Fed cuts rates; crisis over?

Doug Henwood dhenwood at panix.com
Thu Oct 15 13:01:33 PDT 1998


Louis Proyect wrote:


>This is just impressionism, Doug. The issue is not financial crisis, but
>economic crisis which the stock markets only indirectly reflect.

Not entirely. The relations between the financial and real aren't so simple, nor is the financial a simple reflection or derivative of the real. And since the recent crisis first appeared in the financial sector, has been transmitted internationally through finance, and threatened to undermine the real through a severe credit crunch, the financial environment is particularly important.


>The more
>interesting and revealing numbers are contained in Harry Shutt's "The
>Trouble With Capitalism", Zed Books, 1998, p. 38.
>
>---
>OECD: variations in rate of change in output, private consumption,
>fixed investment and consumer prices (annual % change)
>
> 1953-60 60-65 65-73 73-79 79-85 85-89 89-95 50-73 73-95
>Gross domestic product 2.9 5.3 5.0 2.7 2.1 3.4 1.8 4.3 2.4
>Private Consumption 2.9 5.1 5.1 3.0 2.1 3.5 2.0 4.3 2.6
>Fixed Capital Formation 4.4 7.1 5.9 1.2 1.1 5.3 1.8 5.7 2.1
>Consumer Prices 2.5 2.6 4.8 10.3 7.5 3.5 3.4 3.4 6.4
>---
>
>The brute fact is that capitalist growth slowed down in the early '70s and
>neither neo-Keynsianism, nor monetarism has worked to change that.

But the slowdown is only relative to the Golden Age; recent growth is in line with pre-1950 rates. (And why should a slowdown in growth be read catastrophically anyway?) Here are growth rates by period for four important countries:

UK Germany US Japan 1820-1870 2.0% 2.0% 4.2% 0.3% 1870-1913 1.9% 2.8% 3.9% 2.3% 1913-1929 0.7% 1.2% 3.1% 3.7% 1929-1950 1.7% 0.9% 2.6% 1.1% 1950-1973 3.0% 6.0% 3.9% 9.2% 1973-1994 1.7% 2.2% 2.5% 3.5%

1973-82 0.8% 1.6% 2.0% 3.5%

1982-94 2.4% 2.6% 2.9% 3.4%

1820-1950 1.8% 2.0% 3.7% 1.5%

I'm certainly not arguing that capitalism will ever become a stable, egalitarian system. Even when it works well, billions of people can do very badly. Nor am I saying that financial crisis couldn't return, nor that depression is impossible. But a lot of rhetoric of recent months about the system flying apart, including my own, is looking a bit overheated right now.

Doug



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