frame or shape the debate. The entire policy discussion, such as it is, appears to be taking place within a context that is skewed towards shrinkage and failure rather than expansion and recovery. The ability to end this depression is within our grasp, but a sufficiently strong core of people resist the ideas underlying the solution so that we never have the debate we need.
Couple to that political gridlock the ongoing debasement of true democracy in the US by inflows of money, and the consequent endemically corrupt political process, and we arrive at a state where a few groups can dictate the policy argument and twist it to their short term gain and away from consideration of the benefit of the populace at large. Our economic institutions have shifted from being largely inclusive and productive of broad scale benefit, to being more and more exclusive and productive for a restricted few. This shift has been a paradoxical consequence of the effort to open up the economy and to deregulate it. Paradoxical, that is, to the naive alone. Anyone else would have, as many of us did, protest that opening up our economic institutions exposed them to capture if, at the same time, our political institutions were co-opted by an energetic and well financed minority.
The reason that the Reagan/Clinton/Bush era has seen the steady erosion and eclipse of our middle class is simply attributable to this coincidence of political and economic enclosure. The modern enclosure movement echoes that of pre-industrial Britain. A segment of society sees benefit in the execution of new ideas and techniques and seeks to extract value from them. In order to do this they have to re-arrange society. They need to dispense with prior existing social contracts and establish new ones that give them leeway to effect the value creating change. They need to co-opt the political process in order to write the laws needed. They need to alter inhibiting social norms. They need to entrench themselves so as to extract what they can. And they need to divert the dispossessed into different and more malleable channels of subsistence.
In our case the new technology or set of ideas that undergirds the modern enclosure movement is that of economics. Particularly neoclassical economics. Whether we like it of not modern America is increasingly being re-shaped to conform with the notions of society that form the basis of that theory. Variants of it infest modern business management theory; they underpin the explosion in the share of our economy diverted into finance; they inform the media’s attitude towards policy; they form the basis of common discussion about the economy; and they provide an intellectual backdrop for the dominance of post-Reagan right wing political positions. There has been no effective reaction from the left over the past four decades because its elite too has been captured.
The attack on welfare and social programs makes most sense in the context of a latter day enclosure movement.
The incessant attack on the older social contract by the operatives of modern management and economic thinking has undermined voter’s loyalty to the very institutions that protected them. Government is reviled. It is seen as irredeemably inefficient, whether or not that is true. Unions are seen as obstacles riven through with rules that prevent progress rather than as bastions against exploitation. Rather than reform or improve these institutions we are presented with only one solution: get rid of, or marginalize, them. That way enclosure can proceed. The route to efficiency is presented only in the context of neoclassical dictums. Alternatives are taken off the table.
Our entire elite has become, effectively, part of the enclosure movement. Opponents linger in outposts but are not taken seriously. Indeed quite often they become caricatures of themselves advocating ever more stridently the very actions that brought them defeat. By so doing they ensure their marginal status. They become locked in what society at large – as led by the elite – views as the past. This is why no one takes Marxism seriously even though there remains great value in a Marxist critique of our problems. Likewise Keynesians have found it difficult if not impossible to get their policy solutions enacted. Memories of what efficacy such groups may have is expunged so that enclosure may take hold.
Thus it is that we are having an election in which it is taken as read that we need a ‘long term solution’ to our ‘entitlement problems’. Whether we have such problems is not being discussed. Austerity, which is manifestly a disaster in Britain and Europe, is seen as the only ‘serious’ policy action. That we can solve our debt problem – if it exists – through issuing more debt is greeted with incredulous and knowing smiles by our elite. As if their actions were innocent of harm.
Yes. Our economy is wallowing. But it is a deliberate wallowing. It is the direct result of decades of effort. It is entirely predictable and consequential to the ongoing enclosure of our economy by people energized and validated by economic theories that treat human beings not as people but as machine like units substitutable and uniform and endowed with an Orwellian version of choice. That being a choice that always follows the thought processes of neoclassical economics. Such thought processes is an oxymoronic concept and wreaks of hypocritical irony when articulated by an academic safely entrenched behind the barriers of tenure. Indeed the concept of choice in Rational Choice theory is neither rational nor choice. It is ideological armory for enclosure.
So we wallow.
It is not worth worrying about the economy when it’s performance is subject to political constraints. Our discussion ought not to focus on economic policy but on the enclosure movement and the grab for power now underway. That’s a far bigger fight and one that many people I know don’t have the stomach for because it requires them to recognize the deep flaws and myths that riddle the image of America they hold dear.
So we wallow.