The Coming Great Depression: Scapegoats and Exploitation
Correspondent Cheryl A. (who recommended the coming depression as a topic) followed up with a suggestion to define "depression" and "recession" as a baseline/context to the discussion.
Thank you, Cheryl, excellent idea:
A recession is a contraction phase of the business cycle, or "a period of reduced economic activity." The U.S. based National Bureau of Economic Research (NBER) defines a recession more specifically as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment, industrial production, and wholesale-retail sales." A sustained recession may become a depression.
Some business & investment glossaries add to the general definition a rule of thumb that recessions are often indicated by two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP).
A depression is a severe and prolonged downturn in the economy. Prices fall, reducing purchasing power. There tends to be high unemployment, lower productivity, shrinking wages, and general economic pessimism.
Great Depression: (Wikipedia) The Great Depression was not a sudden, total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929. Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.
In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs.
The decline in the American economy was the factor that pulled down most other countries at first.. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late in 1930, a steady decline set in which reached bottom by March 1933. My rough-and-ready definition: any period of stagnating/declining assets, income or purchasing power longer than 8 quarters is a Depression. Then there's the wag's definition: when you lose your job, it's a recession, when I lose mine, it's a Depression. No doubt pundits galore will grasp at some phony 1% "rise in GDP" (Never mind what's happening to incomes or assets) to declare the "end" to the "recession."
So in the Fantasyland of CNBC/MSM Punditry, 3 quarters of declining GDP interrupted by a single quarter of manufactured "rise" in GDP followed by another 4 quarters of declining assets and income (purchasing power) will be labeled "back to back shallow recessions."
The MSM will be anxious to call the Depression "stagflation" or "back to back recessions"--anything but what it really is, a Depression.
Given the excesses and cycles/trends which are intersecting in this timeframe, I would anticipate a sharp Depression of 4-5 years (2012-2013) which appears to end in a "false Spring" and then reverts to a stagnation/decline lasting another 10 years to 2022-23. More on that later.
Today's topic: who/what is responsible for the coming Depression? Put another way: will the American public seek scapegoats, or will it be honest enough to forego scapegoating in favor of a real analysis of exactly who/what caused the Depression?
Correspondent Chris S. made some comments recently which address just this question.
"Good essay The Baby Boom's Market Order: Sell, Sell, Sell (November 20, 2008) and is only a tip of the iceberg at this point that will sink the RMS Boomer. I would suggest another essay regarding who has already taken to the lifeboats, grabbed a seat, and put oar to the water. The WHO is very important. At this point it is more important than the how or where they are going. Many people are stuck below decks and don't even know it still.
Interesting that the automakers fly into DC and get an angry dressing down by the Hill and told to sell their private jets. There was no such pejorative lecture when the global (but US-based) bankers showed up in DC and the Hill trolls were all too eager to sign their blank check and hand over the gold. It is with no small irony that I note physical gold is hard to find.
The automakers employ 3 million people in this country (the ones that weren't outsourced under Clinton and Bush I and II), whereas it appears <30,000 will directly benefit from the banker bailout after the Wall Street lay-offs are over and the remaining big banks have consolidated.
Meanwhile, the American people are already clamoring in the streets screaming "No bail-out for Detroit!" Quite frankly, if I wasn't already so cognizant of the average person's total ignorance about open source current events, it would amaze me how they raised little cry over paying their tax dollars for contrived bundled paper "products" while kicking out against the hard goods and trickle down services that employ many of their common neighbors.
The auto industry, the national resource infrastucture that feeds it and the resulting support services in every US town and city from coast to coast employs and supports 1,000 times more people than the paper "products" banker industry by comparison. But how dare one of the young bulls move to the forefront of the herd while the wolves feast upon this year's calves? I suspect the herd will isolate the young bull and leave it to the wolves as well. There will be no bail out for "Detroit" (or Chicago, Indianapolis, St Louis, Louisville, etc).
As I've written many times before, I've known this was not a sustainable "liefstyle" over the longterm. People far far higher in the hierarchy know this, too, and have already headed for the lifeboats.
The loan to the automakers would have to be paid back, the bail-out to the bankers doesn't. I guess to TPTB (The Powers That Be) it doesn't make a difference what it's called.
The "who" it really is will be different from "who" gets the blame. The last time this happened in the 20th century it didn't turn out very well and it didn't matter which color the arm bands were. Try to tell Average Joe there's no real different between a fascist and a communist in practice and they've been programmed to knee jerk like they were hit with a sledgehammer."
Thank you, Chris. To start the analysis, I propose the "Private Jet Metric:" if you have to lease your private jet, well, you didn't make it into the lifeboat. If you have to beg from Congress, you didn't make it, either. Those in the lifeboat got their hundreds of billions in private meetings; there was no need to sully themselves with abject public contrition or begging in front of cameras.
I have on occasion mentioned the "traffic jam" of private jets bedeviling Kailua-Kona Airport on the Big Island of Hawaii. There just isn't enough tarmac for all the private jets of those visiting their 3rd or 4th or 5th resort home.
If you're in the lifeboat, you don't deal with regulations; you have attorneys and lobbyists for that. (41,000 lobbyists and counting in D.C., and guess how many represent Common Cause or other "we represent the common citizen's interests" groups).
For a deeper analysis, let's turn to correspondent Bruce C. who recommended two historical/analytic approaches:
Social cycle theory of P.R. Sarkar:
The Law of Social Cycles is a theory of Varna, arising out of the Indian episteme. Essentially, there are four different types of people, warriors, intellectuals, acquisitors and labourers, who find basic fulfillment in four different kinds of ways.
According to Batra (1978), the West is currently in the age of acquisitors, also known as Capitalism. This age followed then age of intellectuals, which gave birth to the Enlightenment and the British parliamentary system. Before that the West went through the age of warriors and the age of discovery. Feudalism, an earlier age of acquisitors, reigned before that. It had replaced the age of intellectuals, with restrictions on religious thought and also gave birth to the Renaissance period. Before that, Rome ruled the West under the aegis of warriors.
Exploitation and Breakdown
To Sarkar, each age would run its course, with the social motivity going too far, causing much grief to the majority of people (Sarkar, 1967). The situation could unchecked go on for a long time, before things got so bad that a spontaneous revolution and overthrow of the system took place. In fact, as this was the reason for social change, it was clear that no single class of people could remain dominant indefinitely. Power was destined to pass from one class to next in the prescribed order, or cycle.
The Decline of the West (By Oswald Spengler): (This is a long excerpt but worth the time/effort)
The Decline of the West (German: Der Untergang des Abendlandes) is a two-volume work by Oswald Spengler, the first volume of which was published in the summer of 1918. Spengler revised this volume in 1922 and published the second volume, subtitled Perspectives of World History, in 1923.
Spengler sees "Blood" as the only power strong enough to overthrow "Money," currently the dominant power of our age. Blood is commonly understood to mean race-feeling, and this is partially true but misleading. Spengler's idea of race has nothing to do with ethnic identity, indeed he was hostile to racists in that sense.
The book talks about a population becoming a race when its united in outlook, possibly diverse ethnic origins are not a concern. Crucially Spengler talks about the final struggle with money also being a battle between Capitalism and Socialism, but again Socialism in a special sense: "the will to call into life a mighty politico-economic order that transcends all class interests, a system of lofty thoughtfulness and duty sense".
He also writes "A power can be overthrown only by another power, not by a principle, and only one power that can confront money is left. Money is overthrown and abolished by blood." Therefore if we wanted to replace Blood by a single word it would be more correct to use life-force rather than race-feeling.
Caesarism is essentially the death of the spirit that originally animated a nation and its institutions. It is marked by a government which is formless irrespective of its de jure constitutional structure. The antique forms are dead, despite the careful maintenance of the institutions; those institutions now have no meaning or weight. The only aspect of governance is the personal power exercised by the Caesar. This is the beginning of the Imperial Age.
Despite having fought wars for democracy and rights during the period of Contending States, the populace can no longer be moved to use those rights. People cease to take part in elections, and the most qualified people remove themselves from the political process. This is the end of great politics. Only private history, private politics, and private ambitions rule at this point.
Spengler asserts that democracy is simply the political weapon of money, and the media is the means through which money operates a democratic political system.
Democracy and plutocracy are equivalent in Spengler's argument. The "tragic comedy of the world-improvers and freedom-teachers" is that they are simply assisting money to be more effective. The principles of equality, natural rights, universal suffrage, and freedom of the press are all disguises for class war (the bourgeois against the aristocracy).
In reality, freedom of the press requires money, and entails ownership, thus serving money at the end. Suffrage involves electioneering, in which the donations rule the day. The ideologies espoused by candidates, whether Socialism or Liberalism, are set in motion by, and ultimately serve, only money. "Free" press does not spread free opinion--it generates opinion, Spengler maintains.
Spengler notes that the greater the concentration of wealth in individuals, the more the fight for political power revolved around questions of money. One cannot even call this corruption or degeneracy, because this is in fact the necessary end of mature democratic systems.
Through the media, money is turned into force--the more spent, the more intense its influence."
So what can we distill from this analysis?
1. The Mainstream Media cannot be trusted to "identify the culprits" as they have actively promoted and abetted the obfuscation and diversions which have deflected any questions or analysis which got close to the truth, i.e. that a tiny privileged class gained immensely from the phony debt-based "prosperity" while the majority lost purchasing power.
And now this same elite benefits as easily-predicted stupendous losses are socialized (bail-outs paid for by taxpayers far less wealthy than those being bailed out) while profits were left safely private. Hedge fund managers got special tax breaks, as did all those multi-millionaires using offshore tax havens and squads of high-priced tax attorneys to forge and manipulate tax loopholes.
So expect the MSM to create red herrings, dodges, excuses, foreign scapegoats, etc. and to lead the gullible public down a path of "alternative explanations" which leave the elites untouched. For instance, lack of regulation: nice, but who lobbied to have the regulations relaxed? What pressure was applied, and by whom?
2. "Money" will continue to exploit/dominate until "Blood" rises up to displace that power with its own power.
In the U.S., I interpret Blood to mean a democratic (small "c": the Democrats sold us down the river as fast if not faster than the "never met a tax cut and resulting deficit we didn't love" Republicans) social movement which forces the political class to betray Money via the only threat Blood can raise: you will lose an election and hence lose power and wealth.
Or, Blood will storm the state capital or launch a Tax Rebellion in which the taxpayer debt-serfs simply stop paying taxes. Once "Money" no longer has unlimited access to tax revenues, the worm will have turned against Money and their political lapdogs in both parties.
3. The ideological banner of "free enterprise" is a wonderful cloak for the reality of exploitation. Ditto "democracy." If we're so "democratic," how come 97% of all elected officials "win" re-election, regardless of the disasters they have fomented/aided?
4. When the exploitation reaches unsustainable extremes, then the exploited finally rise up. I would guess the exploitation ($7 trillion stolen from taxpayers and given to the ruling elites) has reached a financial extreme; the poltical extreme is probably years away. The suffering will have to become far greater and more widespread for people to start questioning if all this was just an inevitable "business cycle" like the waxing and waning of the moon, or if it was calculated exploitation of the "system" by a few who benefitted to an extraordinary degree at the expense of the many who now pay the price of their blindless/apathy.
In a similar vein, correspondent Maclean recommended this provocative piece:
Congress Confronts Its Contradictions (By George Monbiot)
According to Senator Jim Bunning, the proposal to purchase $700bn of dodgy debt by the US government “is financial socialism, it is un-American”. The economics professor Nouriel Roubini calls George Bush, Henry Paulson and Ben Bernanke “a troika of Bolsheviks who turned the USA into the United Socialist State Republic of America”. Bill Perkins, the venture capitalist who took out an advertisement in the New York Times attacking the deal, calls it “trickle-down communism”.
They are wrong. The banking subsidies are as American as apple pie and obesity. The sums demanded by Bush and Paulson might be unprecedented, but there is nothing new about the principle: corporate welfare is a consistent feature of advanced capitalism. Only one thing has changed: Congress has been forced to confront its contradictions.
One of the best studies of corporate welfare in the United States is published by my old enemies at the Cato Institute. Its report, by Stephen Slivinski, estimates that in 2006 the federal government spent $92bn subsidising business. Much of it went to major corporations like Boeing, IBM and General Electric.
The biggest money crop - $21bn - is harvested by Big Farmer. Slivinski shows that the richest 10% of subsidised farmers took 66% of the pay-outs."
Book Notes: My "little book of big ideas," Weblogs & New Media: Marketing in Crisis is now available on amazon.com for $10.99.
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Wednesday, November 26, 2008
The Coming Great Depression: Scapegoats and Exploitation
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