Connoisseurs of Catastrophe
By Doug Henwood
The other week in this paper, Peter Eavis wrote about James Grant, proprietor of an eponymous newsletter covering the credit markets. Grant, one of the few remaining bears in these bullish times, is tireless in uncovering reasons to be gloomy. Back in 1994, he even invited me to speak at one of his semiannual conferences to terrify attendees with tales of an imminent anticapitalist revolution.
Anyone who’s stuck with a bearish strategy since the bull market’s birth–1981 for bonds, 1982 for stocks–would be lucky to be solvent today. (Grant acknowledges this with characteristic humor; the badge given to conference attendees was decorated with a picture of a bear wearing a barrel.) But he survives because he’s a smart guy and a stylish, witty writer, and there’s always a reliably populated bears’ den on Wall Street. Why any Wall Streeter should be bearish in an era when pretty much the entire world has been transformed into a free-fire zone for capital is a mystery I’ll return to in a bit. First I’d like to take a look at why so many people on my end of the spectrum are expecting, even rooting for, doom.
In his Aug. 16 "Wild Justice" column in this paper, Alexander Cockburn speculated that Bill Clinton was looking forward to "four years of economic depression under the supervision of George W. Bush." Not long ago, Cockburn’s Nation sparring partner Katha Pollitt told me that she thought there could be no revival of the American left without a depression. In a mid-August interview with Salon, Gore Vidal said: "I’ve spent my life studying American history and politics. I know how the country’s run. There will be an opportunity to get rid of this system. And the opportunity will come from the total collapse of the economy, which I think is on the horizon. The Dow Jones, the Nasdaq, will collapse and the people will be very angry. At that moment you can make big changes."
What is it with this leftie lust for disaster, this embarrassing habit of predicting disasters that never quite arrive? Now I’d be the last to argue that some kind of neo-depression is impossible. Throughout its long and charming history, capitalism has been through many crackups. Much of the Third World has been in some kind of depression for 20 years. But it seems highly unlikely that a First World economy could experience a rerun of 1929-’33, when real GDP fell by 27 percent, and the unemployment rate soared from 3 percent to 25 percent. Look at Japan, where the consequences of their bubble-pricking has been a decade of near-zero growth, but no outright collapse.
But since many of these predictions of collapse include no small amount of wish-fulfillment, I’ve got to ask: What friend of the working class would long for 30 million layoffs (today’s equivalent of a 30s-style collapse)? Tight labor markets are good. The best thing that Alan Greenspan has done in his vastly overpraised reign–a period that includes the 1987 stock market crash, the S&L debacle, the leveraging mania, the credit crunch of the early 1990s and the Mexican and Asian crises–has been to let the unemployment rate fall to 4 percent and stay there. The lowest jobless rate in 30 years has helped bring about the lowest black poverty rate ever, the lowest level of violent crime in the history of the government’s victimization survey, and real wage gains across the entire distribution. It’s also contributed to a new and imaginative protest movement and signs of imagination and militancy among American unions–with students and labor working together, in contrast with the fabled 1960s. These are all excellent things.
When people think it’s relatively easy to find or keep a job, they’re more likely to kick up a fuss. Yes, it’s true there was all kinds of political ferment in the 1930s–though in places like Germany and Italy it took a rather uncongenial form. More likely than that kind of depression is something like the 1970s and 1980s, when unemployment was high enough to make people nervous, but not high enough to make them think about plant occupations–or some place like Japan today, which is hardly a crucible of interesting political ferment.
The major reason a rerun of the 1930s is so unlikely is that state bailout managers have learned how to contain a financial panic and keep it from turning into a deflationary collapse. Which brings me back to the Wall Street bears. Lefties who imagine, or even long for, disaster often do so because they find capitalism a repellent system and hope that some break might bring about its end, or at least its reform. Hoping for collapse is a lot easier than organizing and persuading the masses.
But you have to wonder why Wall Streeters, who have been raking it in like never before for nearly two decades, would be so itchy for a collapse. I think there’s a kind of perverse wish-fulfillment working there too. The Street’s permabears are mostly libertarians who find the whole apparatus of modern capitalism, with its developed and indulgent state underpinning, to be theoretically offensive. They often overlook the degree to which they depend on that indulgence. Like Western libertarians who denounce the gummint, forgetting that their region would be barely habitable without massive federal water projects, and cyberlibertarians who excoriate Washington, forgetting that their computers and Internet wouldn’t exist without decades of federal subsidy, Wall Street libertarians kvetch about state intervention, forgetting that capitalism would have collapsed long ago without lenders of last resort and big spending programs. The permabears, Hayek in hand–or a few thirdhand snippets from The Master in their heads–just know that state intervention sullies the market’s perfect beauties, and can’t work over the long term. So the collapse has to come. And if it doesn’t come tomorrow, then we’re just postponing the inevitable, and so it will come, worser than ever, the day after tomorrow.
But of course, I find myself occasionally wishing for a killer bear market to drive all the assholes out of town.
[Doug Henwood edits Left Business Observer. His book, A New Economy?, will appear late this year from Verso.]
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Carl
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