Roubini on the Instability of Inequality
Business-school professor and economist Nouriel Roubini earned his nickname Dr. Doom by repeatedly predicting the chain of events that would cause the global economic house of cards to fall down.
Yesterday he laid out the economic dilemmas that are triggering a global Occupy movement and concludes:
“Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.”
Read this brilliant essay here.
Similar to the comments made in The post why the excitment over debt, Roubini fails to mention that the power of capital may not actually be paying attention to these protests, and neither do most of the ruling parties. Potentially it goes back to the root of globalization. Capital is now massively light speed and hyper globalized. Political space to coubter is still barely national, and that is with a very strong left at the nation state. So to me it is great to take notes but we must understand the reality. Profits are doing just fine within this light speed economy, and as long as the lu gs of capital are breathing profits, a few protests here and there are actually a benefit to global capital, merely a safety valve, a steam whistle for the massive engine, blowing at random bits of debris on the track. The safety brake that global capital really fears- is the end of profits, and that is not changing.
The protestors are at least as global as the capitalists. That have been occurring throughout Europe. The protests in the Middle East has similar themes.
From the Toronto Star: “There were plans for global rallies on Saturday in 71 countries, according to Occupy Together and United for Global Change.”
With the political situation there, the US may end up being the last place the revolution comes to (if there is one coming).
globalized? i don’t think so. not in the same breath as capital. sorry Darwin, and given they are up against a machine that breaths profit, I do not see the basis for change. Now if somehow that loose coalition of at least similar ideals- that you feel is globalized- can somehow effect change towards influencing profits of say the financialization of the economy, through a transaction tax, then maybe I will admit the protests are more than warning us of random bits of debris on the track.
But the could be a beginnng of political change that could pervade the nation states. However, if we did a proper accounting in the countries that vote, even there the protest voices lose, as the shift has been to the right. And then we take into the non-“democratic” nations, and they for sure have shifted in the direction of more profit.
Profit is not a bad thing inherently, but the sole pursuit at all costs, definitely is what we are talking about capitulation of at the global level.
Roubini has been on role lately. His co-authored paper –The Way Forward–provides a cogent and systematic analysis of the present crisis and its origins. Crucially they go beyond the financial aspects of the crisis and lay the blame squarely at the feet of neoliberalism and the imbalance in class power between capital and labor as the cause and the inevitable crisis in *over accumulation* (what they call an over supply of labour and capital) that it provoked.
We’re still talking as if globalization were a force of nature, an inevitable thing created by neutral technology and impersonal progress. It isn’t, it’s a matter of regulation and institutions which was carefully nurtured into being by political intervention. Globalization was created and it can perfectly well be uncreated. Not easily, perhaps, because the political pressures leading to its creation are so strong and because it has led to so much shift in physical plants and reservoirs of skill.
But basically, regulate money and trade differently, put the brakes on footloose money and slap on enough protectionism to block races to the bottom, and the economy would get a whole lot less global. You can argue about whether the overall consequences of that would be good or bad, but it can certainly be done.
Why is it that when those on stage start saying stuff that many in political economy have known for some time it gets such flaberghast and astonishment. I am confused.
Is it that we are all astonished that in fact that much of what progressive have been saying for years is now being finally reaized. Of course not, we have all been bitching about declining wages for sometime now, we have been saying you cannot have bubbles at the center of your economy since, well, the time of Marx or perhaps the dutch tulips.
Potenially we need to start work on some statistical textual data mining on major economics talking heads and that will be a better gauge of where in the world acceptance or rejection of progressive economics is.
I recall thinking about market failures as far back as the dot.com bubble, by keeping my eye on value and production, or I guess in less marxian terms, price to earning ratios of stocks. (which to me gets somewhere towards that process)
We lost our way in the 1970’s and to me it was all kicking the can down the road, albeit a long and dare I say painful worker adjustment way. Since the 91 recession, capital became more desparate at it seen some major obstacles coming.
Wealth and value, it always gets back to the very basics.
I have needs and lots of wants, I can also perform a very thin slice of tasks and create value in which I am willing to trade. Hook me up to the machine and let me value add, and keep me somewhat happy, alienated but happiness reification, shiny objects, legal drugs, feeding the poor, whatever. But keep me happy in whatever way the machine will let me define it, and I become one with that happiness.
So it gets back to those basics. How can we do it so I can value add at some culturally defined, measured, accounted, socialized, and renumerated process and then turn around and take that tiny surplus, and regenerate. Create that value so more and more people can consume (and depending on your politics) some bell shaped distribution to each of those participants and we have an economy.
But it comes back to we need to have demand, that is sustainable and growing. Capital is successful at accumulation and pointing that accumulation. But it is the means and the ends that are problematic. And when, like we have now, let a large proportion of capitals, “cheat”, i.e. create ficticious value external to the process, it creates accumulation problems and demand problems. which is first, seems to be the debate, but that is secondary, it is the external process, the finanicalization of surplus value and the fiction that not only throws just sand into the machine, but eventually when going past some boundary of tolerance upsets the entire disfunctional (at best of times) function and ends up unplugging it.
SO which way forward. How do we create demand. The 90’s we about false financial profits of the dot.com, and then the false profits from a housing bubble. Is that the best out of the box, deregulating capital could do to keep us all happy?
I guess the plan is to reprogram expectations, which has been going on since the 80’s. But not only have we hit the debt wall in a capitalist sense of debt, (MMTers’ I am sure would disagree) but we have also hit the happiness wall in reprogramming acceptable expectations of life, love and happiness.
Now that is what Roubini should have said and I do believe global solutions are needed, we can erect some regulations on standards and those ill hopefully help. But it is so much deeper than that. THink about this, automation, and now smart machines, entering into the production process. They offer so much hope for humanity. But it has steep investment costs, and ongoing production, that if you can hire a 1000 workers in another country not making a living wage, then why would you automate. Just think about what those these trade and valuation practices have done to prevent automation and the implementation of capital.
THere is no end to needs and wants. Truly they are infinite. But we need to do it in a fashion that is sustainable and a whole lot more equitable within the north and between the south.
Call me a techno optimist. But the solutions are there, I have seen them and it centers on informating value and its production. RIght down to the micron level there is an economy of innovation that is largely untouched. And mainly because we have let the financiars take the easy speculative route out to allow capital to harness these quite simplistic notions of value creation.
Have a great week.