Wednesday, October 14, 2009

Obama's Bankruptcy

From an excellent article by Alan Nasser: "Dubious Economics: Obama's Recovery Plan and the Median Wage Earner" --

It's an excellent article and I just want to point out a couple of things. First, Obama justifying US taxpayers bailing out the banks while taxpayers themselves are being put through the wringer:
"And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks- ‘Where's our bailout?,' they ask -the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to famiies and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth." (The New York Times, April 14, 2009 "Obama Stands Firm on a Sweeping Agenda", by Peter Baker)

That's right. The banks will take that money and loan it out, creating a multiplier effect. Except that the banks aren't loaning it out. Because US households are drowning in debt. Didn't think that one through, did you Obama? And, are we to believe that a dollar going to a US household wouldn't get recycled through the economy having a multiplier effect? Why did it have to get filtered through a bank which would attach the drag of an interest charge on the actual use of the money?

Secondly, his neoliberal plans for a US-American economic revival:

In the Georgetown speech Obama alerts us that "We must lay a new foundation for growth and prosperity, where we consume less at home and send more exports abroad." Obama has repeatedly underscored that the main propellants of "new normal" growth will be investment and exports, attended by reduced consumption -necessitated by wage reduction- at home. He is in tune with the neoliberal Economist magazine, which, in expanding on the notion that consumption will play a much diminished role in future US growth, writes "Something else will have to grow more quickly. Ideally that would be exports and investment." (May 6, 2009)
The picture is clear: wage reduction is a strategic imperative if the US is to regain the competitive edge it enjoyed in the boom years 1949-1973. Policymakers are convinced that manufacturing activity is gradually shifting from the US, Europe and Japan to China, India, Brazil and other low-wage countries, so that US companies will be increasingly in competition with firms located in predominantly low-wage countries. US workers will have to make the necessary "adjustments." Obama was quite explicit in an interview on September 18 with the editors of the Pittsburgh Post-Gazette (September 18, 2009).
"Pittsburgh is now having to pay attention to what happens in Beijing and Bangladore and Eastern Europe in ways that in the past it didn't have to pay attention to... The manufacturing base that employed so many people, the decline in that sector of the economy took decades. It didn't start last year, it's been going on for two decades. And reversing that and rebuilding it is going to take two decades as well."
It doesn't get any clearer than that. Remaking American industry in the image of the restructured General Motors and Chrysler will take decades, after which a leaner, meaner America employing workers making poor-country wages will rise from the ashes to regain its status as a great power whose economic prowess will once again match its military predominance.


Even when the intellectual bankruptcy of their ideas have caused literal bankrupticies on a globabl scale they just can't shake their adherence to their dogmas. In the face of a consumption crisis brought about by three decades of neoliberal decimation of working class living standards and wages, Obama and the Democrats believe that further wage restraint is the answer.

They're not even beginning to address the roots of the economic crisis. You just know they're incapable of even thinking about the ecological crisis.

2 comments:

Anonymous said...

I think the major problem facing the American ecconomy is the failure of banks to "roll over" consumer debt. Rather than extending credit card limits they start to retract them. This could leads to widespread bankruptcy

thwap said...

Well, the banks weren't thinking about perpetual motion. And the whole US economy was built on destroying the ability of the population to manage its debts.