Tuesday I mentioned the difficulties of re-regulation given the strength of the financial class. In fact, the problem is considerably wider than just a matter of being able to get the right regulations in place. It is also a matter of what we think a recovery is, who benefits from the recovery, and who does not. The mainstream conception of what counts as recovery is determined by financial markets – rising stocks supposedly float all boats. Resistance to this way of thinking is beginning to seep into mainstream discussions, with liberals like Krugman noting that the recovery is largely for the people at the top. A recent graph, found at naked capitalism, points out that, at the bottom, things are slow to improve.
The jobless recovery, of course, has been part of the news, but few have bothered to connect this joblessness to the financial character of the bubble, not to mention the ‘recovery’ itself. Doug Henwood is one of the few to point out the connection between the two as general feature of financial bubbles.
The implication of Henwood’s analysis, and the steady stream of facts supporting it, is not just that somehow financial interests have managed to seize control of the state and economy and use it to their benefit – though they have managed to do a good deal of that. It is that the general model of growth and job creation, starting in the 1970s, is defunct. Cheap credit, debt-financed consumption, readily available mortgages, rising debt-income levels, alongside stagnant wages, rising inequality, and asset bubbles were at least some of the key features of this model. It was, significantly, not just a model of growth and job creation in the narrow economic sense, but a kind of tacit social compact. Post-war living standards would be maintained, not through high wages, public provision, and regulation of the economy, but through the instruments of the market – which effectively meant credit. This was sometimes called a ‘neoliberal’ model, though notably the concept neoliberalism rarely includes mention of the financialization of the economy. Whatever the name, it is that model of capitalism in general that would have to be replaced before any real recovery takes place – at least a recovery in which everyone recovers.