Citizen Action Monitor

We learned nothing! — After 2008 disaster, it was back to business-as-usual, as-fast-as-possible

Circumstances may have changed, but the goal remained the same — renewed economic growth.

No 2041 Posted by fw, August 27, 2017

To access all other synopses from Prosperity without Growth, click on the Tab titled “Prosperity without Growth” — Links to All Posts in the top left margin. 

As Jackson explained in Section 1 of Chapter 2, the “Introduction”, government attempts to bailout failing banks and jumpstart the economy not only failed, they precipitated further crises.

Tim Jackson

In this, Section 5 of Chapter 2, titled “A year in the Keynesian sun”, Jackson addresses this question: Why, after our unrelenting drive for economic growth spurred the world towards the brink of economic disaster, did it not occur to our policymakers to engage in a critical analysis of our growth-at-all-costs economic model? Instead, we returned at full speed to restart economic growth.

Tim Jackson is a British ecological economist and professor of sustainable development at the University of Surrey.

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A year in the Keynesian sun, a synopsis, from Chapter 2, “Prosperity Lost” of Tim Jackson’s book, Prosperity without Growth, Routledge, 2nd edition, 2016-17

The realization that the unrelenting drive for economic growth drove the world to the brink of economic disaster should have triggered a critical analysis of our growth-at-all-costs economic model. But it didn’t. Quite the contrary – it was back to business-as-usual, as-fast-as-possible.

Initially, some concessions were made to create a façade of remedial action:

  • short selling was suspended — but only for 6 months
  • executive remuneration was capped – but huge executive bonuses returned after a few months
  • capital adequacy requirements were modest – but phased in slowly
  • part-nationalization of financial institutions – has still not been achieved

Circumstances may have changed, but the goal remained the same — renewed economic growth.

Ethical questions about the “nature of prosperity” never entered the conversation.

So, what was the thinking that impelled a rapid return to the pursuit of economic growth?

  • a recession stokes fear of job insecurity and rising unemployment
  • businesses fear failure and bankruptcy
  • politicians fear election losses
  • the moral imperative, to extent that there was one, was to protect jobs and prevent deepening recession

Above all, this was not the time to blast the capitalist economic system and growing inequality. This was the time for figuring out how to “rebuild consumer confidence and boost high-street spending.”

Two corrective options were on the table: expand the money supply, or engage in a Keynesian stimulus program.

Keynesianism won the day, and a mix of stimulus programs emerged in 2008:

  • huge sums went towards rescuing the financial sector
  • $23 billion bailout US car industry; £2.3 billion to UK
  • even the US porn industry asked for direct support
  • Clean Green technologies lobbied for support

The Keynesian game plan: let national debt rise to pay for the stimulus program; credit will flow; consumers will spend; business will invest; productivity will increase; and governments will reduce debt with higher tax revenue.

However, “after a year in the Keynesian sun” things were not happening fast enough for nervous politicians and critical commentators. The tide was turning. Talk of austerity and calls for massive cuts to public spending were winning support. Even economic guru Paul Krugman’s call to stay the Keynesian course – “it’s foolish and destructive to worry about deficits when borrowing is very cheap” – could not save the day.

Krugman’s concern that “imposing such austerity in already depressed economies would deepen their depression and delay recovery were airily dismissed.”

As things turned out, Krugman was right. The switch to austerity pushed back into recession economies that were trending towards recovery.

“The greatest tragedy of austerity is not that it has hurt our economies. The greatest tragedy of austerity is the unnecessary human suffering that austerity has caused,” said health economists. And the suffering to the poor and vulnerable continues to this day.

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