Are we there yet?

from Peter Radford

Where?

At the point where we dip into a second recession.

No.

This is despite last Friday’s abysmal US employment number. For those of you distracted by storms and earthquakes: the US economy added no jobs – as in zero – last month. That is appalling. Terrible. Corrosive of our national wealth. It is outrageous. It is a scandal. And it is an affront to all of us concerned about our common wellbeing.

And it will not be solved by our worthy leadership elite any time soon. They are all too deeply involved in their childish and destructive political posturing, and in their self imposed austerity driven charge towards a replica of 1937.

Worse than last month’s numbers, if that is possible, was the revision to the previous two months which resulted in much lower job growth. June was revised up by 20,000, and July down by 85,000. Since neither month had been a bonanza before revision the story they now tell is even more depressing. Our economy is going nowhere.

The excuse popular on Wall Street is that August’s figure was a result of the ridiculous political spectacle surrounding the great debt ceiling debate. There may be some truth in this. The imminent default, deliberately contrived rather than a result of events beyond our politicians control, was enough to make any sensible business manager cringe in fear. Never before had the business community been confronted by the notion of our economy being tossed over the cliff. It may have driven over the cliff by accident. It may have had all sorts of uncertainties injected into it by partisan bickering. But never had that bickering had the possibility of a deliberately planned and executed attack on our national, collective, income.

What a farce. It is hard to contemplate in memory. The pity is that the same epic fail could be repeated at any moment whenever our extreme right wingers swoop down to derail anything smacking of sensible recovery policy.

Still, I don’t buy the debt ceiling excuse as the only reason we are not generating jobs. Indeed I consign it to marginal one month quirk status. It doesn’t explain the dearth of jobs in July, June, or any previous month. What caused that?

Lack of demand.

Period. End of debate.

There are some who look through the discredited lens of supply side theory. They will argue, wrongly, that the unsettled outlook for government spending is the root cause of our problems. Or that borrowing by government is squeezing out private investors creating a lack of investment. Or that the need to raise future taxes to pay off our current bulge in debt is causing both consumers and businesses to hoard cash as an offset against those taxes.

Rubbish.

Survey after survey is telling us that the number one worry for business is lack of sales. Not one survey has returned evidence to support the supply side theorists. Not one. Yet they still cling to their fantasy. And they have enough clout, quite why after such a total failure of their ideas I cannot say, to muddy the policy waters. They are well enough entrenched in our elite, scattered amongst our decision making leadership, that they can sow dissension and confusion. They can prevent us from breaking free of the grip of this pernicious stagnation and vex us with their pot shots at anyone bold enough to propose proper solutions.

The state of our economy is a textbook example of what happens after a private sector debt binge and subsequent implosion. Textbook. There is nothing spectacularly odd about it. It’s not even an advanced textbook. It is macroeconomics 101. As taught circa 1948. With the great depression still alive in their minds, the theorists of that age wrote the book on how to propel an economy out of its malaise. Add in the embellishments of those who extended theory to account for finance, debt, and the inherent instability of banking, and we have all we need to get back on track.

Yet we don’t.

Because economic theory subsequently wandered off into an unnecessarily arcane and mathematically contrived world that became less and less related to actual economic problems, and more and more related to a self absorbed discussion of utopian pipe dreams.

The ramification of this theoretical failure on the part of economists is that we are now led by a generation for whom that 1948 textbook and its embellishments are unknown. Not just forgotten, but never taught in the first place. Or, rather, sufficiently challenged by right wing economists who want to justify their ‘market or nothing’ account of an economy at any cost – including the futures of countless American workers – in order to preserve their theory’s standing.

Meanwhile: are we there yet?

No.

We are not at a point where we will tip back down. We are merely stagnant. Which may be worse, because it relieves politicians of a crisis driven need to act. Instead they can triangulate on various political positions, and thus jockey for election.

Perhaps we should rephrase ourselves to get their attention.

We are in a depression. So talk of a double dip is entirely specious. We are depressed. We never recovered fully in the first place, so talk of renewed decline is missing the point. The word recession implies active decline. As in the economy is contracting. The word depression is more passive. It fits better with our current lingering malaise. We are neither expanding nor contracting – at least not at a pace that is truly noticeable. Instead we are meandering along, rudderless, leaderless, and lost. We have no direction. There are no jobs. There is no plan to add jobs. No one particularly cares enough to act. Morale is low. People are scared and adrift. But things are no so bad that we have food lines or riots. We are depressed.

Psychologically, if not economically.

No. Make that economically as well.

Are we there yet?

Yes. We are in a depression.