Boom Wasn’t So Great for the Have-Nots

It’s at times like these, when the stock price indexes are bouncing like a yo-yo on a well-frayed string, that we hear brave talk about the strength of “fundamentals” of the U.S. economy. On Monday, we heard just such words from the U.S. Treasury secretary Robert Rubin. Trouble is, the fundamentals aren’t that good, unless we measure the health of the economy by the fortunes amassed by a fraction of the populace. In terms of the main indexes of economic dynamism--the growth of output, productivity and investment--the economy of the 1990s has been the worst of the postwar epoch, inferior even to the stagnant ‘70s and ‘80s and not remotely comparable to the boom decades of the ‘50s and ‘60s.

Indeed, UCLA historian-economist Robert Brenner, who draws a stark picture of world economic turbulence in the July/August New Left Review, points out that the growth of output per hour and also the growth of hourly wages have, since 1973, been worse than at any time in the last century, including the Great Depression, and, on average, have not improved in the ‘90s. To put some numbers supplied by Brenner on the famous “fundamentals”: Between 1950 and 1973, labor productivity growth in the private, nonfarm sector was 2.7% a year. From 1990-97, it was 1%. In 1997, workers’ hourly real wages were 12% lower than in 1973 and the same as in 1965.

To be sure, the jubilation of financiers, industrialists and their acolytes in the business press has not been entirely irrational. After a long period of depressed returns, corporate profitability, especially in manufacturing, increased spectacularly in the 1990s. With the increased profits came the stock market boom, albeit at a tempo ever more out of sync with reality.

But the boom came at the expense of the working people and also of America’s leading competitors. Between 1987 and 1997, real hourly wages here for production workers fell by more than 3% and the U.S. dollar was devalued by 40% to 60% against the Japanese yen and the German mark. Our goods became the shoppers’ choice on the world markets.

But this state of affairs, which provoked ecstasy on Wall Street and in the self-congratulatory speeches of Team Clinton about “growing the economy,” could not last. The economies of Germany and Japan went into crisis because of the sag in exports consequent upon U.S. competition. The U.S. dollar duly began to rise, thus shaving the American advantage. And as the U.S. economy began to grow rapidly in 1997, U.S. wages at last began to rise. By mid-’98, with their competitiveness now falling as a result of rising wages and the rising U.S. dollar, U.S. producers’ profit rates began to go down. The stock market did not take long to reflect this change.

Ironically, the very success of the U.S. in imposing its neoliberal model on the world has played no small role in inducing the downward lurch in economies round the globe. Neoliberalism spells out as slashed social spending, balanced budgets, tight credit. So, country after country that was beaten into austerity by the International Monetary Fund and other U.S.-dominated institutions have seen their markets shrivel.

The crises in Asia and Russia have been the direct result of this international overcapacity in manufacturing and oil. And so homeward fly the chickens. The desperate export drives put pressure on U.S. manufacturers’ prices and profits. And the Russian collapse slashed into the profits of big U.S. banks. Collapses in Latin America cast another dark shadow.

With the stock market in tumult, consumers here will ease up on their spending, which has been propelling the economy. Now what? So fervent have been the neoliberals in their preachments and in their presumed victories that it will take a huge effort in mental self-abasement and reappraisal to make them realize the folly of their doctrines. Neoliberalism has yielded only the bitter fruit of a world depression. Can neoliberals abandon the totems of balanced budgets, reduced government spending, high interest rates and financial deregulation?

We’ve reached a moment in which there’s no good news anywhere in the world. The received wisdom was wrong. Look at one more figure: Between 1989 and 1995, the average annual growth of U.S. government spending in real terms excluding transfers averaged 0.1%, compared with 2.4% for the previous 30 years. Clinton would do well to get that number up off the floor, and to realize that ex-bond traders like Robert Rubin have a limited notion of what “fundamentals” can mean to ordinary people, who don’t see the ‘90s in quite the terms as Rubin and his Wall Street pals.