|
Whoever
has won this election (I’m writing before Tuesday)
will end up having a miserable time. The so-called "New
Economy" is about to be exposed as a dud. Until recently,
the stock market had been falling at a steady pace. This
is likely to continue; indeed to accelerate. The market
is overvalued. The ratio of stock prices to corporate earnings
has been roughly twice the historic average. Earlier this
year it was more than 30 to 1. The average over the past
30 years has been around 15 to 1. Billions of dollars were
wasted on the dot-com industries, money that could have
been used more productively in traditional industries.
A
collapse on Wall Street will almost certainly lead to a
recession, as high-tech firms relying on investment capital
go out of business. Those corporate employees who had cheerfully
accepted stock options in lieu of hard cash will come to
regret their choice. As will those workers who had taken
early retirement, expecting to live off their stock options.
In a recession, they are unlikely to get their old jobs
back.
With
investors no longer pouring their money into Wall Street,
the huge U.S. trade deficit suddenly becomes unsustainable.
The current account deficit for this year is projected to
be $425 billion, or around 4.5 percent of GDP. The United
States has been getting away with numbers of this magnitude
for years without having to devalue the dollar only because
the deficit could be financed by the ceaseless flow of cash
into Wall Street. Once stock prices tumble, investors will
look elsewhere for steady rates of return.
In
which case, the dollar will start to slide. Already Saddam
Hussein has announced that he wants nothing further to do
with the dollar. He insists Iraq be paid in euros for its
oil exports. A falling dollar will encourage others to take
Saddam’s lead. The Fed will be in a tricky position.
It could allow the dollar to slide. This would lead to inflation
as the prices of imports surge. Or it could raise interest
rates and thereby deepen the recession.
Given
the staggering size of America’s current consumer debt,
the consequences of a deep recession for millions of American
families will be dire. Meanwhile, all the cheerful projections
of a U.S. government budget surplus lasting forever will
soon be an embarrassing recollection. Much of this expectation
was based on government continuing to collect huge taxes
on capital gains. In no time, budget deficits will be back.
After all the brave campaign talk of balancing the books,
the new president is unlikely to allow massive government
deficits to accumulate. He will respond either by raising
taxes or by cutting government expenditure or by a combination
of both. Either way, the recession will only get worse.
The
future is especially perilous today given that welfare has
now effectively been abolished. The political establishment
has been congratulating itself for four years on a job supposedly
well done. But it was easy enough to shove people off the
welfare rolls when unemployment is very low. Once the recession
hits, it will be the least skilled who will be laid off
first. What will happen to them?
Even
within this New Economy life was never that rosy. Income
disparities between the very rich and everyone else have
been growing at a furious pace for years. From 1995 to 1997
the average after-tax income of the wealthiest 1 percent
of Americans increased by $121,000, or 31 percent. By contrast,
the average after-tax income of the bottom 90 percent of
Americans increased by only 3.4 percent. Average after-tax
income rose nine times faster for those at the top than
for everyone else. In 1999, 11.8 percent of Americans were
living in poverty. This figure showed a slight improvement
on 1998, but still worse than the number in 1979. In 1999
the number of people without health insurance was 42.6 million – around
15.5 percent of the population.
These
less-than-stellar figures are for times that, allegedly,
are the best there have ever been. What will the figures
look like when times get rough? During this election, Ralph
Nader was the only candidate who ridiculed the pretensions
of the New Economy. He mocked the meaningless statistics
about booming stock markets and soaring profits that our
corporate-owned hacks endlessly tout. What on earth is that
deity demanding of worship – the ever-growing GDP? As
Nader correctly explained, "If you have a lot of street
crime or a lot of pollution, [dealing with those] generates
a lot of economic activity, profits, jobs, and sales. But
that’s not something we really want an economy to spend
its time doing… We don’t measure whether an economy
is developing. We just measure whether companies are selling
more, whether inventories are up or down, not whether the
health, safety and economic well-being of people are being
advanced."
Nader
has now positioned himself as a leader in waiting, someone
who will give voice to the coming frustration and bitterness.
Moreover, he is a unique figure in America capable of reaching
out to left and right. This is why Nader’s refusal
to engage in identity politics will prove to be a very shrewd
decision. It infuriated the left that he concerned himself
with real issues like the declining quality of people’s
lives, rather than parochial concerns like gun control,
abortion and gay marriage. Identity politics destroyed the
left. Ralph Nader now has the opportunity to fashion a new
political alignment.
|
