Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I think I agree with you on your medium-term optimism, especially about the increasing necessity of a low-carbon social life, but not on the first two historical factors that supposedly forms the basis of the current and recent bad bubble times:

* the first factor has been the end of the Soviet Union, and the discredit it brought to economic theories competing with "free markets." Coming at a time when our keynesian-drive economies were going through various strains . . . stagflation, etc .... the Berlin Wall falling . . .

The above appears to refer to the period between the late 1970s and about 1990, when state-directed Japanese and East Asian 'tigers' were the wonder of the economic world. But what was all that the mainstream U.S. media taught its citizens (I don't know what was being taught readers in Europe) then about the Japan and east Asian success story: 1, they were 'cheating'; 2, they were so different from us culturally that we could never do as they were doing.

The above is just the best example of the larger point: it wasn't what was happening in the larger world that turned us toward Milton Friedman's economics, it was power: who controlled the media and who increasingly controlled the academy. The interpreters of our economic reality and determiners of our 'common sense' about that became decisively more conservative, especially around the mid-to-late 70s.

Stagflation was the excuse not the reason. If anything, if labor had had the upper hand power-wise during that crossroads time, the U.S. could have used stagflation as a reason to adopt the state-directed economic policies of the country that was kicking U.S. economic ass back then. Many were arguing exactly that back then and all through the 80s. But we didn't. Greater short term profits were to be had by cutting labor costs and off-shoring capital . . .

* the second factor has been the rather brutal entry on the global market of the Chinese and Indian workforces. When you increase the supply of a good, in this case labor, its price tends to go down . . .

This, of course, ignores the role played by the destruction through various means of protection of the working classes of the high-wage countries (tariffs and quasi-tariffs, controls on exporting capital). Which, of course, is related to the destruction or near-destruction of those nations' labor unions and their political power. Supply and demand determining wage levels is a 'natural law' but one routinely squelched by policy while labor had the power to make that happen.


by fairleft (fairleftatyahoodotcom) on Mon Aug 23rd, 2010 at 11:54:56 AM EST

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