by John Clegg and Aaron Benanav
Paul Mattick’s most recent book, Business as Usual: The Economic Crisis and the Future of Capitalism, was just published by Reaktion Books. In late April, he sat down with John Clegg and Aaron Benanav of the journal Endnotes.
Rail: Recent reports suggest that the economy is growing again. The unemployment rate is stabilizing, or even declining, and the Dow is trending upwards. So was the crisis really that deep? What makes you think that we haven’t already seen the end of it?
Paul Mattick: Quite a few things. One is the ongoing difficulties in the world as a whole with regard to state finances and unemployment. It is a mistake to look simply at the United States. This is a global problem. There has been a parade of fiscal crises in Europe: in Portugal and to a certain extent Spain. The attempt to master the crisis has led to deepening depression-conditions in England and Greece. It has even reached China, where apparently high growth rates are leading to seemingly problematic rates of inflation—exactly like the pseudo-growth of the 1970s, which generated high inflation rates in the west. Even with respect to the United States, and I wouldn’t be so impressed by measures such as employment going up and down. To a certain extent, this reflects the fact that people are dropping out of the labor force. There are of course minute changes from month to month in the number of people who get jobs, but overall conditions remain extremely poor.
It’s also worth remembering that the GDP growth rate is an artificial construction. For example, since economic theory assumes that everyone who receives money is being paid for some service or good that has been produced, whenever someone from Goldman Sachs gets a bonus, that appears as part of the growth figures. If you give Lloyd Blankfein a $35 million bonus, it’s assumed that he has performed $35 million worth of services. The truth is that the growth rates are increasingly a measure of activity in the financial sector, so even today, all this remains completely imaginary. It’s nice if a person here or there gets a job, but the truth is the city of Detroit is still 25 percent smaller than it was ten years ago. The unemployment rate in Tampa, Florida—which I happened to read about today—even if it is one percent lower than it was last month, is still 11 percent. All over the world unemployment rates remain high. There is very little lending from banks, very little investment, and very little actual economic growth.
Rail: You spoke about this being a world crisis. Could say a little more about the major state responses to the crisis? How coordinated were those responses at a global level? Were there differences in the way thatthe crisis was handled between the US, Europe and East Asia, or between rich and poor countries?
Mattick: I don’t think the responses are very coordinated. As always in a period of crisis, there is an increase in competition: the different regions jockey to do the best they can for their national capitals. In the United States there was a small attempt at stimulus. It largely took the form of trying to preserve the financial structure, which is important not just in the United States but for the world economy. In Germany, they sat back and hoped that they would be able to export capital goods to other countries, while in the weaker economies of Europe, there were very serious collapses. The governments of Ireland, Spain, Portugal and Greece are now trying to safeguard the positions of local financial operators, to bail out the bond holders, to bail out the banks and to force local populations to bear the brunt of it. So the Euro bloc has become weaker as the better off countries, especially Germany and to a lesser extent France, find themselves having to pay for the collapsing situation in the weaker countries. In China, again, there is a different situation, because China doesn’t have a normal capital market. The Chinese government controls internal finance and created an enormous amount of debt in order to stimulate the Chinese economy, which is now running into serious problems. They’ve spent two years building empty cities and financing real estate bubbles. Now they seem to be reaching the limit of this, which people are very afraid of, both in China and in the rest of the world.
So each part of the world deals with the crisis on a different basis. If you have a lot of oil, like Qatar or Saudi Arabia, then you can sell it to the West and have a lot of money to play with. You can spend $36 billion trying to lower the level of protest in your cities. But if you don’t have any money, like Egypt, then you have to deal with a restless population. You are dependent on the richer countries propping you up.
Αποδώ
Paul Mattick’s most recent book, Business as Usual: The Economic Crisis and the Future of Capitalism, was just published by Reaktion Books. In late April, he sat down with John Clegg and Aaron Benanav of the journal Endnotes.
Rail: Recent reports suggest that the economy is growing again. The unemployment rate is stabilizing, or even declining, and the Dow is trending upwards. So was the crisis really that deep? What makes you think that we haven’t already seen the end of it?
Paul Mattick: Quite a few things. One is the ongoing difficulties in the world as a whole with regard to state finances and unemployment. It is a mistake to look simply at the United States. This is a global problem. There has been a parade of fiscal crises in Europe: in Portugal and to a certain extent Spain. The attempt to master the crisis has led to deepening depression-conditions in England and Greece. It has even reached China, where apparently high growth rates are leading to seemingly problematic rates of inflation—exactly like the pseudo-growth of the 1970s, which generated high inflation rates in the west. Even with respect to the United States, and I wouldn’t be so impressed by measures such as employment going up and down. To a certain extent, this reflects the fact that people are dropping out of the labor force. There are of course minute changes from month to month in the number of people who get jobs, but overall conditions remain extremely poor.
It’s also worth remembering that the GDP growth rate is an artificial construction. For example, since economic theory assumes that everyone who receives money is being paid for some service or good that has been produced, whenever someone from Goldman Sachs gets a bonus, that appears as part of the growth figures. If you give Lloyd Blankfein a $35 million bonus, it’s assumed that he has performed $35 million worth of services. The truth is that the growth rates are increasingly a measure of activity in the financial sector, so even today, all this remains completely imaginary. It’s nice if a person here or there gets a job, but the truth is the city of Detroit is still 25 percent smaller than it was ten years ago. The unemployment rate in Tampa, Florida—which I happened to read about today—even if it is one percent lower than it was last month, is still 11 percent. All over the world unemployment rates remain high. There is very little lending from banks, very little investment, and very little actual economic growth.
Rail: You spoke about this being a world crisis. Could say a little more about the major state responses to the crisis? How coordinated were those responses at a global level? Were there differences in the way thatthe crisis was handled between the US, Europe and East Asia, or between rich and poor countries?
Mattick: I don’t think the responses are very coordinated. As always in a period of crisis, there is an increase in competition: the different regions jockey to do the best they can for their national capitals. In the United States there was a small attempt at stimulus. It largely took the form of trying to preserve the financial structure, which is important not just in the United States but for the world economy. In Germany, they sat back and hoped that they would be able to export capital goods to other countries, while in the weaker economies of Europe, there were very serious collapses. The governments of Ireland, Spain, Portugal and Greece are now trying to safeguard the positions of local financial operators, to bail out the bond holders, to bail out the banks and to force local populations to bear the brunt of it. So the Euro bloc has become weaker as the better off countries, especially Germany and to a lesser extent France, find themselves having to pay for the collapsing situation in the weaker countries. In China, again, there is a different situation, because China doesn’t have a normal capital market. The Chinese government controls internal finance and created an enormous amount of debt in order to stimulate the Chinese economy, which is now running into serious problems. They’ve spent two years building empty cities and financing real estate bubbles. Now they seem to be reaching the limit of this, which people are very afraid of, both in China and in the rest of the world.
So each part of the world deals with the crisis on a different basis. If you have a lot of oil, like Qatar or Saudi Arabia, then you can sell it to the West and have a lot of money to play with. You can spend $36 billion trying to lower the level of protest in your cities. But if you don’t have any money, like Egypt, then you have to deal with a restless population. You are dependent on the richer countries propping you up.
Αποδώ
