Tuesday, January 14, 2014

Why is the recovery (so-called) so slow?

I have been perusing comments at economistsview, seeking explanations for the slowness of economic recovery as we now experience it.  Well, the commenters are seeking explanations; but I in my usual omniscient fashion believe that the answer lies plainly before us, in the form of history, not of economics.  My view -- which crystallized while examining some anonymous musings on the sustainability (or not) of borrowing against home equity-- is that such borrowing represented the last gasp of the struggling middle class, to preserve the generous levels of consumption, to which its members had become accustomed in the great post-war economic boom.  That boom has of course ended, in consequence of the ongoing war against workers, as embodied in the tearing-up of the social contract between labor and capital, which has been the main social and economic consequence of what I will broadly refer to as Reaganism.

Then, to specify: regarding the sustainability (or not) of borrowing against home equity: it was sustainable as long as the prices of houses kept going up, i.e. in a real estate bubble.  This was a recent phenomenon: it was the strategy arrived at by normal middle class people to sustain their accustomed lifestyle when twenty (now thirty) years of flat wages finally started to seriously bite into their spending habits.
Flat wages were a natural consequence of the 30 year war on the labor movement (and on workers more generally)  that began with the presidency of Ronald Reagan. Then it took the mortgage securitization boom, and the ensuing foreclosure fraud, to throw millions of families out of their homes, and to thus ensure that borrowing one's way to imagined prosperity was a scenario that would not be replayed. Of course, the lost homes are being snapped up by private equity players, who now fancy that they will become real estate magnates skimming the rental cream, while ignoring the plugged toilets.
People talk about our situation as if it were the consequence of immutable economic law. Well the only immutable economic law I know of (I am an engineer, formerly a chemist) is that no economic process whatever transpires without human agency and volition. Which is to say, the economy is what our choices have made it; the facts before us are the consequences of votes and policies and individual decisions by political-economic actors great and small.

The big news this past week was that Boeing has extorted fromthe machinists' union their right to a defined benefit pension, which will be replaced by a 401k. This is part of a general process of asset stripping by Boeing management. Multiply this by a million to get the current situation.

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