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The U.S. Economy Is Down By 50% – Where Are the Job Programs It Needs?
The U.S. has a service economy. Some 70% of its gross domestic product is generated by personal consumption. The emergency measures taken to slow down the covid-19 pandemic decreased consumption by a huge margin. The GDPNow model by the Federal Reserve Bank of Atlanta shows the slump:
The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. Our GDPNow forecasting model provides a "nowcast" of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.
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Latest estimate: -52.8 percent — June 1, 2020
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2020 is -52.8 percent on June 1, down from -51.2 percent on May 29.
Source: GDPnow via The Big Picture – bigger
The GDPnow model gives a snapshot of GDP on any given day. It is not the GDP for the year, which will be down much less, but just a moment in time.
With the lockdowns loosening the GDP will certainly increase again. But a haircut missed due to the lockdown will not result in a desire to get two haircuts. The meals not eaten in a restaurant during the last two month will not be made up by additional meals eaten after the reopening. The losses are for real.
With the end of the lockdown half of the 40 million currently unemployed will likely soon be back to work. The jobs of the other 20 million will not come back for a long time. The travel and hospitality sectors will be most effected. People who do not make money can not spend any.
The unemployed and the economy will not be impressed by Trump's current fake 'law and order' show or by his pandering to Evangelicals.
If Trump is as smart as he claims to be he will ask Congress for a huge amount of money to be spent on infrastructure programs over the next three years. That money should be shared for projects on the national, state and local level. There are plenty of bridges, roads and rails that need repairs or replacements.
But Trump isn't as smart as he claims and the people around him, as well as Trump himself, are from the FIRE economy – the Finance, Insurance, and Real Estate sectors. Such people do not value the real economy where real stuff is made and used.
The stock market, on which Trump is fixated, has long ceased to be a reflection of the real economy. Propping it up again and again, as the Fed and the Treasury do, may well enrich Trump's friends, but it does nothing for the voters he needs to get reelected.
Does he not understand that?
And why, by the way, ain't the Democrats out in front demanding that more be done to create new jobs? They seem to have totally vanished from the scene.
Adam Smith, that Prime Mover of Capitalism, knew what he was talking about. After all, if you’re going to create a religion based on greed (for, ultimately, economics is nothing more than a religion), you probably have a keen and subtle awareness of the psychology of greed. Here, in the conclusion of Book One Chapter 11 of Adam Smith’s sacred text The Wealth of Nations he reveals the extent to which he understood that an economic system based upon greed must seek ways to prevent the greedy (ie: business) from assuming the reins of political power [em. mine]:
The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order [ie, “those who live by profit”], therefore, has not the same connection with the general interest of the society as that of the other two [ie, landowners, and “those who live by wages”]. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Thus the Prime Mover of Capitalism Himself said in his Bible that political power should never be exercised by businessmen because all they care about is their own gain, and will gladly “deceive” and “oppress” the public for it. Since he had such profound insight into the nature of such men, even to the point of understanding that the greatest profits are reaped when a country is going to ruin!, did he have a strategy to prevent such men from assuming the organs of government? No, none that I’ve found. Because there aren’t any. Such men would inevitably find ways to assume the reins of political power. Adam Smith’s economic religious theories basically gave such men the keys to Pandora’s Box without providing any way to close it again. That’s because greed is an unstoppable force, and there is nothing to stop an unstoppable force from eventually assuming the absolute power they need to “deceive” and “oppress” to further their gain.
Obviously Smith clearly understood what those devoted to wealth would do with political power. That’s why he so clearly and strongly cautioned against putting “those who live by profit” — ie, modern-day neoliberal corporatists (aka businessmen) — in such positions. That’s because Smith, like Ralph Nader, like Paul Hawkens with his philosophy of Natural Capitalism, all understand that the motor behind capitalism is the drive for profit, and they all understand that for capitalism to work for society rather than against it it must remain small (capitalism with a “c”) and be held in check.
But capitalism cannot remain small. It must always expand. That’s the inherent contradiction that must inevitably explode in greed’s favor. You cannot foment an addiction and expect that it will never develop into a pathology. And we are seeing the result of that right now. Capitalism without any regulatory oversight — the neoliberal vision that has been American policy since Reagan — is a catastrophe waiting to happen: it is letting drug addicts into the pharmacy while the druggist goes out for lunch, expecting that the addicts won’t help themselves to all those Category I & II drugs. And now the catastrophe is happening, but it’s only just the beginning, a mere trickle before the tsunami that is quickly coming.
Posted by: Lohmann | Jun 3 2020 21:26 utc | 45
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