Catastrophists weigh in
lnp3 at panix.com
Wed Nov 5 08:08:02 MST 2003
Euphoria and the bursting bubble
By Michael Roberts
As you read this, the papers are probably full of the news that the US
economy is growing at the fantastic rate of over 6% a year. No wonder
the stock markets of the world have been booming. US share prices are up
25% this year in anticipation that the dark nights of economic recession
or slump have been banished from America and, as the US recovers from
the terrible year of 2001, it will sweep up the rest of the world
(Europe and Japan) in a new economic boom.
US President Bush has been having a hard time of it recently. He thought
that his adventurist attack on Iraq and Saddam would win him a landslide
re-election victory in 2004, as Americans patriotically flocked to his
support - just as some gullible Britons did to Thatcher after the
Falklands. But unlike the Falklands war, which merely left a small
contingent of the British army to look after the sheep in the fields,
the Iraq war did not end last May when Bush declared hostilities over.
Since then, Iraq has become a killing field for American troops and for
Iraqi civilians in larger numbers than the American military invasion
And the cost of the occupation is also mounting. Bush has already had to
ask the US Congress to stump up $150bn to finance the Iraqi and Afghan
occupations. He’s trying to raise some funds from the other imperialist
powers, but the response of Germany and France has been to hold their
noses. So Americans are worried and Bush has slumped in the polls just
as his British poodle, Blair, has done back in London.
As always, everything now depends on delivering a successful economy
that keeps sufficient numbers of Americans with enough in their pay
packets each week. So the Bush gang is spinning euphoria about the
success of their economic policies. The Republican National Committee
views the state of the US economy through rosy spectacles: “Last month
this economy exceeded expectations and added new jobs. Inflation is low.
After-tax incomes are rising. Home ownership is at record highs.
Productivity is high. Factory orders, particularly for high-tech
equipment, have risen over the last several months. Our strategy has set
the stage for sustained growth. By reducing taxes we kept a promise, and
we did the right thing at the right time for the American economy.”
But growth and investment are one thing. Without jobs, Bush won’t win
this time next year. That’s why the Bush gang is now rattling on about
jobs. Treasury Secretary John Snow puts his name on the mast: “I would
stake my reputation on employment growth happening before Christmas.
Everything we know about economics indicates that the sort of economic
growth expected for the next year, 3-4%, will translate into two million
new jobs from the third quarter of this year to the third quarter of
next year. That's an average of about 200,000 new jobs a month.” That’s
an ambitious forecast, considering that job numbers have been falling
for eight consecutive quarters and only in September was there a rise of
This euphoria is hogwash. Let’s make a prediction that’s more likely to
come true. Having watched 2.6m jobs vanish since he took office, Bush
will likely soon be the first president since Depression-era leader
Herbert Hoover to preside over a net loss of jobs in his first term.
The reality is that the economic growth that the US is now enjoying is
an illusion. It is based on three things. The first is massive spending
by the government. The Republicans are supposed to believe in the ‘free
market’ and oppose the whole idea of a state that interferes in the free
rein of capitalism. But when needs must, ideology goes out of the
window. Just like Reagan did before him back in the 1980s, Bush is
trying to replace the failure of capitalists to invest and spend by
getting the government to do it. Defence and “homeland security”
spending is at record levels. The free market has been replaced by
Keynesian-style pump-priming of the capitalist economic cycle.
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