[p2p-research] What's different about this economic downturn? -- the severe unemployment

[Kevin Carson]

On 9/7/09, Michel Bauwens <michelsub2004 at gmail.com> wrote:

> I do not give credence though to the automation argument of paul .. this has
> been a recurrent theme in every crisis, yet employment has been growing
> steadily, with woman entering the workforce etc... The simple reason is:
> human needs are evolving,and there is plenty of cultural work, environmental
> work, relational work that is very hard to automate, and even should not be
> automated ... (machine massage sucks, for example, because it doesn't give
> you the human relation that is part and parcel of such a service). There is
> enough 'work' for everybody, even given industrial automation,

I think the answer, quantitatively, lies somewhere between your and
Paul's arguments.  There is extreme overcapacity of manufacturing
industries, coupled with what will be permanently weak demand without
a new debt bubble to restart it.  The value of assets is declining as
outlay costs for physical manufacturing plummet (the same thing that's
already rendered so much investment capital superfluous and with no
outlet in the information and culture industries, according to
Rushkoff).

Put the two together, and I think we will see something like what Alan
Greenspan called "The Great Malaise" back in the '80s (see Harry
Magdoff and Paul Sweezy's article "The Great Malaise").  Greenspan,
anticipating "Helicopter Ben" Bernanke, speculated that the tools
available to the Fed meant there would never be another Great
Depression on the pattern of the '30s.  After the '29 crash, the Fed
actually tightened money, which led to a snowballing series of
deflationary collapses fueled by bankruptcies.  A stock market
collapse on the 1929, or a banking collapse on the pattern of 1932,
Greenspan, would be met with an emergency expansion of liquidity to
prevent the kind of catastrophic deflationary spiral that happened in
the last Depression.  And in fact, that's what actually happened after
the stock market collapse of 1987 and the bank crisis of 2008.  Had
there not been monetary countermeasures by the Fed after the October
1987 crash, and had the government followed the same do-nothing
approach it did in 1929, it probably would have led to another Great
Depression.  What we will have in lieu of depressions, Greenspan said,
is the Great Malaise:  long periods of economic stagnation and
overcapacity, with unemployment never dipping below 8 or 9 percent.
He wrote that, BTW, before the series of "jobless recoveries" that
began in the 1990s.  It's also noteworthy that the average rate of
profit, decade by decade, has been falling in the U.S. since the
1960s.  The rate of profit in the '90s and the 00s was at a record
historical low since the 1930s.

I think the permanent overcapacity will result in just such a
long-term stagnation, with employment figures never rebounding but
with no sudden collapse either.  Rather, employment rates will
gradually decline over the next decade or two, and much of the decline
will be concealed as underemployment.  Meanwhile, increasingly
underemployed workers will of necessity shift a growing portion of
their value-creation outside the cash nexus and into direct production
either for their own consumption or for the social economy in the
informal sector.  Expect to see a steady increase in such things as
home gardening, participation in LETS systems, and the "do it
yourself" ethos.

There will also be no significant increase in investment in the
conventional corporate economy.  Investment will see the same pattern
of long-term stagnation as employment.  The singularity in small-scale
production technology, like Fab Labs with CNC machines and RepRap, is
causing initial capital outlays for manufacturing to implode, with a
factor 10 or more reduction in the need for all that superfluous
investment capital.  So conventional mass-production industry will
follow the old strategy for economic downturns, but on steroids:
they'll let the old mass-production core stagnate and slowly decay,
restricting investment to maintenance needs (if even that), while
shifting more and more production to small shops in flexible
manufacturing networks that require less and less capital to engage in
production.

In the end, almost the entire manufacturing economy will be in small
shops with entry costs in the few thousands of $$ and virtually zero
overhead.  Most value creation will be either through part-time
employment in such industry or unmonetized production in the
household/informal sector.  The old corporate centers of mass
production will have evaporated, first leaving a sector of decaying
industry with massive overcapacity, then a legal shell of trademarks
and advertising, and then (when the small flexible manufacturing
networks take the final step of simply disregarding trademark and
patent rights) nothing at all--much like the way the Cheshire Cat
disappeared all but his smile, and then the smile itself vanished.

My hope is that this process will be fairly gradual and slow over a
couple of decades, with no sudden dislocations or catastrophic
collapse, and that despite the steady erosion of conventional economic
metrics like employment and dollar output, when the trendlines finally
bottom out most people will be living so comfortably they won't really
care.

I've got a review copy of Doctorow's Makers on the way, which deals
with a lot  of these themes.  I can't wait to read it.

-- 
Kevin Carson
Center for a Stateless Society http://c4ss.org
Mutualist Blog:  Free Market Anti-Capitalism
http://mutualist.blogspot.com
Studies in Mutualist Political Economy
http://www.mutualist.org/id47.html
Organization Theory:  A Libertarian Perspective
http://mutualist.blogspot.com/2005/12/studies-in-anarchist-theory-of.html