Re: Re: Bill Tabb is gone: A new direction??

["Jeffrey L. Beatty" <Beatty.4@xxxxxxx>]

At 12:45 AM 12/20/00 -0500, Yoshie Furuhashi wrote:

>I believe that we are heading into a recession, but the questions are:
>
>1.  What kind of recession?  Mild or severe?

There is still a great deal of hope for a "soft landing" for the U.S. economy.  A lot depends upon whether or not the Federal Reserve is sufficiently adept at pursuing the more expansionary monetary policy that would be appropriate under recessed conditions.  And a lot depends upon the effect upon expectations of these gloomy forecasts and all these profit warnings corporations are issuing.  As you know, any economic slowdown that takes place will be the first such slowdown of the e-trading era. _I_ think the increased ease of trading has probably helped increase the volatility of financial markets.  Add to that the presence of many relatively inexperienced small investors, the foot soldiers of the 1990s stock market upswing, and there is the danger of the "nightmare scenario" the financial markets have been having for several years--i.e., a "panic" among new investors leading to a massive exit from financial markets.  During "corrections" over the last few years, of course, these small investors haven't shown an inclination toward panic, but things can always change.


>Just the USA or 
>dragging down the rest of the world? 

There are already some danger signs from Europe.  There a indications of a slowdown in the German economy.  As of November, the Ifo, the monthly business climate indicator, had been in decline for five straight months. This confirmed the view of many economists that the euro-region's growth has peaked (_Financial Times_, Nov. 22, 2000, p. 8).  Moreover, Germany's industrial output declined for a second straight month in October, apparently in response to rising oil prices and increases in short-term interest rates (_Financial Times_, Dec. 8, 2000, p. 10).  And, as you know, Japan remains stubbornly recessed.  I would say any slowdown that takes place has sources outside the U.S. alone.       


What may be the trigger?  When 
>will it come?
>


To the extent that evidence of a slowdown already exists, the "trigger" has already been pulled.  I have thought for some time (unfortunately not in print--darn it!) that the fundaments of the "Goldilocks economy" of the 1990s--relatively low interest rates and oil prices--were eroding.  I don't know that I ever completely bought the Gospel of the New Economy and its apparent view that the business cycle has been repealed.  

>2.  Will Americans be really more receptive of left ideas in the 
>event of recession?  If so, which kind of left ideas?  

Historically, there has been little relationship between downturns in the business cycle and the receptivity of the U.S. public to the ideas of the left.  The heyday of the U.S. Socialist Party--that is, its greatest electoral success--came in the first two decades of the 20th century, not particularly a time of economic downturn, I believe.  And of course, the U.S. "New Left" and the emergence of the newer, leftist social movements of the 1960s and 1970s took place during the relatively good times of the 1960s and early 1970s.      

What will move U.S. political discourse in a leftward direction, if anything does, will be demographics, in my view.  As the U.S. population ages, and as the "baby-boomers" become more worried about security in its old age, there may be increased political support for social programs.  But a lot depends upon how much the "boomers" depend on such programs.  Many of the "boomers" are certainly not expecting Social Security to take care of them in their retirement.

Another demographic inducement toward a move to the left could be the changing racial hue of the U.S. population.  It is now expected that white people will constitute a minority of the U.S. population by about the middle of the 21st century.  To the extent that the social mobility of African-Americans, Hispanics, and relatively recent immigrants is restricted, I would expect these groups to embrace a politics to the left of that embraced by white Americans.  Indeed, it may appear to historians of the future that the more adversarial, more radicalized right-wing politics of the Gingrichized Republican Party represented the desperation of a dying WASP culture.



Given the main 
>currents of Seattle & like movements as well as the Nader/Green 
>campaign, is the likely winner -- *if* left-wing ideas gain more 
>currency at all -- a protectionist America-First politics in the name 
>of "social-clause, fair-trade" high-mindedness, with or without more 
>China bashing?
>


I think the short-term outlook is for pressure on the new Bush administration to move in a protectionist direction.  As recent posts to this list have indicated, the auto-makers are facing pressure on their earnings.  The U.S. steel industry has been in dire straits for some time.  Before the Asian financial crisis induced many steel manufacturers to try to export their way out of the crisis, steel imports made up 22 percent of U.S. consumption.  Now the figure is about 33 percent.  The stock prices of domestic steel companies has declined sufficiently that the entire industry could be bought for about $7 billion (Washington Post_, Nov. 24, 2000, p. E01).  Even relatively successful companies, like the mini-mill Nucor, have been joining other, less lucrative steel companies in alleging "dumping" by foreign producers (_Financial Times_, Dec. 19, 2000, p. 16).

All this means the manufacturing industries that have faced pressure from foreign competition and failed to make necessary restructuring before will once again be lobbying for relief from the new Bush administration.  I suspect we will see ad-hoc protectionism of the kind practiced during the Reagan and Bush years, the free-market rhetoric of these administrations notwithstanding.  In this sense, there will be a swing toward a more unilateralist, "America First" position. 

But I caution against dumping Nader/the greens/Pat Buchanan/U.S. policy-makers all into the same box.  There are certainly differences of emphasis.  I don't think the talk of the Clinton administration about environmental and labor clauses in trade agreements should be dismissed as simply rhetoric.  Moreover, I think Pat Buchanan and his ilk are more likely to "bash" China than either the Clinton administration or the new Bush administration.  As for Nader and the greens--well, beyond rather mindless dislike for big business, they're pretty much clueless about policy.

REFERENCES

"Activism among the mini-mills reveals depth of US steel crisis."  _Financial Times_, Dec. 19, 2000, p. 16.

"Fall in German index."  _Financial Times_, Nov. 22, 2000, p. 8.

"Germany's output falls a second time."  _Financial Times_, Dec. 8, 2000, p. 10.

"U.S. Trade Debate Heats Up with Steel at its Core."  _Washington Post_, Nov. 24, 2000, p. E01.
--
Jeffrey L. Beatty
Doctoral Student
Department of Political Science
The Ohio State University
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