Beyond the Crisis: Why We Need A Different StoryLine About the Economy

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Beyond the Crisis Why We Need A
DifferentStory-Line About the Economy

• Jim Stanford, Economist, CAW
• November 2009

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A Moment to ChallengeOld Ways of Thinking

• People want to understand the crisis
• People are hungry for alternative visions
• Need to start at the basics
• Demystify the economy
• Demystify this crisis
• Demystify our goals, demands

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GFC
Global Financial Crisis
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MOAM
Mother Of All Meltdowns
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BFEC
Big Fat Economic Crisis
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TLADOCAWKI
The Long-Awaited Demise Of Capitalism As We Know
It
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My GoalDemystify Reclaim Economics

• Get concrete
• Relate ideas to daily life
• Avoid jargon, graphs, math
• Empower people as legitimate, confident economic
  citizens with opinions and influence

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MY GOAL To Demystify Reclaim Economics
www.economicsforeveryone.ca

• Excerpts
• Lesson plans
• Resources
• Glossary
• Blog
• Feedback

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Step 1Demystify the Economy
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What is the Economy?
W O R K
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Step 2 Demystify the Crisis

• Economy sum total of the work we perform, to
  meet our needs and wants
• We can work today as well as ever
• In fact, we can work better (technology, skills,
  productivity)
• Theres no material reason for this crisis!
• Ignore the financial mumbo-jumbo
• Focus attention on real work, production
• Demand our right to work and produce!

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Where Did This CrisisCome From, Anyway?
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Where Did This CrisisCome From, Anyway?
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Financialization

• Since early 1980s, policy emphasized financial
  activity over real production
• Employment and real production kept under tight
  control
• Jargon Need to control inflation
• Reality Goal is to control workers!
• But finance was given total freedom
• Deregulation ? Globalization
• Speculation ? Tax Subsidies
• Economic split personality
• Political/cultural effect Stock-marketization

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The Real Economyand the Paper Economy
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The Real Economyand the Paper Economy

• Real Economy the work we all do to meet our
  material needs wants
• Paper Economy financial sector plays a
  different, unique role
• Not directly productive
• Trades in paper assets
• Theory Paper economy facilitates, lubricates
  real investment production
• Practice For every 1 of productive lending
  finance, the paper economy spends 100 on
  speculation (buying/selling existing assets)

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Wha Happened?

• Speculative bubble (again)
• Centred in U.S. housing
• Aggressive, irresponsible lending
• NINJA mortgages
• Speculators borrowed at 501 or more
• U.S. housing prices began falling in 2006
• Chain reaction of bank collapses
• Impact on wealth, confidence, lending,
  investment, spending ? RECESSION
• Globalization made things far worse

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Been There, Done That, Got the T-Shirt

• 1978-1981 Neoliberalism is born with interest
  rate crisis
• Mid-1980s U.S. savings and loans crisis
• 1994 Peso crisis
• 1997-98 Asian financial crisis / Russian bond
  crisis
• 2000-01 Internet stock market collapse
• 2007-08 U.S. subprime meltdown
• 2012? 2014? 2016?

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Deconstructing Recovery
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Deconstructing Recovery

• Traditional (narrow) definition
• Real GDP (which fell for 2 quarters) starts
  growing again
• Does this mean human welfare is improving???
• Even by the narrowest (quantitative) definition,
  recovery is not here

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Jumping to Conclusions
-4.5 in 10 months
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Jumping to Conclusions
0.1 for 1 month
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Back to Reality
Bouncing along bottom
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Recovery For Whom???
Stock Market Up 50
Unemployment Up 50

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Whats in Store

• Bouncing along bottom
• Until normal engines of private-sector growth
  kick back into gear (2-3 yrs)
• Or until government gets serious about LEADING
  growth (not just arresting the free-fall)
• Downside risks
• Another round of corporate crisis
• Another financial bubble / collapse
• Perverse government spending CUTS

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We Produce
They Dont
We Didnt Cause the CrisisThey Did
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A Comprehensive, Credible Alternative

• Re-regulate finance, socialize credit
• Stimulus to address the real slowdown
• Public services are stimulus
• Protect the victims of the slowdown
• Develop key industries firms
• Protect, expand pensions
• Go further Priorize the real economy
• We need a NEW GROWTH MODEL
• Do more work to meet human needs

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Declare War, End Recession

• 1939 Recession ended immediately
• Enormous social challenge
• Side-stepped profit motive for initiating work
  and production
• 2009 Do it again
• Declare war on pollution, poverty

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Beyond the Crisis Why We Need A Progressive
Story-Line About the Economy

• Jim Stanford, Economist, CAW
• November 2009