Sunday, March 23, 2008


by the Sandwichman

Nothing restores a sandwichman's optimism like a pep talk from "economists" about how they've arranged things so there can't be "another depression like the 1930s"!

Case in point: an article by Charles Duhigg in the New York Times today assures readers that economists say "the odds of a full-blown depression are almost nonexistent."

Why? "incomes are more stable. Many more Americans hold jobs in service sectors, like medicine or education. And more Americans work for the government, which is less inclined to fire people just because the economy turns gloomy."

"Moreover, there are safety nets that can be traced to the Great Depression, like Social Security, unemployment benefits, food stamp programs..."

"Today, we have a lot more flexibility and we can prop up banks and the economy to give us enough time to let things stabilize..."

"... whatever name economists give the current downturn, we are unlikely to see the bread lines, shantytowns and dust bowl of the Great Depression. More likely, these economists say, would be a sudden increase in the number of people selling belongings on eBay."

For sure there won't be another depression like the 1930s. There also will not be another war like World War I or even World War II. But there already is the Iraq War and there already is homelessness, "foodbanks" and social economic exclusion. No breadlines? What about the ones that have been there throughout the boom years? Are they going to abolish those? How long those folks "selling their belongings on eBay" will have to wait for a free terminal at the public library is another question.

The public policy priority of the last 35 years has been to whittle away at the "safety nets", both regulatory and personal security. I see nothing in the NYT article about recent enthusiasm for "reforming" Social Security. Is that because those reform proposals relied on perpetually rising financial markets? Let me get this straight: Social Security, which a few years ago was headed for "bankruptcy", is the safety net that will spare the economy from the consequences of the credit crunch. Could you explain the logic again S L O W L Y, please, Mr. Duhigg?

In a word, ladies and gentlemen, BULLSHIT! Another thing that has changed since the 1930s is the carefully-orchestrated refusal to entertain progressive policy responses to emerging economic
difficulties. And economists have been at the forefront of the neoliberal gatekeeping. Policy ideas have to pass through the wringer of the market-friendly test. The result: wasteful bloat-is-growth policies that enrich the wealthiest and leave the rest to stagnate.

On cue, all the hacks and charlatans who have been clapping and chanting, "FREE MARKETS! FREE MARKETS!" will continue clapping and but begin chanting, "GOVERNMENT SAFETY NETS! GOVERNMENT REGULATIONS!" And all will be well, children.


Robert D Feinman said...

Historical analogies are always faulty. One of the principle differences about this meltdown and previous ones is that the world is no longer on the gold standard.

The BBC world service had their weekly economics show yesterday. Three gold "experts", an historian, an economist and a gold mine owner. Only the economist "got it". He said gold is just another commodity and there is no rational reason for central banks to hold any. When necessary they can print money and governments can use other things for collateral, like land. Meanwhile investors are buying it up as if it has magical properties. Aside from jewelry and some industrial uses, gold is mostly worthless. It is kept at a high price by tradition.

There is also unprecedented central bank coordination that never existed in the past. The financial system is in uncharted waters, perhaps, but has more tools available than in prior crises.

I have no special knowledge, but I'd not be surprised if many financial instruments and firms are already under priced. This doesn't mean that they can't go lower as the panic hasn't subsided, but we really aren't going to see another 1929.

Let's face it the GOP is prepared to start another war, if necessary to boost economic output. Amazing, but true..

Sandwichman said...

Let's face it the GOP is prepared to start another war, if necessary to boost economic output.

And with optimism like that who needs pessimism?

Eleanor said...

I am really enjoying this blog, though I am finding these times rather too interesting. I wonder if the memory of the Great Depression has made us ignore or undervalue a lot of smaller crashes and panics. The oil crisis in the 1970s. 1987 and 2000 in the stock market. The Asian Crash. The Latin American financial crises. The S&L and LTCM bail outs. The world economy looks rocky and not really in control, if one starts to notice all of this. The fact that we continued to dismantle the work of the 1930s, while bouncing from crisis to crisis is interesting.