As the G20 votes for global Hoverism, aka: disaster, a friend asked why Hooverism is spreading so widely. Part of the answer has to do with elites, and I’ll deal with that another time, but let’s talk about why the public supports belt-tightening.
The belief amongst the public, I suspect, is that most of the money was spent on bail outs for the rich, not on them. They have come to see stimulus as code for “bail out” and as such, do not support it. While, of course, the bailout and the stimulus were two different things, the fact is that more money was spent bailing out the rich than was spent on the middle class and poor.
Likewise the results (spare me apologists) have been anemic at best. This is the WORST recovery in post-war history. It is bloody abysmal. Yes, it could be worse, you know it and I know it, but ordinary people have not seen a significant improvement in their ability to get jobs. The stimulus has not “worked”. It has not been seen to work. Not enough, anyway.
Forgive me for saying so, but this was predicted repeatedly. I wrote it the moment I heard the makeup of the stimulus bill. If you read the President’s own economic advisers, though they were over optimistic they predicted it wouldn’t do the job either(pdf). It was not just us crazy hippies who have a record of being right over and over and over again, and so are not serious people and must not listened to.
The stimulus was very badly put together (not just in tax cuts, but in how its spending was targeted). It was not large enough. It was a piece of crap.
If you want something to be considered as viable policy, it must be SEEN to work. It must not be arguable. People must feel good as a result.
Though I’m using the US as my example, this is true in many countries, especially when it comes to spending more money on saving the rich than on helping the middle class and poor. If ordinary citizens are going to have pay the bills for the bailouts, and don’t feel they’re seeing the benefits (they aren’t) the logical reaction is to say “stop!”
Now, of course, this isn’t why the elites are crying for it to stop. They want it to stop because they’ve been saved. Corporate profits have pretty much recovered. So why spend money helping the middle class and poor folks?
nihil obstet
If ordinary citizens are going to have pay the bills for the bailouts, and don’t feel they’re seeing the benefits (they aren’t) the logical reaction is to say “stop!”
While ordinary citizens aren’t seeing benefits from the bailouts, they are suffering the cuts that lack of stimulus makes necessary — larger classes in the schools because of teacher layoffs, limiting infrastructure maintenance to emergency repairs, cutbacks in amenities like library and park hours, virtual dismantling of the mental health system, and so on. In the U.S., I think a lot of what’s going on is a continuation of the war on the poor — we’ve overspent because we’ve given too much money to those people (and you know who I mean), and now government will just take more money from me and give it to them unless government stops spending. The constituency for any single expenditure isn’t enough to stop the overall gutting of social welfare expenditures.
Z
Yeah, the elites are at the card table playing with our money that is fed to them via “our” government and, undoubtedly, THEIR federal reserve, and they’re saying “hold!”.
Z
Lori
I’m so depressed.
anonymous
If ordinary citizens are going to have pay the bills for the bailouts, and don’t feel they’re seeing the benefits (they aren’t) the logical reaction is to say “stop!”
Who cares what ordinary citizens think? Or, in the words of “dick” cheney, “So?”
Now, of course, this isn’t why the elites are crying for it to stop. They want it to stop because they’ve been saved.
And that is pretty much all of the explanation that is required. Going backwards in recent history:
1. When it came time to paying rentier fees to the medical services industry, obama&company said “No, we’re not going to stop, meaning, you’re not going to stop paying.”
2. When it came time for Obama to decide whether to stop spending money unproductively on the weapons makers and mercenaries (AKA, “military contractors”), O&co said “No, we’re not going to stop paying for this. And by ‘we’, I mean ‘you’.”
3. When it came time for Congress to decide how the Treasury and Fed. Res. would set up trillions of dollars in spending on all sorts of “assets”, well, Congress wasn’t consulted. Bernanke and Geithner decided on repealing that part of the U.S. Constitution that says that all spending bills must originate in the House of Representatives. It’s part of the legacy of the reign of Bush&Cheney.
3. When it came time for the TARP to be voted on, the “ordinary people” said, “No!” and “Hell, No!” and were listened to for a day. The next day, Congress said, “So?” and went on to do what would benefit its socioeconomic class and protect it from harm.
4. A decade of deficit spending that was brought on by
a) the bush tax cuts for the wealthy and
b) spending on weapons and mercenaries
c) spending on higher drug costs for medicare
has just passed by without any hesitation or mention of “fiscal responsibility.”
“Fiscal responsibility” is simply propaganda/code for “we’re going to benefit our supporters/class and screw our opponents.”
anonymous
(Needless to say, the previous post was meant to have five enumerated items, instead of two items listed as ‘3’.)
Lex
While ordinary citizens aren’t seeing benefits from the bailouts, they are suffering the cuts that lack of stimulus makes necessary — larger classes in the schools because of teacher layoffs, limiting infrastructure maintenance to emergency repairs, cutbacks in amenities like library and park hours, virtual dismantling of the mental health system, and so on.
Indeed. The pace of turning the United States into a “developing nation” is quickening. Funny that the elites who’ve feasted for so long on golden eggs can be so oblivious to strangling the goose.
Or, apparently Time was right – around 1900 – to declare Detroit the future of America. Or, the world is a ghetto.
The Raven
I think also the fallacy of composition is at work here: the idea that a national or global budget can be managed in the same way as a household budget. A family on hard times that is borrowing money is usually making a huge mistake. Public finance economics tells us that under the right circumstances it makes sense for a country to borrow money in hard times, if the right sort of borrowing is done. But the case has to be made for this and, as you say, our gummints have instead made the anti-case, by treating the huge recession as an excuse to transfer money from poor to rich. Of course the public is skeptical: a lot of the stimulus and bailouts have been a scam.
anonymous
So why spend money helping the middle class and poor folks?
Gov’t. spending should especially be specifically targeted to women who are single and black or Hispanic. According to this report by the Insight Center for Community Economic Development, these women have a median wealth (excluding vehicles) of $100 and $120, respectively: http://www.fair.org/index.php?page=4078
Can someone tell me of a more stark indicator of racism in the country?
Glen
Well, the elites missed the mark. It’s very likely the wheels will come off and the financial system will once again go kerplunk.
Best thing to do to prepare is let everyone know the score – the elites want to screw YOU, all of YOU.
Jim
Why spend money helping the middle class and poor indeed.
The first assembly line in auto manufacturing began operating in the Detroit area in 1913. The wage scale of workers in Detroit, and especially the wage scale of black factory workers, was measured by the wages of the 17,000 black workers at Ford. At that time, 50 percent of all black factory workers in Detroit worked for Ford. This base of well-paid workers became the hub of the black middle class in Detroit. Today the intensifying polarization of wealth and poverty finds its expression in the exodus of capital investment from Detroit – and from the auto and manufacturing sectors in general. Within Detroit, 40 square miles of land stand vacant – enough to encompass the whole of Boston, Massachusetts! Gone are the days when the auto industry paid $28 an hour. With the introduction of computers, advanced electronics, and advanced robotics, the struggle over jobs becomes more intense.The new concessionary contracts have cut auto wages to $14 an hour, as capital flows away from unprofitable industries, toward more speculative investments.
Detroit’s history of less than 100 years of modern industry shows the tremendous capacity of the capitalist class to revolutionize the instruments of production. It also starkly reveals where that revolution in production leads under this economic system.
Ian, you have made some right-on predictions but if I may be so bold to quote Marx with one of his own:
“[I]n order to oppress a class, certain conditions must be assured to it under which it can at least continue its slavish existence. … The modern laborer … instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth. And here it becomes evident that the bourgeoisie is unfit any longer to be the ruling class in society. … It is unfit to rule because it is incompetent to assure an existence to its slave within his slavery. … Society can no longer live under the bourgeoisie; in other words, its existence is no longer compatible with society.”
Bernard
The rape of America is going on since St. Ronnie gave control the Government to the Corporations. who knew it would end this way. lol. the propaganda is continuous and adept. that it is still true most Americans haven’t a clue, period. Idiocracy indeed. The Corporations are messing up our nests and fouling the seas, this time.
instead of Shrinking the Government down the tub, an easier way to destroy any Government turns into “owning” the Government. stripping it bare and the country as well. before it leaves.
Formerly T-Bear
@ Bernard
The rape of … was going on long before your “St. Ronnie”. Recall if you will the likes of Teapot Dome, the rape of the Naval Oil Reserve in California, etc., etc.
St. Franklin D halted that rape for a while. That lasted mostly intact until Nixon, the devil, initiated the breakup (privatization) of Ma Bell, eventually into ten “baby bells” also accomplished in “St. Ronnie’s” administration IIRC. Do you find it curious that 10% control of the original AT&T resulted in 10% control of each of the baby bells? and the ability to acquire additional percentages of the baby bells was a lot cheaper than acquiring the same additional percentage of the original?
Once the gorilla of AT&T was taken care of, all the lesser edifice FDR’s New Deal constructed was easy to privatize. Do you recall when TVA was privatized? Do you even recall TVA? its history? why it was done and the economic effect it had? what the economic effect of privatization has been? and are we better off for it?
The purchase of the regulators also started with the Nixon devil’s administration, quietly, mostly unobserved. Recall that the John Birch Society was a significant force at the time, both as a politically active support for neoconservative points of view, but also as a ideological force subscribed to by the business owner and management communities, aided, abetted, and given intellectual validity by the Chicago School of Economic Phrenology. Would you find it curious that after GHWB41 issued the only true statement in his life re “VooDoo Economics”, he was called to Annenburg’s (sold TV Guide to Rupert Murdock for 3+ billion, again IIRC) estate with “St. Ronnie” and emerged as the VP of the Republicans, nary a contrary sound was heard since? Could GHWB41 actually been functioning president for three terms, once on his own? It is amazing how those back, smoke filled room deals work out.
About the only relationship provided by history to the current state of affairs is not with the Italian Fascists of Mussolini, but rather the period prior to Theodore Roosevelt’s administration when the multitude of “Trusts” were buying everything (political) in sight and running amok, a.k.a. The Golden Age. Today, the corporation has control over government, just the mirror of the government being the power facilitating business as was the case with fascism. Suppose we will need a new word to accurately describe the change in reality.
lambert strether
Reminds me of an anecdote from military history:
QUESTION TO ADMIRAL: How will we know that the aircraft carrier is obsolete?
ADMIRAL: When it fails in war.
The only thing that will get our elite’s attention is a collapse so complete that it affects them (see Jared Diamond). For good or ill, they seem to be rapidly bringing that about. I look around me, and I don’t see one single institution at the global or national level that isn’t in a state of FAIL, and state and even local aren’t doing so hot either. Needless to say, this is a situation that is neither resilient nor sustainable. I’m not a worse-is-better advocate, because the pain to be borne by ordinary people is too great in that scenario, but at this point, I think assuming that’s what is to come is the prudent approach.
lambert strether
Raven:
No, the budget of a nation is not like a household. For a nation that is sovereign in its own currency (like the United States, and not Greece) spending is not operationally constrained by revenues.
beowulf
“That lasted mostly intact until Nixon, the devil, initiated the breakup (privatization) of Ma Bell”
Enforcement of antitrust laws is not the same thing as privatization. In fact, our economy could stand to use see more antitrust actions, not less.
But while the mystery of what killed the great American jobs machine has yielded no shortage of debatable answers, one of the more compelling potential explanations has been conspicuously absent from the national conversation: monopolization. The word itself feels anachronistic, a relic from the age of the Rockefellers and Carnegies. But the fact that the term has faded from our daily discourse doesn’t mean the thing itself has vanished—in fact, the opposite is true. In nearly every sector of our economy, far fewer firms control far greater shares of their markets than they did a generation ago.
http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html
anonymous
Has anybody else noted the emergence as part of the conservative “conventional wisdom” that factoid that FDR was the most corrupt president ever? I suppose it is a reaction to the rise of the term “Hooverism”, and its acceptance seems rather widespread and unremarked on.
I feel like I’m 12 years old again and sitting thru another Irwin Allen disaster movie, except I’m middle aged and it’s for real. In those movies there was always some short sighted authoritarian type who led most victims to their demises with his crappy leadership, and it was usually someone who was partially responsible for the mess to begin with.
anonymous
As the G20 votes for global Hoverism (sic)…
Can anyone justify why this shouldn’t be thought of as the 21st-century version of the Smoot-Hawley Tariff Act”?
If all of these gov’ts. carry out the draconian cuts that they’ve been discussing, aren’t they all expecting exports (that is, the accounting equivalent of a tariff on imports) to lead them back to growth and full employment?
Also, I wonder whether Ian Welsh considers the prospect of these gov’ts. doing what they are saying they will do has replaced “When Will the Chinese Property Bubble Burst?” as the most important economic question in the world today:
https://www.ianwelsh.net/the-most-important-economic-question-in-the-world-today/
Ian Welsh
Nah, Hooverization has been looking likely for months. So it wasn’t much of a question.
S Brennan
My manufacturing business has cratered.
I had a good interview in Canada Friday…don’t know anything yet, I hope it works out.
I am a former US Army soldier, an Engineer from a top 10 university with a work record of accomplishments, 7 National/International design awards, US patents 2 sole, 7 co-inventor, current skills and can-do attitude. All of…
…which is absolutely no use to the USA. I was loyal to the USA, I gave my all, but it was unrepentantly unrequited. So I hope to sing…
…O Canada, we stand on guard for thee.
God keep our land glorious and free!
O Canada, we stand on guard for thee.
O Canada, we stand on guard for thee.
anonymous
So, “Hooverization” has been a foregone conclusion since when, Dubai’s Minsky Moment?
OK, then. Are there any foregone conclusions about how the populations of the EU states are going to react to draconian cuts? Will they wait until the cuts have been made or will they react in the coming weeks to forestall the cuts now that this communiqué has been announced?
anonymous
It sounds as though you would be of considerable use to the U.S., if it were to start jobs programs that addressed the problems that the country is facing. Unfortunately, as Ian Welsh pointed out in The Tea Party and the Ancien Regime*, only existing industries that are able to lobby for special status are supported in the U.S.
(It may be a chicken-and-egg problem: In order to get gov’t. money, new industries need to lobby and donate. But before they can lobby and donate, they need to get gov’t. money. )
Solutions that are recommended by non-lobbyists and their campaign money are called Not Serious.
*”ancien régime” is defined as a political and social system that no longer governs. But the rent-seeking businesses that Ian Welsh describes still do govern.
Formerly T-Bear
@ Beowolf
Your >>>Enforcement of antitrust laws is not the same thing as privatization. In fact, our economy could stand to use see more antitrust actions, not less.<<<
It is surprisingly oxymoronish to attribute to Republicans an act to enforce “antitrust laws”, not gonna happen. Consider; there are such things as natural monopolies, AT&T a.k.a. Ma Bell was one of them. It was under absolute control. Those controls were so well constructed they were unbreakable, binding AT&T in no uncertain terms. The two ways to free the corporation was to either obliterate the controlling set of laws (for what reason?, what purpose?) or to privatize it into smaller companies as mentioned above, using “antitrust” as camouflage for rationalizing the breakup. The interests being held in intact AT&T were retained in all the baby bells, the stock priced substantially below the stock price of AT&T, a perfect buying opportunity. I think your statement is naïf and misleading. The conclusion is perfectly agreeable.
Formerly T-Bear
@ Beowolf
Would add: There is nothing inherently amiss with monopolies if they are under firm control. It is the absence of control that harm abounds. Self control by monopolies is insane.
alyosha
@S Brennan – good luck, and keep us posted. Many of us are eyeing the exits.