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View Diary: Obama to GOP: "Our biggest problems in the next 10 years are not deficits" (120 comments)

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  •  Haven't time to read it now (1+ / 0-)
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    SilentBrook

    One of the problems that enabled the decline in the support both theoretically and in terms of policy for Keynesian solutions was the stagflation crisis in the 1970s. This enabled those that held more traditional solutions to launch an attack (leading to the rise of new classical and real business cycle arguments) and the further shift to limited fiscal spending to deal with recessions.

    The more serious problem lies in the international (global) nature of the capitalist system in which domestic stimulus will have a more limited impact due to the nature of consumer spending (purchases of foreign produced cheap goods for example). Fiscal stimulus (like the one that was put out in the first term of Obama's presidency) were small and were meant solely to get international trade moving again and to try to stave off a full collapse rather than a recovery. The thing is if the US goes the austerity route its return to recession will pull every other country along with it. The problem we are facing is the fall in income of the majority of consumers in the advanced capitalist world due to long-term stagnation and then decline of wages; the impact of persistent unemployment and then cuts in benefits has yet to be felt totally.

    "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

    by NY brit expat on Thu Mar 14, 2013 at 11:22:25 AM PDT

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    •  One more additional problem that we are seeing (0+ / 0-)

      in the advanced capitalist world comes from monetary policy as the basis of stimulus. Quantitative easing which flows into pockets of corps and the wealthy is not stimulative. The problem comes back to rising income and wealthy inequality; companies increase production, investment and hire people if they think that expected profitability (due to rising expected demand that will last) is going to rise. Lower incomes for the vast majority means that they will not increase any of these things. What is also happening in the UK is the low productivity indicating that businesses are holding onto people hoping that the economy's situation will change. If things do change, they will not hire, what they will will increase intensity of production and increase productivity. That means that employment will not increase; it also explains why unemployment in the UK has not increased as badly as expected given the state of the economy. I do not know if the same thing has happened in the states.

      One of the stupidest things I have seen in mainstream economic discussions is the disconnect between production, consumption and incomes that seems to be a general problem in neoliberal understandings of the economy. So while they know austerity will shrink the economy (e.g., the IMF) they are doing this for its long-term effects, the shift of services from the public sector to the private sector, but if you decrease incomes, the people that used to get services free at the point of delivery cannot pay for them when they are privatised (see Greece for a perfect example; the privatisation of health care means that people can no longer access it).

      "Hegel noticed somewhere that all great world history facts and people so to speak twice occur. He forgot to add: the one time as tragedy, the other time as farce" Karl Marx, The Eighteenth Brumaire of Louis Bonaparte .

      by NY brit expat on Thu Mar 14, 2013 at 11:57:59 AM PDT

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