There is a story (and quite a good poem) about a man running away from a tiger. He runs along a cliff-edge, which crumbles under him. He clings to a root, the tiger above him, while far below him, the tiger’s mate is waiting for him to fall. Two mice are gnawing through the root. In front of his face is a strawberry plant with one fruit on it.
If you like, the election and inauguration of Barack Obama is that strawberry, and everything else is everything else in the world.
Consider the United States, which toils not, neither does it spin. Instead it pushes numbers around and flips hamburgers and operates tanning salons. This last quarter its economy, based on these noble activities, contracted, according to the official statistics, 3,8%. The Creator hasn’t bothered to find out if this was an actual contraction or an annualised contraction (i.e., the real contraction that quarter was 0,95%). It doesn’t matter, anyway, since official statistics in the United States are completely worthless; they are lies to start off with and those lies are massaged out of all recognition by political propagandists. All we know is that it’s incredibly unlikely that the contraction was less than that.
An interesting sidebar on American economic politics; the news that the decline was 3,8% caused the New York Stock Exchange to rise sharply. How could that be, when the economy was contracting? Because it was said that analysts had predicted that the decline would be 5%, and therefore a 3,8% decline was good news.
What this means is that the analysts were told well in advance that the public relations people at the U.S. Treasury were going to pretend that they knew that the decline was 3,8%, so the analysts pretended that they were predicting that the decline would be 5%, and then this could be spun as a victory, so that the market would go up and the analysts and propagandists’ friends could hastily sell their stocks before the calamitous situation sank in and the market fell below the crucial 8000 level, which happened almost immediately. (It is now around 7900; it will bounce back above 8000 again, but probably not for long.)
But, you may rightly say, is this a big deal? Should anybody care about this stuff?
Another way to look at it, is that the fall in the stock market and the massive contraction in the economy has lately been compared with two periods: with six years ago, and with twenty-seven years ago. Well, phew! So that’s all right then! They aren’t comparing us, not at all, with eighty years ago, when the global economy collapsed and stayed flat on its arse for ten years! We’re safe!
No, we aren’t. Six years ago the global markets temporarily plunged. The reason for this was that everybody knew that America was about to invade Iraq. Most serious observers thought that it was going to be a cakewalk to Baghdad, but the American government, in order to “legitimate” the most serious crime that any government can ever commit, that of unprovoked aggression, was pretending that the Iraqi government had powerful weapons — nuclear, biological and chemical. Many people suspected that there was no smoke without fire. If the Iraqis really had such weapons, they could have used them to devastate not only the invading armies (which were quite weak) but also the whole of the Fertile Crescent, had they chosen to. Meanwhile, no matter whether the Iraqis had thermonukes or just had strands of wet spaghetti (the latter being the actual case) the activity was bound to alienate and disrupt the whole Middle east and perhaps set off a chain of wars (which was in fact the case — both Lebanon and Gaza can ultimately be traced back to the invasion of Iraq). So people figured they had better sell their stocks. Smart people, anyway.
So that was a temporary thing — a moment flash of clarity before the steady visual and aural streams of sewage buried all the world again. It was a panic, as they call it, and the panic came to an end, and the stocks went up. There was no reason for them to do so, but they did.
But twenty-seven years ago was another kettle of shit. At that stage, the Reagan Administration, led by Mr. Milton Friedman, was deliberately damaging the U.S. manufacturing economy. They had raised interest rates to exorbitant levels; the reason for this was to discourage borrowing and thus slow the creation of money, because Mr. Friedman believed that the creation of money was the source of all evils. (It sounds like the kind of thing which should get you into a room with rubber walls and straps on your bed, but this is known as monetarism, and it is the foundation of modern macroeconomics.) As a result, everybody who owed money was in a state of panic and crisis, and everybody thinking of borrowing money forgot about it, and the economy went into a tailspin and unemployment soared. And this was a great success, for it weakened the position of the working class, undermined the unions which Reagan was attacking, and generally set the scene for thirty years of the ruling class looting the country like Viking berserkers.
So now, the U.S. economic conditions are being compared with a temporary collapse in confidence a few years ago, and with a deliberate (but again necessarily temporary) yet savage collapse of the U.S. national economy.
The point is that the comparison is not valid because conditions are so utterly different. Today, interest rates are pushing zero. Banks are willing to lend money for free — except they aren’t, because virtually no banks are sure that they have any money to lend. Still, theoretically such low interest rates should be promoting economic growth, not contraction.
The U.S. government has been trying to promote economic growth. President Bush tried to stimulate the economy by giving every citizen a cash rebate so that they would go out and consume. Meanwhile, under Bush trillions of dollars were poured into the private economy, mostly to banks, to try and get them to use the money productively. The amount of money being spent made little things like the New Deal or the Interstate Highway Programme look like pennies. None of that socialistic activity managed to save the U.S. economy from contracting.
OK, another solution is tax cuts. Tax cuts don’t usually work, admittedly — when the Great Depression happened, Herbert Hoover cut taxes until there was no more to cut, and he was still heaved out of the White House by the scruff of his neck first chance the voters got. But, theoretically, tax cuts are supposed to be stimulating. And taxes just happen to be lower than they’ve been since the Second World War. But the economy is contracting, not growing.
What all this means is best expressed in terms of a Western movie. A bad guy has rolled into town. Luckily, the sheriff, unafraid, waits for the bad guy in the main street at high noon, The sheriff waits till the bad guy in the black hat is close enough, then draws his .45 Peacemaker and fires six shots. Every one hits, for of course the good sheriff in the white hat never misses. But unfortunately the bullets just bounce off, for the bad guy is not from a Western movie at all, he’s one of the bad guys from a superhero movie, and bullets don’t faze supervillains. What’s more, he’s coming at the sheriff, wearing a ski mask and carrying a chain-saw. Will the sheriff stand still to be chopped into hamburger, or will he run, leaving the townsfolk to their fate? What difference would it make?
None. Like unto the dangling person on the cliff with the tigers.
However, we may get some clues of the predicament of the present government from the behaviour of America’s lawmakers. The new President is proposing a “stimulus package” of some $800 billion. Some of this is going to be borrowed and fed into the U.S. economy over the next two years; some is going to be income tax cuts. A great deal of the spending is aimed at middle-class supporters of the Democratic Party, although most of this will in some ways benefit the U.S. economy (for example, spending on sexually transmitted diseases goes mainly to doctors, but STDs are a costly medical burden; spending on public infrastructure goes mainly to construction companies, but roads and railways are a nice thing to have). As for the tax cuts, of course these benefit the ruling class and the upper-middle-class disproportionately, because they are the people who potentially pay most of the income tax (poorer people contribute to revenue mainly through sales tax).
What this means is that the “stimulus package” is not as much of a stimulus as it ought to be (if President Obama really wanted to stimulate the economy he would borrow that $800 billion and give $2,500 tax-free to every American citizen — then he’d see some consumer spending!). On the other hand, it is more nearly a stimulus package than, say, borrowing a similar amount of money and giving it to banks (which President Bush did last year to no obvious gain for anyone except a handful of bankers). However, the Republican minority in Congress is doing its utmost to oppose this package, demanding that less be spent on anything which might conceivably stimulate the economy, and more be spent on tax cuts. Tax cuts do not have meaningful impact on a depression, but they do benefit the rich much more than the poor, and the Republican Party is openly committed to this as a policy. (The Democratic Party’s commitment to this policy is unspoken, although real.)
The chief reason for the depression is that wealth disparities have gone too far. The rich are now so rich that they are spending little on consumer goods and services. The poor are so poor that they have to go into debt to buy consumer goods and services. Now the debts are being called in, loans are not being made, and the poor are not buying any more. As a result, the weaker service providers and retailers are collapsing, and the stronger ones are gleefully cutting back on employment and on remuneration, hoping to make more profits when the upturn comes. But this means that there are fewer and fewer people with jobs, and those with jobs have less and less money to spend. So people buy even less goods and services, and the spiral renews itself.
The only way out of the spiral is to stop the vicious process by which the U.S. capitalist system is starving the people who do the buying of any cash to buy things with. This is a suicidal process, but the system is working this way because the people in charge want more cash for themselves. Ironically, these people do not spend the money on goods or services, but put most of it into financial institutions — and it is these institutions which are particularly in crisis as a result of the collapsing wider economy. It is as if there were a huge cash-in-transit robbery syndicate which was dedicated to stealing money and flushing it all down the toilet, after which more robberies are needed to get more to flush. The robbers are incapable of seeing how absurd their behaviour is because they are so in love with the money they steal and the power they have to steal it. The people from whom they steal have no protection (the robbers have bought off the cops) and no capacity to influence the robbers.
All that anyone can do is inject more money into the system, and stop sending that money by cash-in-transit vans. (Getting a new set of cops might be a good idea, too.) There is no sign that President Obama or any of his friends plan on doing anything like this. Hence the spiral into depression will continue until the U.S. no longer has the money to fund its operations because the banks can no longer lend it money and it is in any case no longer considered a good credit risk. Nobody seems to have thought about the consequences of a financial collapse of the United States, apart from some science fiction writers (Bruce Sterling’s Distraction opens with an image of U.S. troops setting up roadblocks to shake down passers-by for cash), and science fiction writers usually resolve their problems with a technological deus ex machina. There is no god in any box who is coming to save the U.S. Or the rest of us.