The ‘Third Way’ Scam

The ‘Third  Way’ Scam

October 27, 2020

By Francis Lee for the Saker Blog

Historically speaking “left” ‘’right,” and ‘centre” has been the political configuration dating from the French Revolution. In the 1789 French National Assembly, the nobility and high clergy sat to the right of the chair, while the third estate and lower-status clergy sat on the left. The benches in the middle became associated with political moderation.

Over the next century-plus, most European polities allowed for a “centrist” presence. Even the design of the European parliaments where the seating arrangements were horseshoe shaped and still are, except that is for the British parliament where the contending parties sit directly facing each other; initially Tories and Whigs but from the 20th century onwards Labour and Conservative. There were the cross-benches where the minor and generally ineffective parties sat. But Centrism will likely be distressed to learn that the first recorded appearance of the word “centrist,” according to the Oxford English Dictionary, was an 1872 insult from London’s Daily News correspondent in France, who assailed “that weak-kneed congregation who sit in the middle of the House, and call themselves centrists.’’

In the UK the centre was traditionally moderate, providing a seating space for a small Liberal party, until that is, the late Celtic arrivals of Irish, Welsh and Scottish militant nationalists – Sinn Fein, Plaid Cymru and the Scottish National Party who began to make their presence felt.

But it was the European party structures and their Parliamentary expression that led invariably to coalition governments; this was the case even in Nazi Germany where Hitler had to form an alliance with the Zentrum Liberal party to get an absolute majority in the Reichstag. This was quite different from the Anglo-American two party systems where the Government could de facto be elected on a one-party vote.

Nonetheless, centrism had its more forthright defenders. In the US at the dawn of the Cold War, liberal historian Arthur Schlesinger celebrated political moderation as a vigorous “Third Force” in his 1949 book The Vital Centre. Rather than left or right, he wrote, the real conflict was “freedom vs. totalitarianism.” The United States’ goal presidential election — which saw the resounding defeat of George McGovern in 1972 — occasioned a rightward shift in centre-left parties. Smarting from defeat and the Nixon triumph Democratic elites moved to retake control for a new direction for the party. And it was this that set the tone, not merely for the United States but also in Europe. In 1992 the man of the moment William Jefferson Clinton had arrived. But there was much work to be done. The sabotage of the tools that had underpinned the prosperity of the Golden Age of Capitalism (1945-75) also created unprecedented challenges for the political parties of the ‘soft’ left. Infused with what were thought to be new ideas they now began to look for new paths forward less hostile to finance and big business.

‘’We have moved past the sterile debates between those who say that government is the enemy, and those who say that government is the answer, said Clinton who, along with his wife Hilary had studied at Yale school during the 1970s, and Bill had an unfinished stint at Oxford as a Rhodes scholar in the late 60s (1) ‘My fellow Americans we have found a ‘Third Way’

THE INSTITUTIONALIZATION OF THE THIRD WAY

The ‘Third Way’ was a rather slippery and nebulous concept. In purely policy terms, however, the Clinton reforms were a mixed bag and differed from the postulates laid down by the former Reagan administration. In his 1992 presidential campaign Clinton promised that, if elected, he would bring about the “end of welfare as we know it.” This catchy election pledge aimed to address middle class concerns about so–called welfare dependency while also arguing that the government had an important role to play in fighting poverty and unemployment. Clinton’s Third Way position, at best, offered a way out of the liberal/conservative impasse on how to effectively reform America’s welfare system. At worst, Clinton’s position undermined the concept of welfare entitlements that the Democratic Party had established in America at an earlier period. In 1996 during the lead up to that year’s presidential election, President Clinton signed into law the most significant federal welfare Act since the 1960s. However, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) that Clinton signed had largely been drafted by congressional Republicans. Then came NAFTA, the bitterly contested policy which still rankles.

But possibly the most politically significant piece of legislation authorised by the Clinton administration was the repeal of the Glass-Steagall Act of 1933. This Act had prevented ordinary commercial banks owning excess of certain types of dubious and dangerous financial companies, which had been considered so useful that it had survived until it was repealed in 1999 under Clinton and his Treasury Secretary Robert Rubin, the former Goldman Sachs banker.

Of course this was manna from Heaven for the banking and financial fraternity, and it indicated the President’s choice of policies which had little in common with his professed ‘Third Way’ beliefs. In conclusion the failure of Clinton’s Third Way welfare agenda opened the way for more conservative reforms. This experience is illustrative of the pitfalls of Third Way politics with its mix of post–entitlement welfare policies and hard–nosed electoral positioning.

That being said the US economy began to move into high-gear during the 1990s and even managed a budgetary surplus. Alas, however, as with all upturns comes the downturns and the long-run, dot.com blow-out of 1999/2000, the US boom of the roaring 90s turned into a secular decline, and this was followed by even deeper economic crises in 2008 and now in 2020.

It could be argued in terms of cyclical political movements that there exists a rough correspondence between political and economic phases. In political terms this is usually a cyclical period between progress and reaction, movement, and order, conservative or radical, revolution and restoration. The great German social and political theorist, Max Weber, (1864-1920) would have argued that the Clinton restoration being based upon the Reagan/Thatcher ascendency was an example of charismatic authority that was superseded by legal-rational authority. In broad illustrative terms the MaoZedong period in China was followed by Chou En Lai, Trotsky was followed by Stalin, Napoleon by Louis XVIII, Cromwell was followed by the reinstallation of Charles II. As day follows night Revolution is followed by Restoration. But the restoration is never complete, and there can be no turning back to the status quo ante. But the strange thing was that during the second half of the 20th century a reactionary right-wing movement, best illustrated by Reagan and Thatcher was replaced by a milder ‘Third Way’ version of the same theory. The ‘Third-Way’ was beginning to take on rather familiar social and political forms, although its proponents would argue otherwise.

THE THIRD WAY CROSSES THE BIG POND

By 1997 the Clinton ascendancy – the Third-Way – had come to the attention of an ambitious young man who was trying to find an occupational niche for himself in the London milieu. Anthony Charles Lynton Blair, who preferred to be called ‘Tony’ (of course) and described himself as a ‘regular kind of guy’ (goes without saying) was the son of a barrister, Blair attended Fettes College in Edinburgh (a school often viewed as ‘‘Scotland’s Eton’’) and Saint John’s College of the University of Oxford, where he combined the study of law with interest in religious ideas and popular music. But he displayed little enthusiasm for politics until he met his future wife, Cherie Booth. He graduated from Oxford in 1975 and was called to the bar* the following year. While specializing in employment and commercial law, he became increasingly involved in Labour Party politics and in 1983 was elected to the House of Commons to the safe Labour parliamentary seat of Sedgefield, a tight-knit former mining district in north-eastern England. His entry into politics coincided with a long political ascendancy of the Conservative Party (from 1979) and Labour’s loss of four consecutive general elections (from 1979 through 1992). He stood as leader of the Labour party and won an overwhelming victory (1997) over a divided, dispirited and out-of-ideas, Conservative party.

Blair was one of those archetypal politicians – unfortunately one of many – who didn’t have a political notion in their heads; and as a complete opportunist he was, as was the case with Clinton, able to latch on to some of the fashionable threadbare and dubious political and economic ideas current at that time. One of those fashionable notions was the ‘Third Way’ in politics.

In fact the ‘Third Way’ was a pretty simple idea.

‘’It was an attempt by the parties of the left to stake out a new middle-ground in politics. Fuddy-duddy socialist ideas were considered distinctly de trop. Globalization as its proponents would argue, was considered inevitable, so countries should embrace it and adapt to it, hitching a ride on the growth of global financial markets, then shaving off globalizations rough edges with progressive social policies and dollops of good old-fashioned redistribution. As Blair and Germany’s Gerhard Schröder summarised it in a joint declaration in 1998, the Third Way stands out not only for social justice but also for economic dynamism and the unleashing of creativity and innovation.

But this third way was always an offshore model, a recipe for countries effectively to turn themselves into tax havens in order to prosper in rough, globalizing seas. The model was, in turn, driven by the competitiveness agenda, the notion or ideology, that states must be ‘open for business’ constantly dangling enticements to large multinationals and banks and to rootless global money – for fear that they will decamp to more hospitable or ‘competitive’ places like Dubai, Singapore or Geneva. (2)

THE IDEOLOGICAL ASSIMILATION OF THE OLD LEFT

But behind the rhetoric of a new golden age which awaited the electorates on both sides of the pond was the familiar sound of disappointment among the loyal supporters and believers who were somewhat sceptical about the new order – with good reason. The newly entrenched and consolidated Third-Way involved strict de-regulation of labour markets and only light-touch regulation – if at all – of financial markets. In the meantime financiers, were still relatively untouched by the pseudo-rhetoric of globalization. The whole dreary neo-classical credo was trotted out namely that that if left alone, financial markets would reward efficient firms and punish inefficient ones which would go out of business. Meanwhile financiers could help with mergers and transfers of ownership of the more efficient. This reasoning also bolstered demand for the privatisation of state enterprises, which was soon embraced with almost as much enthusiasm by social democratic parties as by their right-wing opponents – witness the French socialist government of Lionel Jospin and the renamed ‘New Labour’ government of Tony Blair.

The period of debt-financed growth got into gear in the early 80s during which it was sustained up until the start of the 21st century. That time bore witness not only to economic issues but also to political and ideological questions and concepts; a reactionary milieu established itself where decadence had become de rigueur. The presence of rampant individualism, obsession with self, contempt for failure was contained in Ayn Rand’s view of life. Doyenne of the new age Ms Rand’s rise in popularity coincided with the widest gap between rich and poor in the history of the US. Her books are today actually more popular than when she lived, and attempts are being made by very wealthy parties to sell her ideology as the philosophy of our era.

Ms Rand has been accused of Vulcanism, that is of exhibiting an attitude of pure logic unbalanced by empathy and humanity like the character Spock from Star Trek, who is from planet Vulcan. When people of high intelligence lack human empathy, they can be intellectually arrogant, even narcissistic.

One of the major criticisms of Ayn Rand is that all her heroes are self-centred sociopaths, as she is: they are concerned only with themselves, with their own purpose and ambition, and they are entirely unconcerned with others.

Rand also ignores context in her assessment of reality: the persistence of her logic leads to places where philosophy gets utterly divorced from common sense and reality. Philosophical materialists must contend with the facticity that we are woven into in its entirety, even with those aspects of our facticity that are what she would view as not heroic, like the hunger of the masses.

Okay it can be generally agreed that the idiosyncratic Ms Rand is a little bit over the top, but her generalisations roughly ring true with today’s ailing social and moral societal collapse.

But as Emile Durkheim (1858-1917) once noted:

‘If, in activities that almost completely fill all of our days, we follow no rule save that of our own self-interest, as we understand it, how then can we acquire a taste for altruism, for forgetfulness of self and sacrifice? Thus the lack of any economic discipline cannot fail to produce damaging social effects that spill over beyond the economic sphere, bringing with it a decline in morality.’’(3)

One wonders whether or not Ms Rand actually believes in her virulent anti-social messages, or, what I rather suspect, she is simply out to shock the more gullible by voicing what are in essence simply crackpot outpourings.

That being said she certainly has a following particularly among those well-heeled denizens who seem intoxicated with these rantings.

IT’S THE ECONOMY STUPID

Turning to economics the situation goes from bad to worse. This is hardly surprising since the attempt to abolish the trade cycle, a rather eccentric and fashionable notion since the early 1980s, was bound to result in an economic nemesis. It has been argued that:

‘’Whilst all capitalist systems are premised on the monopolisation on the gains of growth by the people who own the assets, under finance led growth these dynamics become more extreme. Rising private debt might conceal this fact during the upswing of the economic cycle, but when the downturn hits it becomes clear that finance-led growth is based upon trickle-up economics, in which the gains of the wealthy come directly at the expense of ordinary people. This is because financialization involves the extraction of economic rents from the production process – income derived from the ownership of existing assets that does not create any new value. (4)

Paper currency is not value, it is a claim on value, a promissory note. Value is produced in the production process, whereas economic rent – rent on land, titles of future ownership claims (stocks, shares, bonds) monopolistic pricing, patents – is produced in the extractive process. It is fictitious capital. The financial economy is essentially parasitic on the productive economy.

When corporations generate ‘growth’ it should be understood that the Central Bank enables this ‘growth’ when it showers the same corporations with QE monies who simply buy-back their own shares/stocks and become richer! In the same manner when large corporations buy other smaller businesses – through mergers and acquisitions M&A, they also become ‘richer’ but in fact no new wealth has been created, what has occurred is a shift of wealth from one sector of the economy to another, this is a zero-sum game where the central bank determines the winners and losers in this rigged fixture: the rich get richer and the poor get poorer. Another side of this process is the increasing market concentration with the growth of monopolies/oligopolies and the monopoly rents that go with it.

Having painted itself into a corner the economics institutions, both public and private, seem unable to extricate themselves from an ever-tightening process of slow economic and political strangulation.

In summation we may say without reservation that the ‘Third-Way’ was a rather transparent con-trick reminiscent of the second-rate magician in Thomas Mann’s allegorical novel Mario and the Magician. In this particular work the sorcerer, Cipolla, is analogous to the fascist dictators of the era with their fiery speeches and rhetoric designed to hoodwink his political audience into believing that what appears to be real is in fact not real. In our own time this simulacrum is the product of modern advertising techniques designed to mask the reality behind a stream of psychological manipulation and conditioning of the audience. How long this process and phenomenon will last is problematic. Western civilization seems standing at the crossroads without a plan B.

It’s rather like Gerald Celente always says: ‘‘When everything else fails, they take you to war.’’

NOTES

(1) As the 2016 presidential campaign closed in on the finish line, the Washington Post published  an eleven-year-old tape of Republican nominee Donald Trump’s making controversial remarks about women. The inevitable partisan rancour that ensued largely targeted the behaviour Bill Clinton, husband of Democratic candidate Hillary Clinton, including the repetition of rumours that he had been expelled from Oxford University in 1969 for raping English classmate Eileen Wellstone.

The allegations weren’t new — Republican opposition research strategist Roger Stone had tweeted about them a year earlier:

The backdrop for these rumours was that just prior to his graduation from Georgetown University, Bill Clinton won a prestigious Rhodes Scholarship to study at University College, Oxford, for two years and headed off to England for the 1968-69 academic term — but he returned to the United States (under a pall?) before finishing out the full two-year course of study.

There was additionally the Lewinsky affair. Yes, Mr Clinton certainly had a penchant for the ladies.

(2) Nicholas Shaxson – The Finance Curse – Chapter 5 fn 10 – p.97) In the words of Peter Mandelson, Blair’s Svengali and his co-author Roger Liddle in their book – The Blair Revolution – the main aim of the Third Way project was to ‘… overcome Britain’s continued slide into international competitiveness … based upon partnership or private and public sectors and create a more equal and cohesive society.

(3) Emile Durkheim – The Division of Labour in Society – p.xxxiv.

(4) Grace Blakeley – Stolen – p.14.

* ‘Called to the Bar’ This has nothing to do with going for a drink in a licensed establishment! It is a term used by the legal profession signifiying the entrance of the candidate into the legal profession and practising of law thereof.

The Twilight of Neo-liberalism?

The Twilight of Neo-liberalism?

by Francis Lee for the Saker Blog

It speaks volumes about the gravity of the current political and economic situation that the leading US investment bank Goldman-Sachs has seen fit to issue a sombre warning.

‘’Goldman Sachs Group Inc. put a spotlight on the suddenly growing concern over inflation in the U.S. by issuing a bold warning on Tuesday that the dollar is in danger of losing its status as the world’s reserve currency. With Congress closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy, and the Federal Reserve having already swelled its balance sheet by about $2.8 trillion this year, Goldman strategists cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign-exchange markets …

There are many factors pushing the gold price higher, including fear of increasing political uncertainty, rising concerns involving another spike in COVID-19 infections in the country, increasing government debt, rising inflation, and concerns that the US dollar is seeing a new downtrend to the Chinese Yuan.’’ (1)

The fact that gold is being spoken about by the financial cognoscenti is in itself significant. Gold bugs (like me!) have long been regarded by orthodox academic economists and business financiers as being beyond the pale in terms of their relevance to current economic and financial issues. But, as with everything, times change, fashion changes, paradigm shifts take place – such is the way of the world.

At the time of writing gold has, after the 2012 engineered smackdown, been ascending remorselessly toward its present gold price of $1972,00.00 a whisker away from $2000.00 per oz. This latter price has an important psychological significance – a tipping point for both investors and owners of this particular asset. The new economic order established paper assets – representations of wealth, which replaced real wealth – i.e., gold. This was the beginning of the new epoch, a turbulent period now reaching what appears to be a climax. The increasing economic disorder has become chaotic since that date as fundamental and seemingly intractable problems began to manifest themselves.

The Nonage

In order to maintain a semblance of vitality, western capitalism entered into a period of steroid-enforced growth based upon increasingly unorthodox methods. This inflexion point took place in 1971 when in a televised broadcast Richard Nixon took the US off the gold standard and introduced a fiat standard based purely upon the US dollar. This was a little later supplemented by the US-Saudi agreement whereby oil would be fixed to a dollar price. At a stroke, these two events destroyed the Bretton Woods system of a dollar-gold standard with the $ convertible with gold at $35 per oz. The old order was finished; a new ideological economic regimen was rolled out. When and how long it might last is a matter of speculation.

In this Brave New World and following the lead of the US most of the rest of the world economies followed suit. This was a pivotal moment in economic history. But, whisper it softly, there were deep-going structural weaknesses initially hidden from view in the new economy which would eventually become increasingly problematic. The global economy had become increasingly dependent on expanding debt levels and on the expansion of fictitious capital. This was all part of what was to become known as neoliberalism, globalization or increasing financialization, call it what you will, it amounts to the same thing. [2]

Fictitious capital, consists of layers of financial paper assets – but it should be understood that these ‘assets’ are only symbols of value, not real values. For example, company shares which are traded like goods and services do not, in the same way, embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value it is only a claim on value. Real value is the production of goods and services such as cars, haircuts, IPhones, hotels and eating out, aroma therapy, shoes, books … and so forth, in a productive economy. This as opposed to rising share/stock prices which are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity.

John Stuart Mill once commented in this respect.

‘’The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies’’ (3)

Capital movements into and out of existing assets was not necessarily productive investment but mainly pure speculation. And speculation itself was driven by increasing levels of cheap debt, both sovereign and private. This process may be observed in the Fed’s force-feeding new monies into the economy at which corporations use this largesse to buy-back their own stock thus enhancing their market price. Insofar as it might be produced it becomes clear that finance led growth is based upon trickle-up economics in which the gains of the wealthy come directly at the expense of ordinary people. Financialization involves the extraction of economic rent from the circulation (of capital) process, as well as patents, copyrights and land/property.

The United States demonstrates these tendencies very clearly and its interest rates remain the dominant influence across the mature economies. This is due to the dollar’s role as a reserve status, i.e., the world money. But there has been a long trajectory of decline in real commercial bank interest rates which averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% and even lower ever since. They are now being held down to zero or even minus interest levels and functioning as free monies for the speculating community or corporations who wish to avail themselves to this monetary largesse to increase their market capitalisation. Demonstrably the US and the rest of the mature economies have been undergoing a secular decline since the 1970s which has eventuated in what seems to be a policy of demented money printing.

Moreover, financialisation has not to any extent been adept at creating more wealth for all, but instead has channelled this wealth to particular favoured groups. This is evidenced with the GDP metric which is only measured in terms of output and not the distribution of and ownership of wealth produced. The result is, in short, that the rich have got considerably richer and the rest have either stagnated or declined. And this has not been an accident.

Maturity and Decline

The present crisis in the global economy has been brought about by the culmination of a number of variables which taken as a whole have been responsible for the present impasse. All the early promises of a new world order of stability, prosperity and peace which were touted in the 80s 90s and 00s never lived up to their billing. The then UK Prime Minister, Gordon Brown, boasted that under ‘New Labour’s’ stewardship the boom-bust cycles of both the domestic and world economies had been banished. University of Chicago’s Professor Robert Lucas claimed that macro-economics had ‘’solved for all practical purposes’’ the problem of economic depressions. In the real world, however, the entire period from 1971 and well into the 21st century was punctuated by a series of rolling bubbles and crises: the 1987 stock market crash, 1990, the collapse of the junk bond market, the 1994 great bond market massacre together with the Tequila crisis in Mexico, the 1997 Asian financial crisis, the 1998 collapse of Long Term Capital Management, the 1998 default in Russia, and the 2000-02 dot-com bubble crash and finally the 2008 blowout. These once in a lifetime events seem to occur every year or so.

But the economic/financial powers that be (PTB) ensconced in the ivory towers of University Economics departments and Editorials in the Washington Post, Financial Times, The Wall Street Journal and Economist were having none of it. As these esteemed ladies and gentlemen saw it the new paradigm was going through a ’tricky’ teething stage and all would be well in the fullness of time, or so we were persuaded. It is difficult to know whether or not these people actually believed what they were articulating or were just plain stupid. But their theories at times actually verged upon a timeless circulation of axioms which are true by definition. It has been noted that,

‘’Academic economics has become a disaster and disgrace … Not only did the academic economists fail to see the great 2008 implosion coming, they weren’t even looking in the right direction. And having been surprised by its arrival, they had little to say about its implications – the greatest event to have befallen the capitalist system since WW2 … although there are shining exceptions, most academic economists, whilst clinging to the idea that their subject is relevant and of interest to the wider world, in fact practice a modern form of medieval scholasticism – of no use to man or beast. The output of this activity consists of articles entombed in ‘scholarly’ journals usually about questions of startling irrelevance, badly thought out and appallingly badly written, littered with jargon and liberally dosed with mathematics, destined to be read by no-one outside of a narrow coterie, and increasingly, not even by them.’’ (5) Agreed!

The Interregnum 2008-2020

The Great Financial Crisis (GFC) of 2008 has shown that perpetual growth and progress is an illusion. Moreover this was the first leg of the mega-crisis of which the second leg is now looming. Recent indicators include structural unemployment which is around 15% in the US – but this figure is almost always understated: See John Williams’ excellent repudiations in Shadow Government Statistics. Additionally there has been the growth of semi-employment in the ‘gig’ economy, short-term contracts, non-unionized labour, and illegal (often foreign) presence in itinerant employment and workers from the EU’s southern and eastern peripheries who are temporarily employed on farms during the summer for lack of UK workers. Many of these workers have no insurance or medical cover and live hand-to-mouth on a daily basis.

Unprecedented debt levels, chronic levels of debt-driven consumption are now common-place and the modern workforce is increasingly stratified. There are well-paid jobs for a small portion of those with requisite skills, but the vast majority of new employment is in the low paid service sector, such as retail, leisure, hospitality, security, aged care, and health care … youth unemployment remains high, even where work can be found starting incomes are around 10 to 12 percent lower than they were in 2007.

This situation was not only present in the UK but on the European continent also.

Millions of Europeans in temporary, part-time or bogus self-employed contracts can only find insecure and badly paid jobs, despite the healthy economic climate. That is the price of deregulating labour markets, Investigate Europe reports. This precarious set of labour conditions was created intentionally.

‘’The misery of bad jobs has many faces. It can take the form of work contracts without health or social insurance; it can be part-time jobs, which don’t pay enough to live on. Or those affected are kept dangling from one temporary contract to the next, or they have to eke out a living as bogus self-employed and contract workers. The methods vary from one country’s national legislation to that of another, but the outcome is always the same: millions of EU citizens have to get by with insecure and badly paid jobs, offering them no prospects.’’ (6)

2020 – the Debacle

Thus the world enters the second decade of the 21st century totally unprepared for what’s coming and with a leadership bereft of any plans or ideas of how to handle the situation. GDP growth is in unprecedented negative territory pretty much everywhere. In the United States, the birthplace of the Washington Consensus, GDP growth rate fell by no less than -32.9% and GDP annual growth rate by -9.5%. In Germany GDP growth rate fell by -10.1% and annual GDP growth rate by -11.7%. In China GDP growth rate was positive 11.5% and annual GDP growth rate was 3.2%. In the euro area GDP growth rate was -12.1% and annual growth rate was -15%. These are quite extraordinary figures which will need to sink in before any reasoned judgements are made. One look at the US situation is hardly comforting however.

‘’On Thursday, the Labor Department reported that 1.43 million new claims for unemployment benefits were filed last week, the 19th straight week that new claims have exceeded one million. After declining for months, new claims have risen over the last two weeks.

The number of workers claiming continuing unemployment benefits also rose from 16.1 million to 17 million for the week ending July 18. In addition, 830,000 new claims were filed for federal Pandemic Unemployment Assistance, which covers self-employed, gig workers and others who do not qualify for traditional jobless benefits.

Under these conditions, the $600-a-week federal supplement to state unemployment benefits is running out today for an estimated 20 million workers. Overnight, millions will see their incomes cut by two-thirds, from an average of $921 a week in May to about $321 a week. In some states, the theft of this lifeline will be even worse. In Oklahoma, jobless aid will be cut by 93 percent to $44 a week.

It is a measure of the precarious situation American workers faced even before the pandemic that the weekly supplemental assistance and the paying out of a one-time $1,200-per-person “stimulus” check led to a 45 percent increase in US personal income in the second quarter. Seventy percent of those who returned to work in June suffered an income loss by doing so.

Last week, the moratorium on evictions expired for about 18 million renters—more than a third of the 44 million total US renter households—who live in buildings with mortgages backed by the federal government. With rent bills accumulated over the last four months now due, housing advocates predict a “tsunami” of evictions, with half a million households in Los Angeles alone threatened.

Millions in the US are also going hungry. According to a US Census Bureau survey, food insecurity last week reached its highest reported level since May, with almost 30 million Americans reporting they had not had enough to eat at some point in the seven days through July 21.’’ (7)

Mindful of the impact of the Corona Virus and not wishing to rush to any rash judgement, the fact still remains that the world economy was already in a parlous and brittle condition, long over-due for a big correction which was going to happen with or without the complication of the Corona Virus. All the sugar-coated promises made at the turn of the century by various politicians, journalists, and world leaders regarding the new economy, a world-wide system of prosperity peace, harmony and growth turned out to be fairy-tales best suited to infants – and infants are precisely what our leaders seem to think we are.

Speculating about future developments is difficult since we are in the early phases of the downturn. What we do know is that it is like most previous downturns but beyond bad and seemingly unprecedented. Events can only be assessed retrospectively. It is now also clear that hegemonic turbo-capitalism and its tendency toward imperialism and war is not congruent for further human development and even perhaps life on this planet. This seems patently obvious to anyone who actually thinks about these issues. We (humanity) is now at a critical juncture in history. But the world has postponed, indefinitely, dealing decisively with the challenges. Anyone who questions the present course is held up to ridicule as a professional permanent pessimist, or worse. Nothing is done, and we ignore reality. Unfortunately as the Russian/American writer Ayn Rand – who is not one of my favourite writers – declared. “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

Enough said. Francis Lee

NOTES

(1)Bloomburg – 27-July-2020

(2) Phillip Mullan – Creative Destruction – pp57/5 – ’In addition to the direct contribution of the fire sector to raising GDP artificially, the explosive growth in debt and other features of financialization a major, probably a bigger role.

(3) The notion of economic rent – made famous by David Ricardo and his theory of ground-rent – is based upon the extraction of rent from particular income streams or other assets, including land. Monopolistic rents are those which contain price levels which are over and above the costs of production.

(4) J.S.Mill – The Principles of Political Economy – 1848

(5) Roger Bootle – The Trouble with Markets – pp.232-233

(6) Tagesspiegel – Berlin – 25-10-2017

(7) World-Wide Socialist Website – 31-July-2020

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