The global economy is in the toilet and the Boomers’ representatives are chanting: “flush, flush, flush.” Me? I am eating cigarettes and wine while admiring the remarkable consistency in the myopia of all of it.
In the name of fiscal prudence the whole of the advanced capitalist zone is in engaged in austerity budgeting and calls for more of the same. Even Martin Wolf, in his otherwise insightful column in the FT online today, felt the need to tap his hat and nod in the direction of the genteelism of supply. Exhibit A, the conclusion to his incisive intervention:
Reconsidering fiscal policy is not all that is needed. Monetary policy still has an important role. So, too, do supply-side reforms, particularly changes in taxation that promote investment. So, not least, does global rebalancing. Yet now, in a world of excess saving, the last thing we need is for creditworthy governments to slash their borrowings.
As is widely acknowledged, monetary policy has little outside of conciliatory role to play at this time. In so far as the CBs should not make the mistake of tightening policy as the ECB and the BoC did. But apart from the role of spoiler there really is not much left for the CBs to do. The problem is squarely fiscal. As Wolf himself went to pains to argue. Why then the conclusion given that further tax reductions are not only going to make the fiscal positions of governments worse they will also likely have the same effect as lowering interest rates at this time: Nadda, ziltch, rien, nothing? The problem is that Wolf has to tip his hat to conventional wisdom. If not; he has no hope of bending the ears of policy makers. Oh well, that is his plight not mine.
Here, given none are listening we may speak frankly. The world economy is in the toilet because free trade, tax cuts, deregulation and above all the liberalization of finance over the last thirty years let loose a Tsunami of forces both economic and political. The liberalization of finance and production allowed for the national gutting and then global whipsawing of labour. As the profiteers profited and retired workers slept while the assets they had built were being systematically stripped and the fortunes being amassed were then turned to the seedy business (although a time honoured practice if one cares to actually read Smith) of buying off the government–and it must be stressed the intelligentsia too–broadly understood.
We now have the perfect storm. A generation of public and private sector functionaries has been trained to believe that the market can do no wrong and the government no good. As a corollary is of course the proposition that monetary and regressive tax policy is everything.
The irony, of course, is that any credible account of the present crisis would have to admit that we are here because free trade, tax cuts, deregulation, the flexibilization of labour markets and above all the liberalization of finance brought us here. How odd it is then that we should be treated to more of the same as the cure for what ails us.