One of the songs I have been listening to on and off this year is an oldie by Donovan, called “The season of the witch”. It’s a great number but it also echoed with some of my thinking. It is as we are in the season of “witchcraft”, in fact we are in the season of a lot of “bad witchcraft”. There is a kind of bewitched charade being played out on issues that are at the root of why we are living in an “age of crisis”.
I say bewitched, because everywhere there is in fact a healthy assessment of the shit we are in, BUT reaction/response/struggle are somewhat muted.
Take the big crash, that’s what we’ve had, its not just another “crises” as our leaders would have us believe , what we have had is a crash that leaves the model fundamentally broken, even on its own terms. No amount of patch work remedial repair work will put it back together again. A lot of people know this and yet we buy the policy of our respective governments. We are in effect “bewitched” into accepting solutions that will impact badly on our own children as well as ourselves. At EU level we have the EU 2020 strategy as our guiding light when its predecessor the “Lisbon strategy” so spectacularly failed. We are accepting coca cola light when in actual fact its not coca cola we need.
Recently,I went along to the Brussels Economic Forum which according to its publicity "offers a unique opportunity to discuss the new era of EU economic governance. High level decision-makers, economists, social partners and the media will gather at the Forum on 18 May to debate and exchange ideas".
High level decision makers were clearly present so too were some economists and people from trade unions and business (this is what social partners means in eurospeak).The majority of participants (based on the participants list provided to delegates ) were from EU institutions and from within the Brussels “bubble”.
What this meant is that there was no debate or even exchange of ideas. It was largely about information sharing. There were no disagreements between presenters and indeed there was kind of “gentleman’s” agreement (and yes they were overwhelmingly men speaking) that all was well, the EU economy was recovering from the crisis. Steps were being taken (like Basel 3 and the Stabilisation fund) which would ensure that we would not be faced again with such a crash. Indeed what really struck me was the way in which those who had not seen the crash coming were so enthusiastically talking about how they had dealt with the crisis and thus created a “blue print” for future bureaucrats faced with a similar problem. These were your DIY guys talking about how there was no procedure that could have followed when the “shit hit the fan”. They had to create new procedures. The crash was thus a challenge in that there was no road map for dealing with it.
The real irony is that their DIY solutions simply focused on better regulation of the financial sector. While the crises initially appeared in the financial sector, the origins of the problem are much deeper and cannot be addressed simply by repairing the “plumbing” of the financial sector.
NO mention of the underlying problem of income inequalities. It is now widely recognized that in most advanced industrial countries, median wages stagnated during the last 30 years, while income inequalities surged in favour of the top 10% and indeed 1%. In effect money was transferred from those who would have spent to meet basic needs to those who had far more than they could easily spend, thus weakening aggregate effective demand. We know how this played out. The negative impact of stagnant real incomes and rising income inequality on aggregate demand was largely offset by “financial innovation” and cheap credit that allowed households to increase consumption by borrowing.
On the other hand, the search for yield by the higher income classes to invest their increased incomes supported the formation of non sustainable asset bubbles.
NO mention that there have been policy failures at both the micro- and macro- economic levels. Loose monetary policy, inadequate regulation and lax supervison interacted to create financial instability. “Reforms” over the last three decades have infact exposed countries to greater instability and reduced the impact of “automatic” stabilizers.
NO mention about the lack of “accountability”. Its like as if the house got trashed but we are not going to discuss who trashed it. Not only that, we are going pay for the house to be fixed whilst the perpetrators will get our support in helping themselves to trash the house again. Not one voice which asked why have we socialised private losses. Why are young people and those less well off being asked to pick up the price of a rich peoples party that got out of hand.
NO mention of the fact that in the post crash context, the financial sector is even more concentrated, the problems of “too big to fail “ have actually increased.
No discussion about how in the post crash context global imbalances remain unabated.Indeed the current receipe is the same as the old one..growth through increased consumption…though ,now we simply want the Chinese to consume more.This is simply crazy. You cannot cure obesity by consuming more. We will not prevent another crash by simply encouraging countries to consume like us . Our plant cannot simply sustain a global lifestyle based on our patterns of consumption.
NO mention that the crash exposed the underlying problem with the free market model that has driven and is driving economic policy. Take the example of Iceland, the deregulation of the banks and the unleashing of a free market regime tore apart a country that had been performing well . The bank meltdown was directly linked to the free market model that was introduced in the 1990’s. Take Ireland. This too has faced a crisis largely because it followed the standard free market orthodoxy: unfettered markets led to a bloated financial sector which put at risk the entire economy; while politicians boasted of the growth (the benefits of which were not uniformly shared) they took little note of the risks to which they were exposing the economy. The core lesson of Ireland’s experience – and that of the US – is that we cannot rely on unfettered markets or self-regulation. Joseph Stiglitz has called this system” ‘ersatz capitalism’, the essential ingredient of which is the socialisation of losses and the privatisation of gains. This ersatz capitalism is closely related to the corporate capitalism that flourished under Bush and Reagan. In some cases, who pays for these gifts to corporations is not so transparent: in the end, of course, it is ordinary citizens, whether as taxpayers or consumers who pay, but often in ways that are not easy to detect, for example, through tax expenditure or through higher prices on the goods they purchase.
NO mention that the belief that light touch regulation, limited government, low taxes, labour market deregulation and weak labour market institutions are all necessary ingredients of economic success has proved to be a recipe for volatility, excessive risk taking, growing income inequality and, in some countries, the rise of precarious employment. While the richest in many parts of the OECD saw their relative position improve – sometimes dramatically – the poorest saw their relative position deteriorate. The OECD itself documented the rise in inequality in its landmark publication Growing Unequal in 2008 (OECD 2008).
NO Mention also that it is NOT true that the policies that we might usefully label as “market fundamentalist” ,led to better economic performance before the crisis broke.This troublesome fact was recognised by the OECD in their reassessment of the 1994 Jobs Study, published under the title Boosting Jobs and Incomes in 2006 (OECD 2006). It was accepted that two groups of countries had achieved ‘good results’ (defined as a high employment rate, moderate inflation and apparently robust growth): those pursuing ‘market reliant’ policies, such as the US and the UK, and those pursuing policies with higher taxes, stronger employment protection legislation, more generous unemployment benefits and much higher investment in active labour market programmes (including Austria, the Nordic countries and the Netherlands).
As I have written elsewhere, we are in grip of the “Positive Illusion Front”(PIF).
http://povertyofpolitics.blogspot.com/2010/10/mission-impossible-why-eu-strategy-for.html
This is the loose and not so loose (interlocking) coalition of willing interests who are all in some way implicated in the “crime of the century” though which we have all been collectively robbed by the very people who we “trust” to ensure that our human rights are preserved.The message of the PIF is simply this “we’ve had a rough time, we have to put our house in order, it means sacrifices for all, it means we must get more competitive (reduce pay and conditions of employment and increase dividends for shareholders), we have to grow through innovation and stimulating consumption , we have to pull together”. The PIF infact seeks to depoliticize reality and just present it a requiring a technical fix. AS such the PIF embodies the idea of “end of history/end of ideology”. Whilst it may be true to say that an ideological distinction based on “left” and “right” party political configurations is in fact redundant, what patently is not true is that the debate about “good” and “bad” capitalism has even really started, except in our public squares not inside gathering such as the BEF.
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