Housing, financialization and the crash

Via Corrente

This video by Richard D. Wolff is a clear and accurate account of the financial crash and the current struggles of American working people.  It dates from 2011, but it is still relevant.  I recommend fast-forwarding through the first three and a half minutes minutes, which are about economic classes, and getting to the meat of the video, which is about the foreclosure and credit crisis.

I can remember when most goods and services were paid for through cash and check, without having to go through credit card companies, other lends and insurance companies.  I don’t deny the benefit of credit or of insurance, or advocate going without either, but it is striking how much we Americans are at the mercy of lenders and insurers.

What if the era of economic growth is over?

The justification for capitalism is that no other economic system has been so successful in generating economic growth.   While economic growth does not in itself create mass prosperity, it creates the conditions in which mass prosperity is possible.

I’ve written many posts about the era when most Americans shared in the benefits of economic growth.  But an economist named Raul Ilarji Meijer asks:  What if growth is gone for good?

Every single proposal to deal with our weakened economies, whether they address housing markets, budget deficits, overall federal and personal debt, or pensions systems, is geared towards the same idea: a return to growth. It doesn’t seem to matter how real or likely it is, we all simply accept it as a given: there will be growth. It is as close to a religion as most of us get.

And while it may be true that in finance and politics the arsonists are running the fire station and the lunatics the asylum, we too are arsonists and loonies as long as we have eyes for growth only.  That doesn’t mean we should let Jamie Dimon [CEO of JP Morgan Chase] and his ilk continue what they do with impunity, it means that dealing with them will not solve the bigger issue: our own illusions and expectations.

We allow the decisions for our future to be made by those people who have the present system to thank for their leading positions in our societies, and we should really not expect them to bite the hand that has fed them their positions.

But that does mean that we, and our children, are not being prepared for the future; we’re only being prepared, through media and education systems, for a sequel of the past, or at best the present. That might work if the future were just an extrapolation of the past, but not if it’s substantially different.

If there is less wealth to go around, much less wealth, in the future, what do we do?  How do we, and how do our children, organize our societies, our private lives, and our dealings with other societies?  Whom amongst us is prepared to deal with a situation like that?  Whom amongst our children is today being educated to deal with it?  The answer to either question is never absolute zero, but it certainly does approach it.

[snip]

All we’ve really done in the new millennium is seek ways to hide our debts instead of restructuring them.  You can throw a few thousand people out of their homes, but if you label the by far biggest debtors, the banks, as too big to fail, and hence untouchable, nothing significant is restructured.  But that doesn’t mean it’s going to go away by itself, the by far biggest debt in the history of mankind.  At some point it must hit us in the form of a massive steamroller of dissolving and disappearing credit.  In a world that can’t function without it.

The question is to what degree our economic growth depends on burning up fossil fuels at an ever-faster rate, and what happens when what’s left of those fuels becomes prohibitively expensive.  Can we find a way to increase, or even maintain, our economic well-being by using human labor and other renewable resources more intelligently?

If our current capitalist system has outlived its usefulness, what would a new and better system be like?  If capitalism is the best system for economic growth, what system would be best for a steady-state economy?  It goes without saying that it would not be like the failed Soviet system!

This is why I am interested in learning more about anarchist philosophy.

What do you think?

Click on All The Plans We Make For Our Futures Are Delusions for Ilarji’s full post on The Automatic Earth web log.  Hat tip to naked capitalism.

Dimitry Orlov’s worst-case scenario

I have long seen the parallels between the economic stagnation of the United States and the plight of the Soviet Union in the Brezhnev era – the failure of industries to compete, the crumbling infrastructure, huge trade deficits, huge foreign debt merely to prop up the material standard of living, the decline of the standard of living despite this, and the projection of military power worldwide as a denial of decline.

But I never until recently thought there is a possibility that the United States would completely collapse as the Soviet Union did.  Even at the depths of the Great Depression or the worst of our Civil War, the United States held together as a society.

Dimitry Orlov makes me to think otherwise.  Like James Howard Kunstler, he points out the interlocking and reinforcing nature of our problems.  The peaking of the world oil supply, the change in global climate and other ecological problems are serious, but not beyond the power of human beings to deal with.  But in the United States, such problems are combined with commitment to open-ended quagmire wars, an economy running on debt rather than production, and a gridlocked government less and less able to perform routine functions, much less cope with crisis.

Orlov says that many of the strengths of the United States will become weaknesses and vice versa, as happened with the old Soviet Union.  One of the things the United States offered its citizens is the possibility of home ownership.  In contrast, the typical Russian family consists of three generations crammed together in one apartment.  But when affordable gasoline ceased to be available, this Russian family was in a better position to survive than the scattered American family will be, with its members stranded in suburbs hundreds of miles apart.

There have been times in the past when the U.S. government was as corrupt and ineffective as it is now, and eventually progressive and populist reformers emerged to fix things.  But in those eras, the United States was growing in wealth and strength.  Reform was a matter of making adjustments so that all Americans benefited from the nation’s forward progress.  Today’s situation is different.  We are in a situation in which the country’s future survival is as much at risk as in World War Two or the Civil War, but unlike in those eras, the peril is not obvious.