Doug Henwood/Mark Jones exchange (from LBO-Talk)

[Louis Proyect <lnp3@xxxxxxxxxxxxx>]

Doug Henwood wrote:

> How could this all resolve itself? You could just have a long
> grinding period of adjustment without a true collapse, like Japan has
> been going through, or the U.s. went through from 1989-92/3. I also
> think you have to entertain the possibility that this really is a
> long upwave of prosperity, so there may be only a minor adjustment
> ahead. I think the character of the next recession will provide the
> definitive answer to the longer-term questions (and will show too
> whether the productivity pickup is a blip or something more real than
> a blip).

As Dean Baker put it in this weeks's Economic Reporting Review:

"  most economists who have
analyzed the stock market in relation to future projections of
profit and economic growth, such as MIT Professor Peter
Diamond and Yale Professor Robert Shiller, estimate that it was
over-valued by between $8 trillion-$10 trillion. The size of the
wealth effect associated with a correction of this magnitude is a
decline in annual consumption spending of between $320-400
billion. A reduction in consumption of this magnitude would
lead to a drop in GDP of 4-5 percent. "

I haven't seen Shiller's new book 'Irrational Exuberance' yet. But I don't
think we have to wait for the next recession in order to understand what is
going on in the world right now. The more the bubble inflates the bigger the
crash will be; it's in the numbers. The obverse of the Anglo-Saxon bubble is
the savage deflationary processes endured by most of the rest of the planet,
as Gunder Frank for one has been arguing also for about 20 years, and
rightly so, and is still doing so on WSN where Doug also inhabits. The
present bubble is the legitimate offpspring of Reaganomics, a phase of US
capital accumulation which successfully put an end not only to the USSR but
to any notion or hope or expectation of development occurring anywhere in
any meaningful form in the neo-colonial, semi-colonial, ex-colonial
peripheries where 2/3 of humankind actually lives. The fact that these
appalling events have coincided with the high flowering of hurrah-capitalism
epitomised in successive and increasingly grandiose and triumphalistic
WB/IMF/WTO annual reports recording huge economic growth in the world
economy, should not blind us to the truth. Most people in
Asia/India/Africa/LatAm are NOT better off or more secure or living in more
democratic societies as a result of this great 'upwave' you and Shaikh like
to speak of. The accumulaion process on a world scale has not just become
more lopsided, it's become extravagantly polarised by ANY historical
standards of comparison except perhaps for the excesses of the
pyramid-builders of ancient Egypt. The present bubble is merely the frothy
ending of this half-century cycle of American hegemony, and since the real
growth in factor productivity in the WORLD even on the most optimistic
assumptions is not sufficient to do anything at all for that ignored 2/3 of
humankind, which is mostly like the fable of the Chinese peasant who is like
a man standing up to his chin in water, so that the merest ripple is enough
to drown him, then even the last residual justification for the grandiose
excesses of US capitalism: that it has created a technological powerhouse
from which a fountain of good things will come if people will just wait
patiently for the benefits to trickle down - is shown to be false. Not only
will the edifice crash down, it DESERVES to crash down and those of us
who've been arguing so for a long time (I modestly include myself in the
category) will be vindicated circumstantially as well as morally when it
does.

Mark Jones

Louis Proyect
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