The Dow closed down 500 points or so today as Italy’s debt problem emerged on the market, got added to the US debt ceiling disaster, then was spun around by the teeny US growth numbers – which are really a contraction – and took a final plunge on fears of a fourth straight increase in the US unemployment numbers due to be released tomorrow.
Does anyone still think neo-Liberal economics are working?
Business has been running the show for the last thirty or so years in this country and others around the world. They’ve delivered lower real wages for many, static real wages for many more, high unemployment, higher prices and economic growth concentrated in the top ten per cent.
The problem, contrary to the Republican majority in the House of Congress, isn’t government debt. Too few are participating in economic growth and that’s just going to get worse in a low growth economy that still drives benefits to the few at the expense of everyone else.
Credit cards are maxed out. Houses are over-mortgaged. And what spare cash people have is being used to reduce debt, not create new consumer based problems. A June CNN poll found that almost 50% of Americans expect a great depression. These people aren’t spending now, and they won’t be spending any time soon.
What’s the answer?
Not more of the same. The Harper government (commodities, Canada’s bread and butter were hit particularly hard today) is still planning to take money out of the economy to reduce the deficit. It’s the wrong thing at the wrong time and recessions and depressions are all about both timing and the right policy instruments.
And business, having pushed wages down pretty well, has shifted to scaring workers about pensions and future income as if grabbing all the profits from the workplace for the last thirty years wasn’t enough.
That’s a sure fire way to get average people out on a shopping spree.
The answer is that the majority of people who are now extraordinarily worse off than the top ten per cent need to start reaping some rewards: Jobs, more money in their pockets, pensions for those who lack them, a break on user fees, higher wages.
Until that starts to happen – and who can expect change soon – the risk of the double dip will be there.
A couple of sites I’ve been reading on this stuff: Paul Krugman‘s analysis is proving useful and correct, much to the consternation of the right (see Neil Reynold’s attack in Thursday’s Globe).
And John Lanchester in the London Review of Books on the Euro debt crisis, how it works and why it matters.