[Marxism] Crash Club

Louis Proyect lnp3 at panix.com
Tue Jul 26 12:06:23 MDT 2011


     Crash Club
     What Happens When Three Sputtering Economies Collide?
     By Mike Davis

     When my old gang and I were 14 or 15 years old, many 
centuries ago, we yearned for immortality in the fiery wreck of a 
bitchin' '40 Ford or '57 Chevy.  Our J.K. Rowling was Henry 
Felsen, the ex-Marine who wrote the bestselling masterpieces Hot 
Rod (1950), Street Rod (1953), and Crash Club (1958).

     Officially, his books -- highly praised by the National 
Safety Council -- were deterrents, meant to scare my generation 
straight with huge dollops of teenage gore.  In fact, he was our 
asphalt Homer, exalting doomed teenage heroes and inviting us to 
emulate their legend.

     One of his books ends with an apocalyptic collision at a 
crossroads that more or less wipes out the entire graduating class 
of a small Iowa town.  We loved this passage so much that we used 
to read it aloud to each other.

     It's hard not to think of the great Felsen, who died in 1995, 
while browsing the business pages these days. There, after all, 
are the Tea Party Republicans, accelerator punched to the floor, 
grinning like demons as they approach Deadman’s Curve.  (John 
Boehner and David Brooks, in the back seat, are of course 
screaming in fear.)

     The Felsen analogy seems even stronger when you leave local 
turf for a global view.  From the air, where those Iowa cornstalks 
don’t conceal the pattern of blind convergence, the world economic 
situation looks distinctly like a crash waiting to happen.  From 
three directions, the United States, the European Union, and China 
are blindly speeding toward the same intersection.  The question 
is: Will anyone survive to attend the prom?

     Shaking the Three Pillars of McWorld

     Let me reprise the obvious, but seldom discussed. Even if 
debt-limit doomsday is averted, Obama has already hocked the farm 
and sold the kids. With breathtaking contempt for the liberal wing 
of his own party, he’s offered to put the sacrosanct remnant of 
the New Deal safety net on the auction bloc to appease a 
hypothetical “center” and win reelection at any price.  (Dick 
Nixon, old socialist, where are you now that we need you?)

     As a result, like the Phoenicians in the Bible, we’ll 
sacrifice our children (and their schoolteachers) to Moloch, now 
called Deficit.  The bloodbath in the public sector, together with 
an abrupt shutoff of unemployment benefits, will negatively 
multiply through the demand side of the economy until joblessness 
is in teenage digits and Lady Gaga is singing “Brother, Can You 
Spare a Dime?”

     Lest we forget, we also live in a globalized economy where 
Americans are consumers of the last resort and the dollar is still 
the safe haven for the planet’s hoarded surplus value.  The new 
recession that the Republicans are engineering with such impunity 
will instantly put into doubt all three pillars of McWorld, each 
already shakier than generally imagined: American consumption, 
European stability, and Chinese growth.

     Across the Atlantic, the European Union is demonstrating that 
it is exclusively a union of big banks and mega-creditors, grimly 
determined to make the Greeks sell off the Parthenon and the Irish 
emigrate to Australia.  One doesn’t have to be a Keynesian to know 
that, should this happen, the winds will only blow colder 
thereafter.  (If German jobs have so far been saved, it is only 
because China and the other BRICs -- Brazil, Russia, and India -- 
have been buying so many machine tools and Mercedes.)

     Boardwalk Empire Times 160

     China, of course, now props up the world, but the question 
is: For how much longer?  Officially, the People’s Republic of 
China is in the midst of an epochal transition from an 
export-based to a consumer-based economy.  The ultimate goal of 
which is not only to turn the average Chinese into a suburban 
motorist, but also to break the perverse dependency that ties that 
country’s growth to an American trade deficit Beijing must, in 
turn, finance in order to keep the Yuan from appreciating.

     Unfortunately for the Chinese, and possibly the world, that 
country’s planned consumer boom is quickly morphing into a 
dangerous real-estate bubble.  China has caught the Dubai virus 
and now every city there with more than one million inhabitants 
(at least 160 at last count) aspires to brand itself with a Rem 
Koolhaas skyscraper or a destination mega-mall.  The result has 
been an orgy of over-construction.

     Despite the reassuring image of omniscient Beijing mandarins 
in cool control of the financial system, China actually seems to 
be functioning more like 160 iterations of Boardwalk Empire, where 
big city political bosses and allied private developers are able 
to forge their own backdoor deals with giant state banks.

     In effect, a shadow banking system has arisen with big banks 
moving loans off their balance sheets into phony trust companies 
and thus evading official caps on total lending. Last week, 
Moody’s Business Service reported that the Chinese banking system 
was concealing one-half-trillion dollars in problematic loans, 
mainly for municipal vanity projects.  Another rating service 
warned that non-performing loans could constitute as much as 30% 
of bank portfolios.

     Real-estate speculation, meanwhile, is vacuuming up domestic 
savings as urban families, faced with soaring home values, rush to 
invest in property before they are priced out of the market. 
(Sound familiar?)  According to Business Week, residential housing 
investment now accounts for 9% of the gross domestic product, up 
from only 3.4% in 2003.

     So, will Chengdu become the next Orlando and China 
Construction Bank the next Lehman Brothers?  Odd, the credulity of 
so many otherwise conservative pundits, who have bought into the 
idea that the Chinese Communist leadership has discovered the law 
of perpetual motion, creating a market economy immune to business 
cycles or speculative manias.

     If China has a hard landing, it will also break the bones of 
leading suppliers like Brazil, Indonesia, and Australia.  Japan, 
already mired in recession after triple mega-disasters, is acutely 
sensitive to further shocks from its principal markets.  And the 
Arab Spring may turn to winter if new governments cannot grow 
employment or contain the inflation of food prices.

     As the three great economic blocs accelerate toward 
synchronized depression, I find that I’m no longer as thrilled as 
I was at 14 by the prospect of a classic Felsen ending -- all 
tangled metal and young bodies.

     Mike Davis teaches in the Creative Writing Program at the 
University of California, Riverside.  He is the author of Planet 
of Slums, among many other works.  He’s currently writing a book 
about employment, global warming, and urban reconstruction for 
Metropolitan Books.  To listen to Timothy MacBain’s latest TomCast 
audio interview in which Davis discusses a possible Chinese real 
estate crash and other perils of the global economic system, click 
here, or download it to your iPod here.

     Copyright 2011 Mike Davis

     [Note for Readers: A sample passage from Henry Felsen’s 1950 
novel Hot Rod:

     "The crushed pile of twisted metal that had once been 
My-Son-Ralph's Chevy was on its back in the ditch, its wheels up 
like paws of a dead dog. Two of the wheels were smashed, and two 
were turning slowly. Something that looked like a limp, 
ripped-open bag of laundry hung halfway out of a rear window. That 
was Marge.

     "The motor of Ralph's car had been driven back through the 
frame of the car, and its weight had made a fatal spear of the 
steering column. Somewhere in the mashed tangle of metal, wood and 
torn upholstery was Ralph. And deeper yet in the pile of mangled 
steel, wedged in between jagged sheet steel on one side, and red 
hot metal on the other, was what had been the shapely black head 
and dainty face of LaVerne.

     "Walt's car had spun around after being hit, and had rolled 
over and along the highway. It had left a trail of shattered 
glass, metal, and dark, motionless shapes that had been broken 
open like paper bags before they rolled to a stop. These had been 
Walt's laughing passengers. Pinned inside his wrecked car, beyond 
knowing that battery acid ran in his eyes, lay Walt Thomas. 
Somehow the lower half of his body had been twisted completely 
around, and hung by a shred of skin."]

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