The recession zombie died today

Today, the United States found this fact: the economy is not in a recession. Two months of negative GDP growth does not cause a recession. And, like the New York Times he admitted, Joe Biden was right about the economy, which added 528,000 jobs in July. Numbers like that are usually placed in the category of boom rather than bust. And we should expect this economy to continue to boom well beyond the midterms. Why? Because the United States has added an average of 400,000 jobs in the last three months. In addition, wages enjoyed a considerable rise. In addition, unemployment is at its lowest 50 years.” In addition, gasoline prices continue to fall. All of this adds up to an economy that won’t be there for the Republican Party, which has put all its medium-term eggs in the basket of inflation and recession.

How come the GOP and the political mainstream didn’t see this coming?

I did. She knew that negative GDP growth was a misleading indicator, particularly in a new situation (the post-lockdown world). He also knew that a recession that doesn’t follow a market crash or catastrophic war tends to be mild or minor (think 1960s). He also knew that job and wage growth made stagflation (high unemployment combined with inflation) impossible. He also knew that one should only worry about a crash and subsequent recession if Wall Street claims that a market boom will last forever. When you hear that, run for the hills.

And so we are facing a week that will eliminate the certainty of midterms. On Tuesday, Kansas made it clear that the Supreme Court’s destruction of Roe vs. Wade is deeply unpopular with American voters. Today’s jobs report means abortion rights will not be stifled by an economic downturn. If the GOP doesn’t win back the House in 2022, people will only have to look back to the first week of August to see why. And it gets worse. Trump sent a bunch of election deniers to major races. Nothing will sound more irrelevant to suburban and independent voters than all this fanatical “Stop the Theft” talk, particularly after another round of committee hearings on Jan. 6.

But one must be impressed with how loud the recession drum has sounded. It wasn’t just Fox News. It was on every major network, including CNN. They were all important papers. Every day. Two months in a row. GOP recession talking points on all sides. Stronger and stronger until it crashed today.

But the right will win at the end of the day. Why? Because he has locked Democrats into an economic structure determined by two questionable factors: interest rates and full employment. What this means is that the Democrats have to deliver more under conditions determined by the business class, by the Republican Party, by the rich. If the Democrats screw up even a little bit, they’re still in hot soup. For example, if today’s jobs report was a solid 250,000 jobs, according to Wall Street’s estimate, then the recession talk would have erupted into a storm that lasted until November. It took a “blockbuster report” to silence the GOP.

As for interest rates, the Fed is likely to raise them to cool inflation, which will rise, they argue, because so many Americans have jobs. Rate increases will only make life harder for workers and better for lenders. Its impact on inflation is doubtful, because the driving force behind high gas prices is greed rather than scarcity or war or whatever.

Democratically speaking, what is needed here is not higher interest rates, but an incomes policy that redistributes the windfall gains made from inflated prices in a given sector of the economy. This thinking, which makes sense in a capitalist context, is offered by Post Keynesians (PDF). As for a future recession, I would pay more attention to mainstream Democrats’ obsession with cutting deficits. Taking money out of an economy does nothing positive for the working classes. The smaller the deficit, the greater the chance of a crash, because job creation is driven by business investment. This is the structure of American capitalism. This is a point made by adherents of Modern Monetary Theory, but was first expressed by post-Keynesians associated with and inspired by Hyman Minsky.

A recession can also be caused by Biden doing too well because economic stability, as Minsky pointed out, is inherently destabilizing. This is one of the many paradoxes of a capitalist economy that only become visible when macro results are linked to micro actors. (Orthodox economists don’t do this: they stick to individuals’ behavior with the assumption that they are rational and have access to all market information.)

Marxists have contradictions, an unfortunate consequence of Hegel’s influence. I am a Marxist until we get to talk about contradictions, which are contaminated by a teleology that defined 19th century German idealism. Post-Keynesian paradoxes have no metaphysical baggage; as such, they better explain the mundane processes of capitalism. But at the end of the day, Marxism is the superior economic reasoning because it recognizes that we need to go beyond capitalism, a system that is not resolved by a better distribution of wealth. As Moishe Postone, a heterodox Marxist, explained over and over until his death in 2017, capitalism is not about wealth but about value, culturally constructed value. And as Marx pointed out in the first volume of Capital, the value is social/cultural, not material. Majority Democrats are nowhere near this kind of thinking. It is a strange planet for them. Your world is completely shaped by the right and its news channels and websites.

I will end with another paradox, which has to do with wealth rather than value. The left, from the Democratic mainstream to the Social Democrats, is better at capitalism:

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