By Holly Stubbs
In this excellent review of Brenner’s The Economics of Global Turbulence, John Judis of the New Republic gives some excellent reasons for pessimism about the future our economy. Not the future next week, not the future of the horse race trading but the future of the modern economies.
The core of the argument is that:
“The underlying cause of the current downturn lies in the “real” economy of private goods and service production rather than in the financial sector, and that the current remedies—from government spending and tax cuts to financial regulation—will not lead to the kind of robust growth and employment that the United States enjoyed after World War II and fleetingly in the late 1990s. These remedies won’t succeed because they won’t get at what has caused the slowdown in the real economy: global overcapacity in tradeable goods production.”
He argues, pretty convincingly, that the real problem with America’s economy is not the growth of the financial sector or the housing boom. Rather, those were both symptoms of the greater problem: overproduction. In short global industries can produce more stuff than people need.
The down turn, according to the book, began in the 1970s when the United States and Europe had rebuilt their industrial bases and industry began to move to developing nations in Latin America and Asia. Industries in the United States and Europe have seen since that time a declining rate of profit because the need for their expansion has decreased.
Judis ends his article very pessimistically saying, “I like to think the countries of the world could find a way out of this mess through national and global planning and cooperation. But I don’t presently see how.”
While personally I am more optimistic than Judis or Brenner, I found this analysis to be the most compelling thing I’ve read that argues for a long term slow down for the world economy.
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