Daniel Alpert does a great job of characterizing the opening decade of the postnormal, an age of apparent oversupply, where people are underemployed because there seem to be no safe investments and there is a world full of others willing to work for less, in a dreadful race to the bottom. The answer — massive investment in retooling infrastructure in the advanced economies — would seem to be the right way to move, but the austerians would rather starve the poor than build high speed trains or green electricity grids.
We are in an age of global oversupply: an oversupply of global labor (hence high underemployment); an oversupply of global productive capacity (hence ultra-low inflation); and an oversupply of global capital (hence low interest rates).
This explains why, around the middle of each of the past three years, activity petered out after predictions earlier in the year that the economy would finally achieve escape velocity.
The jobs created have been mainly low wage and part time. Growth in domestic manufacturing is still slow, and business spending has fallen, though corporations are flush with profits. Debt-saddled households continue to see real incomes deteriorate (even with very low inflation). Sales of new homes have suddenly reversed course. Rents are falling in several markets where home prices have recently increased. Even the seemingly unflappable stock market has been seesawing because of the uncertain economic signals.
Why do we seem unable to get out of this rut? In short, our policy makers are still fighting the last war. We are no longer faced with a world in which supply-side economic remedies — easy money, reduced taxation, fiscal belt-tightening and deregulation — can spur new capacity and the creation of well-paying private sector jobs.
A “reverse supply shock” that resulted from the sudden emergence, especially in the 1990s, of the productive potential of enormous, previously walled-off populations from Eastern Europe to Latin America to East and South Asia, helped fuel successive bubbles.
Hundreds of millions of people who once lived in sleepy or sclerotic statist and socialist economies now compete directly or indirectly with workers in the United States, Europe and Japan, in a world bound by lightning-fast communications and transportation. Countries that were recently poor (and still are, on a per-capita basis) find themselves with huge surpluses and sovereign wealth funds. The rich countries of the world, while still rich, struggle with monumental levels of debt, both private and public, and unsettling questions about whether they can compete globally.
Beginning in the late 1990s, a wave of capital, much of it the result of trade surpluses and big piles of savings in Asia, flooded the world’s capital markets. But consideration of global imbalances has taken a back seat in domestic policy circles. The causes of the crisis, it is often said in New York and Washington, lay mainly in too much risk-taking by the lords of finance, along with too big an appetite for debt among ordinary people.
But one can’t properly understand the financial crisis without appreciating how the rise of the emerging nations distorted the economies of rich countries. And you can’t chart a course to more growth and stability in the developed world without recognizing that many of these distorting forces are still at work. Cheaper credit through monetary easing, for example, doesn’t yield much in an era when cheap capital already exists in abundance.
So we are living in the downside of the upside: enormous excess capital means that an additional increase in capital makes no difference. Political will to invest capital is at an all time low, although interest rates for the US government is almost zero.
Welcome to the postnomal. Another day in paradox.
And today the US government has shut down, which is the newest wrinkle in the efforts of Tea Partiers to reaffirm their core values of starving the poor to death at any costs. After all, that’s the message: poor people don’t deserve the health insurance the Affordable Care Act now guarantees. Just like the roll back on food stamps, school programs, and other safety net programs. After all, the poor are excess to the needs of the holy market forces, aren’t they?
This is simply the most egregious example of the unwillingness of the far right obstructionists, the bankers, and the rentiers to accept the imperative metanarrative of our era: the world is a shared commons, not spoils for the winners of capitalist or state gamesmanship. A commons that should be shared equitably by all, and controlled through governance that puts the world before life, life before man, and the respect of others before love of self.