NYU Professor of Economics Dr. Nouriel Roubini was once known as Dr. Doom, for what turned out to be fairly accurate if gloomy predictions about the state of the economy. In this must-see interview he lays out a number of facts and consequences about the state of the global economy. He paints a picture of a landscape littered with 'zombie banks and zombie households', teetering on the brink of a double-dip recession (which will be observed to have begun in June, when the corrections come out...). He notes the basic facts that we have long understood around here, namely that austerity does not help increase aggregate demand, that bailing out the TBTFs just kicked the can down the road, that the fiscal problems are the result of Bush wars and tax cuts and so on.
And then he does it... BAM
Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.
Even I would have hesitated to invoke Marx when discussing the problem of the concentration of capital and its self-amplifying capture of political and social influence. (you're soaking in it)
Would I break out of my long, lurking obscurity for a moment of diary obscurity for nothing? Sure, I'd like to blather on and sound clever, or maybe vent some of my less positive feelings about certain policies and their makers, but you should just watch this...
Or, if the embedding doesn't work, your connection is slow, or you need to copy and paste, you can read this piece Is Capitalism Doomed? There you will find fun descriptions and fantastic prescriptions:
Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality, and reduces final demand.
Recent popular demonstrations, from the Middle East to Israel to the United Kingdom, and rising popular anger in China—and soon enough in other advanced economies and emerging markets—are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world's middle classes are feeling the squeeze of falling incomes and opportunities.
The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.
Over time, advanced economies will need to invest in human capital, skills, and social safety nets to increase productivity and enable workers to compete, be flexible, and thrive in a globalized economy. The alternative is—like in the 1930s—unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.
And who said economists were just astrologers with suits?
p. s. HT to goinsouth for transcribing the pithy block quote about Marx. (while writing a diary about this same thing last week...)