What Recovery?

[Mark Giebels]

REPLY TO: D66 at nic.surfnet.nl

Cees,

Inderdaad blijft de huizenmarkt hier in de San Francisco Bay Area
merkwaardig stijgen terwijl de bevolkingsdichtheid rond silicon valley
blijft slinken en de huurprijzen daardoor al jaren aan het dalen zijn.
De meest logische verklaring is, naast de rentedalingen, dat men en
masse uit de 'stocks' gaat en in onroerend goed aan het investeren is.
Is het nu wachten op de volgende zeepbel die wordt doorgeprikt? In ieder
geval blijf ik voorlopig nog maar even huren.

Groeten,
Mark


<-----Original Message----->
From: Cees Binkhorst
Sent: 4/20/2003 4:49:53 PM
To: d66 at NIC.SURFNET.NL
Subject: Re: What Recovery?

REPLY TO: D66 at nic.surfnet.nl

Beter een half ei, dan een lege dop? Of toch maar niet?

Wat heeft D66 in het vat voor wat betreft 'redistributing the effects of
slow growth', 'costs of the slowdown', 'class struggle', 'revolt from
below',
'economics of inequality' en 'making themselves rich at society's
expense', zoals beschreven in de laatste paragraaf van dit onderstaande
stuk?
Noot Cees: We kennen de mening van de vorige minister-president over het
laatste, maar wat vindt D66 daar nou van?

En dan bedoel ik _niet_ mooie woorden, maar _vormen_van_beleid_ die het
(voor de VS, maar ook van toepassing op Nederland/EU) geschetste
scenario tegengaan.

Gezien de huidige mogelijke deelname van D66 aan de regering geen
onbelangrijke vragen. En waarschijnlijk voor het 'kiesvolk' heel wat
relevanter dan een 'gekozen burgemeester (nee, minister-president ... of
was het nou toch burgemeester)'

Uiteraard passen 'modernisering van de economie', 'aandacht voor de
kenniseconomie', 'meer samenwerking van het onderwijs en bedrijfsleven'
daar weer wel in.
Maar wat voor beleid wordt daar nou onder verstaan?

http://www.monthlyreview.org/0403editors.htm

[knip]

In the four recessions preceding that of the early 1990s, the proportion
of job losers who lost their jobs permanently was about equal to those
losing them on a temporary basis. Thus workers losing their jobs
permanently averaged 51 percent in the initial phase of the four
recessions
prior to 1990, while in the recession of the early 1990s the percentage
of those permanently laid off-increased to 70 percent. In the initial
phase of the 2001 recession the share of permanent layoffs increased
even further, to 87 percent. This near disappearance of temporary
layoffs
as a factor in unemployment means additional hardship for workers who
are thrown out of work, and greater fear of job loss among those still
employed, putting downward pressure on wages.

[knip]

The great irony in these circumstances is that the U.S. economy is being
propelled forward in the present weak recovery largely by growth in
personal consumption, even as real wages are declining. The main factor
holding up consumption is borrowing on the basis of increased home
values-or a housing bubble. With the stock market and many other
investment opportunities appearing unattractive, significant amounts of
money have shifted into real estate, driving up prices. The Federal
Reserve, which has cut interest rates twelve times in the last two years
in order
to encourage investment, has stimulated this trend. As The Economic
Report of the President, 2003 acknowledged, "Housing prices... rose much
more quickly than the median household income in 2001," which left the
ratio of the prices of houses to the income of households at its highest
level in decades (p. 44). Many would-be new homeowners are unable to
purchase houses selling at high prices and are faced with higher rental
prices. Meanwhile, homeowners have responded to the combination of
increased home values and low interest rates by borrowing massively
against their home equity, primarily to maintain their consumption.
Refinancing totaled $2.5 trillion in the last two years alone. It has
been
estimated that in the third quarter of 2002, on an annualized basis,
Americans drew $320 billion more out of the equity in their homes than
they
reinvested in real estate. Only about 39 percent of homes in the United
States are owned free and clear and the remaining homeowners are
carrying average debt burdens in excess of 80 percent of the value of
their homes. This means that "many Americans have little margin of
safety
should home prices level off or should they fall as much as 20%, as they
did in many overheated areas in the late 'Eighties."
(Cees: hadden wij dat eind 70-er/begin 80-er jaren in Nederland?)

[knip]

For many years imports into the United States have far exceeded exports,
resulting in a potentially serious problem for the U.S. economy.
During 2002, imports of goods and services rose faster than exports,
resulting in a record $435 billion trade deficit ($77 billion greater
than the
previous year). The U.S. current account deficit, a good part of which
results from the deficit in the trade in goods and services, was about
$400
billion in 2001 and will most likely come in at well over $500 billion
for 2002. For over a decade, the trend has been toward increasingly
larger
current account deficits.

[knip]

The Bush administration has only one answer (other than stepped-up
military spending) to this entire economic quagmire: massive tax cuts
for
corporations and the wealthy. Basing its approach on a supply-side
theory of investment that should be absolutely discredited by now, the
administration believes that by increasing the economic surplus
available to capital and redistributing income and wealth from the poor
to the
rich it will open the flood gates to investment and create the
conditions for a new period of rapid growth. Yet, there is currently no
shortage of
investment-seeking surplus within the wealthy sectors of society. What
are missing are the profitable investment opportunities for the
absorption of this surplus. The chief problem has to do with an
overaccumulation of money capital together with insufficient consumer
demand.
Existing trends with respect to consumption, in particular, do not
portend well for those seeking to invest in new productive capacity. The
massive tax cuts now proposed by the administration will only enrich the
wealthy at the expense of the greater part of the population. Taking
resources from the mass of the people, who would spend it for consumer
goods, and giving them to the rich who would not, means a further
undermining of consumption. At the same time, increasing the money
capital in the hands of investors will not convince them to invest
unless
they consider it profitable to do so, which means that there has to be
an expectation of a growth in future demand that will utilize existing
capacity and justify its expansion. Right now this is simply a bad bet
from a business standpoint. Despite twelve interest-rate cuts over the
last
two years, bringing the federal funds rate on overnight loans between
banks down to 1.25 percent, its lowest level in forty-one years, the
Federal
Reserve Board has not been able to spur investment (New York Times,
March 1, 2003).

The fact that there is little inkling in establishment circles of the
underlying problems facing capitalist economies is hardly surprising.
Economic
experts and pundits debate endlessly about the federal government's
budgetary deficit, the current account deficit, the weakness of
investment,
and the bursting of the financial bubble, without ever considering the
possibility that these might be mere symptoms of an underlying disease
of
stagnation. Since the prevailing wisdom is that a capitalist economy
naturally tends toward high levels of investment, breakneck growth, and
economic prosperity, the idea of a tendency toward stagnation, intrinsic
to a mature capitalist economy, is excluded almost by definition. To the
extent that it is recognized that the rate of growth of the U.S. economy
has declined since the 1960s, this is seen as the result of an improper
government policy mix rather than a reflection of a larger tendency
endemic to the modern accumulation process.

In our view, a more realistic approach becomes possible once one adopts
the hypothesis that stagnation is normal for advanced capitalism. From
this perspective, it is the relatively unique periods of rapid growth
such as the 1950s and 1960s that need to be explained rather than the
slower
periods of growth that dominated the second half of the twentieth
century and the opening years of the twenty-first century.

[knip]

What the representatives of capital do seem to be good at under these
circumstances is redistributing the effects of slow growth to make sure

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