Thursday, February 05, 2004

the laughter of Canton...
Comparisons of the EU and US economies are a mainstay of business page op-eds, usually to the detriment of the EU. This tends to conceal the fact that the economic policies of the Bush administration and of at least some of the big Eurozone economies have important features in common, namely reflation through defecit spending and tax cuts (in France and Germany at any rate. In the UK, it's deficit spending and tax rises)

Via a Fistful of Euros, an article from the FT shows that the effects are similar in both cases, combining an uptick in productivity with a stagnant employment picture.

But the survey, which is closely monitored by the European Central Bank, showed employment contracting for the second month in a row despite companies' growing optimism about the economic outlook.

In Europe's case, this is put down to the rising Euro and its effect on export profitability. But the fact that both sets of policies have led so far to a jobless recovery indicates that something else has been at work, namely the legions of cheap and increasingly highly skilled workers on offer from China and India. This adds deflationary tendencies to the global economy as a whole, to which Western policymakers respond with cheap money and huge piles of government debt. Consumption remains more or less steady but increasingly relies on a large but basically static pool of consumers, who rely in turn on being able to service personal debt to buy all the stuff from China and fend off calls from the Bangalore chapter of the bogus Man United fan club.

China joined the WTO a few months before 9/11, gradually infiltrating the global division of labour when everyone was watching the US and co wilfully imposing nobility across the Middle East . As I understand the marketing of the WOT, it was at least partly about defending the virtuous circle of the West, wherein free minds, free markets and free institutions collaborate to accumulate and distribute capital in a manner both efficient and sublime. And what does capital do while it is being so defended? Bug out to China, the world's last great leviathan state. Thanks suckers: and so long.

This is something of a challenge, to say the least, to the neoliberal view of the relationship between markets and political structures. We're all cautioned against protectionism and will be until punditry gets outsourced to a shack somewhere in Uttar Pradesh. Nonetheless, there's huge scope for economic populism, especially in America, as working hours get longer, wages stagnate and job insecurity grows.

Dean's campaign seemed to he trying to articulate some of this, but he peaked too soon. He should have saved his fire till 2008, when the idea that the opportunities have gone to where they can be offered for less money sinks in. I have no idea where all this will lead. But there's a few points it's safe to make:

The Thatcher Reagan cycle of political economy is over. If we don't want the socialism of fools - some combination of blanket protectionism and political nativism - we'd better come up with some other kind of socialism pretty quick.

Free markets don't lead to free minds. Businesses prefer to deal with dictatorships, provided that they are not kleptocrats.

The social contract based on capital accumulation is over. Profit growth does not automatically lead job growth. It's arguably more likely to lead to the company you work for being in a fit state to shed expensive Western labour and make even more money points East.