Posts Tagged ‘Second Great Depression’

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I have been arguing all along (e.g., here) that, after the crisis of 2007-08 and in the midst of the Second Great Depression, capitalism faces a legitimacy crisis.

But don’t take my word for it. Consider the words of Mark Carney [pdf], the Canadian governor of the Bank of England, who is worried that capitalism is eating its own children.

Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes; equality of opportunity; and fairness across generations. Different societies will place different weights on these elements but few would omit any of them.

Societies aspire to this trinity of distributive justice, social equity and intergenerational equity for at least three reasons. First, there is growing evidence that relative equality is good for growth. At a minimum, few would disagree that a society that provides opportunity to all of its citizens is more likely to thrive than one which favours an elite, however defined. Second, research suggests that inequality is one of the most important determinants of relative happiness and that a sense of community – itself a form of inclusion – is a critical determinant of well-being. Third, they appeal to a fundamental sense of justice. Who behind a Rawlsian veil of ignorance – not knowing their future talents and circumstances – wouldn’t want to maximise the welfare of the least well off?

This gathering and similar ones in recent years have been prompted by a sense that this basic social contract is breaking down. That unease is backed up by hard data. At a global level, there has been convergence of opportunities and outcomes, but this is only because the gap between advanced and emerging economies has narrowed. Within societies, virtually without exception, inequality of outcomes both within and across generations has demonstrably increased.

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Our course, A Tale of Two Depressions, is now over (except, of course, for the final exam).

Here’s a link to the additional materials (songs, news stories, cultural responses, etc.) we made available to the students.

Here’s a link [pdf] to some of the charts we compiled to compare the first and second Great Depressions.

And, finally: maybe someday we’ll be able to offer this as a history course instead of current events.

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Back in 2009, in the midst of the Great Crash (and therefore at the start of the Second Great Depression), a colleague and friend asked me whether I expected the teaching of economics to change. His view was that, since mainstream economics had so miserably failed in both predicting the crash and providing a guide as to what to do once the crash occurred, it was obvious the economics being taught to students had to fundamentally change. My answer was that, while the need for a change was obvious, I didn’t see it happening—and it probably wouldn’t happen (thinking back to the emergence of the Union of Radical Political Economics in the late-1960s) unless and until students of economics demanded a different approach.

Well, in various places (starting almost a decade before the current crises, with the eruption of the Post-Autistic Economics movement in June 2000), students have been demanding a fundamental change in the way economics is being taught. The latest effort to move that project along is a report from the University of Manchester Post-Crash Economics Society. Here are some of their key findings, which refer to how economics is taught at Manchester but clearly have much wider relevance, in and beyond the United Kingdom:

  • Economics education at Manchester has elevated one economic paradigm, often called neoclassical economics, to the sole object of study. Other schools of thought such as institutional, evolutionary, Austrian, post-Keynesian, Marxist, feminist and ecological economics are almost completely absent.
  • The consequence of the above is to preclude the development of meaningful critical thinking and evaluation. In the absence of fundamental disagreement over methodology, assumptions, objectives and definitions, the practice of being critical is reduced to technical and predictive disagreements. A discipline with a broader knowledge of alternative perspectives will be more internally self-critical and aware of the limits of its knowledge. Universities cannot justify this monopoly of one economic paradigm.
  • The ethics of being an economist and the ethical consequences of economic policies are almost completely absent from the syllabus.
  • History of economic thought is an optional third year module which students are put off taking due to it requiring essay writing skills that have not been extensively developed elsewhere in the degree. Very little economic history is taught. Students finish an economics degree without any knowledge of momentous economic events from the Great Depression to the break-up of the Bretton Woods Monetary System.
  • When taken together, these points mean that economics students are taught the economic theory of one perspective as if it represented universally established truth or law.

American-Dream

The American Dream has been a prominent theme of our Tale of Two Depressions course this semester. We have had the opportunity to trace both the changing content and contours of that dream and the periods, as after 1929, when it quickly turned into a nightmare.

But, as we know, a new American Dream was invented in the postwar period, the so-called Golden Age of American capitalism, which—while unevenly distributed (for example, in the Jim Crow South and northern inner cities) and openly contested (for example, in the Port Huron Statement and the March on Washington for Jobs and Freedom)—held sway at least in some pockets. Such as Detroit:

Decades ago, car workers lived the quintessential American Dream: they pursued stable, well-paying, union-backed jobs, often straight out of high school. They were able to build a middle-class life and provide the promise of something better to their children.

Now, once again, as the BBC [ht: ja] explains, that dream has turned into a nightmare:

Times have changed.

Now jobs are scarce, and people feel shame in being unprepared for the current labour market.

“Unemployed auto workers, factory workers, they have a lot of regrets about the past,” he said.

“A lot of workers are internalising, ‘You succeed on your own merits and your own abilities, and if you fail, you’re to blame’,” [Victor Tan] Chen says.

He isn’t alone in seeing this pattern.

Experts tell the BBC that job seekers in the US are now, more than ever, blaming themselves for being out of work, due in part to misconceptions about what it takes to succeed in America.

What reinforces such an American Nightmare is a self-help industry that is the modern secular version of our grounding myth—which, as Helaine Olen explains, is “the idea that diligent efforts and thrift demonstrated both godliness and virtue — and would result in worldly success.” Belief in self-help easily becomes self-blame. And, of course, an attempt to blame the victims of the Second Great Depression for their own plight.

Viewed through this prism, you can think of the constant simmering anger in our culture as the road rage of self-help culture. Fearing the humiliation of failure, we aggressively lash out at others who prove the self-help nostrums a lie.

This could be the reason that many, including Republican members of Congress, blame the long-term jobless for their own plight, and cut off their unemployment checks. We say those who fell prey to predatory lending weren’t misled, but were greedy.

According to the tenets of self-help, the victims of the American economic collapse need not a helping hand, but a kick in the pants.

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It just so happens, in the midst of the march to war over Ukraine, this week we’re teaching Berkeley in the Sixties and The Port Huron Statement in the Tale of Two Depressions course.

In 1962, the Students for a Democratic Society were concerned about the effects of “a half-century of accelerating destruction,” especially the policy of nuclear deterrence.

Deterrence advocates, all of them prepared at least to threaten mass extermination, advance arguments of several kinds. At one pole are the minority of open partisans of preventive war —who falsely assume the inevitability of violent conflict and assert the lunatic efficacy of striking the first blow, assuming that it will be easier to “recover” after thermonuclear war than to recover now from the grip of the Cold War. Somewhat more reluctant to advocate initiating a war, but perhaps more disturbing for their numbers within the Kennedy Administration, are the many advocates of the “counterforce” theory of aiming strategic nuclear weapons at military installations — though this might “save” more lives than a preventive war, it would require drastic, provocative and perhaps impossible social change to separate many cities from weapons sites, it would be impossible to ensure the immunity of cities after one or two counterforce nuclear “exchanges”, it would generate a perpetual arms race for less vulnerability and greater weapons power and mobility, it would make outer space a region subject to militarization, and accelerate the suspicions and arms build-ups which are incentives to precipitate nuclear action. Others would support fighting “limited wars” which use conventional (all but atomic) weapons, backed by deterrents so mighty that both sides would fear to use them — although underestimating the implications of numerous new atomic powers on the world stage, the extreme difficulty of anchoring international order with weapons of only transient invulnerability, the potential tendency for a “losing side” to push limited protracted fighting on the soil of underdeveloped countries. Still other deterrence artists propose limited, clearly defensive and retaliatory, nuclear capacity, always potent enough to deter an opponent’s aggressive designs — the best of deterrence stratagems, but inadequate when it rests on the equation of an arms “stalemate” with international stability.

As we know, history is repeating itself, as “the world alternatively drifts and plunges towards a terrible war when vision and change are required.”

Thus, we would do well to consider Stephen Cohen’s argument that the American media are misrepresenting Putin and Russia.

The degradation of mainstream American press coverage of Russia, a country still vital to US national security, has been under way for many years. If the recent tsunami of shamefully unprofessional and politically inflammatory articles in leading newspapers and magazines—particularly about the Sochi Olympics, Ukraine and, unfailingly, President Vladimir Putin—is an indication, this media malpractice is now pervasive and the new norm.

There are notable exceptions, but a general pattern has developed. Even in the venerable New York Times and Washington Post, news reports, editorials and commentaries no longer adhere rigorously to traditional journalistic standards, often failing to provide essential facts and context; to make a clear distinction between reporting and analysis; to require at least two different political or “expert” views on major developments; or to publish opposing opinions on their op-ed pages. As a result, American media on Russia today are less objective, less balanced, more conformist and scarcely less ideological than when they covered Soviet Russia during the Cold War.

And we should remember that Senator John McCain’s shameless denunciation of President Obama, as responsible for a “feckless foreign policy where nobody believes in America’s strength anymore,” was delivered in a speech the American Israel Public Affairs Committee (AIPAC), the most powerful foreign policy lobby in Washington. As John Hickman explains,

McCain fulminated about Russian annexation of Crimea and possibly of the Russian speaking eastern half of Ukraine. Yet he was speaking to an audience that had endorsed the annexation of the Golan Heights and East Jerusalem, and endorses the ongoing annexation of the West Bank. Hypocrisy more complete would be difficult to conceive.

American journalists allow politicians like McCain to get away with such nonsense because many fear reporting anything critical about either Israel or the Israeli lobby. They are also captives of the news frames constructed by official sources in Washington. For the Crimean Crisis the consensus news frame is that Russian behavior is a violation of a strong post Second World War international norm against territorial annexation. The historical reality is that the norm has been frequently and successfully violated: Poland annexed East Prussia, East Brandenburg, Lower Silesia, and Pomerania; Russia annexed Bessarabia and Bukovina; India annexed Goa, Daman and Diu, Dadra and Nagar Haveli; India and Pakistan partitioned Kashmir; Indonesia annexed West Irian; Ethiopia annexed Ogaden; Turkey annexed northern Cyprus; Morocco annexed Spanish Sahara, and Israel annexed the majority of Palestine. Yes, of course some sort of justification could be offered for each of these events. There are always justifications. What is important but ignored in the outrage currently being performed about Crimea is that “the world community” did not protest strongly or effectively.

The consensus news frame also excludes reference to the complexities of Russian and Soviet history. When reporters deploy the propagandistic phrased like “Ukraine’s Crimea” they ignore the fact that Russian sovereignty over the peninsula predates American possession of the Mississippi Valley and ignores the rather artificial transfer of sovereignty over the peninsula from Russia to Ukraine by Nikita Khrushchev, at a time when both Russia and Ukraine were part of the same country (the Soviet Union). Forget about sympathy for the difficulties faced by ethnic Russian minorities in the post-Soviet near abroad.

Between the irresponsible pandering of politicians and the cockeyed international news coverage it seems likely that many will be deceived by a simplistic narrative of Ukrainian nationalist good guys and Russian bad guys. What a pity that it always seems to take so long to realize we are being failed by our political and news media leaders.

In both cases, the march to war was prepared by simplistic narratives produced and disseminated by feckless media and politicians.

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Here’s the link to my appearance, with Lorraine Chavez, to discuss the economics of the Second Great Depression on Liberal Fix Radio.

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Meanwhile, 10.9 million workers remain officially unemployed (4.1 million of them for 27 weeks or more)—to which we should add the 7.7 million workers who are involuntarily working part-time jobs and 2.1 million who are only marginally attached to the labor force. For all of them, the Second Great Depression is far from over.