t byfield on Sun, 14 Feb 1999 03:07:29 +0100 (CET)

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<nettime> CounterPunch on 'prosperity'

     [from the previous issue of CounterPunch]


No Need for the Crystal Ball: Neoliberalism In Bloody Rout

So far as the world economy is concerned, the sky -- as our
dear friend Andrew Kopkind used to say, is dark with
chickens coming to roost. As CounterPunch goes to press,
capital is massing its resources in a determined effort to
hold Brazil together and get Fernando Enrique Cardosa
reinstalled as president, after which point he can impose
enough austerity to suit the bankers' schedules.

And as the world economy cools, CounterPunch's predictions
about the fragility of the boom are being resoundingly
confirmed. The air is starting to seep out of the great
speculative bubble, and with it subside the hedge funds like
Longterm Capital Resources, the newly emerging markets and
the hopes and dreams of those who had been arguing that the
business cycle was dead.

In terms of the main indices of economic dynamism -- the
growth of output, of productivity and investment, the
economy of the 1990s has been the worst of the postwar
epoch, inferior even to the stagnant 1970s and 1980s, and
not remotely comparable to the boom decades if the 1950s and
1960s. Indeed, Robert Brenner of UCLA, who draw a stark
picture of world economic "fundamentals in the July/August
issue of New Left Review, "The Economics of Global
Turbulence", points out, the growth of output per hour and
also the growth of hourly wages has, since 1973, been worse
than in any period during the last century, including the
Great Depression and, on average, has not improved in the

To put some numbers on the famous "fundamentals": Between
1950 and 1973 labor productivity growth in the private,
non-farm sector was 2.7 per cent a year. From 1990 to 1996
it was 0.7 per cent. In 1997 workers' hourly wages were 12
per cent lower than in 1973 and exactly the same as in 1965.

To be sure, the jubilation of financiers, industrialists and
their acolytes in the business press has not been entirely
irrational. After a long period of depressed returns,
corporate profitability, especially in manufacturing, did
increase spectacularly in the 1990s. With the increased
profits came the stock market boom, albeit at a tempo
increasingly out of sync with reality. As always with bull
markets, the children of Dr Pangloss rushed out excited
essays, arguing that we were now in a "New Age" or "Third
Wave" economy, that there was no reason why the elevator
should ever go down.

But the boom came at the expense of the working people and
also of America's leading competitors. Between 1987 and 1997
real hourly wages here for production workers fell by more
than 5 per cent and the US dollar was devalued by some 40-60
per cent against the Japanese yen and the German mark. Our
goods thus became world beaters on the international

But this state of affairs, which provoked ecstasy on Wall
Street and in the speeches of Team Clinton, full of
self-congratulation about "growing the economy", could not
last long. The economies of Germany and Japan went into
crisis because of the sag in exports consequent upon US
competition. The US dollar duly began to rise, thus shaving
down the American advantage. And as the US economy began to
grow rapidly in the one glorious year of 1997, US wages at
last began to rise.

By the middle of 1998, a snapshot of the fundamentals showed
the predictable consequence. With their competitiveness now
falling as a result of rising wages and also the rising US
dollar, US producers' profit rates began to go down. The
stock market would not take long to reflect this changed

Ironically, the very success of the United States in
imposing its neo-liberal model of the rest of the world has
played no small role in inducing the current downward lurch
in economies round the globe. Neoliberalism spells out as
slashed social spending, balancing budgets, tight credit.
So, country after country lashed into austerity by the
International Monetary Fund and other US-dominated
institutions, have seen their own internal markets shrivel
in consequence. Their only option has therefore been to
export or die, and so they have, flooding the oversupplied
world markets and forcing down prices. The crises in Asia
and Russia have been the direct result of this international
overcapacity in manufacturing and oil.

And so, homeward fly the chickens. The desperate export
drives put pressure on US manufactures' prices and profits.
And the Russian collapse slashed into the profits of big US
banks. Collapses in Latin America cast another dark shadow.
With the stock market in tumult, consumers here will ease up
on their gallant spending, which has been propelling the
economy forward.

Now what? So fervent have been the neoliberals in their
preachments and in their presumed victories that it will
take an immense effort in mental self-abasement and
reappraisal, -- probably beyond their limited powers -- to
make them realize the folly of their doctrines, which have
yielded only the bitter fruit of a world depression, already
lacerating major portions of the globe. Can they abandon the
totems of balanced budgets, reduced government spending,
high interest rates and financial deregulation?

We have now reached a moment in which there is no good news
on the agenda anywhere in the world. Chipmunk chatter about
the "fundamentals" no longer suffices. The received wisdom
was wrong. Look at one more figure. Between 1989 and 1995 US
government spending increased in real terms by only 0.1 per
cent. Clinton would do well to get that number up off the
floor, and to realize that ex-bond traders like Robert Rubin
have a very limited notion of what "fundamentals" can mean
to ordinary people, who don't see the Nineties in quite the
terms as have him and his Wall Street friends. CP

3220 N Street, NW, Suite 346
Washington, DC 20007

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