So Far So Good
Ads Without Products warns against recession Schadenfreude, as the property developers will win out eventually, rightly pointing out that hoping for 'property bargains' in a recession is wholly idle. This wasn't entirely my point, however. Part of the reason for my Schadenfreude at the Credit Crunch is that it makes entirely clear that, no matter how much Gordon Brown as 'Iron Chancellor' claimed to have 'ended' boom-and-bust, capitalism's cycles of crisis and expansion have no more ended than has history itself. There really has been a sense over the last few years that this might go on forever, that the rich would continually get richer and the poor poorer but the phantom housing boom and virtual capital would, somehow, manage to keep the system going, at least until global warming stepped in, and opposition would constantly be stymied by the apparent evidence of 'growth', a 'strong pound' and other such occultism.
What's interesting about this story (the seemingly blithe consumer confidence in Britain) as far as I can see, is that people are still thinking like this. The call to tighten belts hasn't actually met with any response. My generation (the people doing much of the spending, I would imagine, given the high sales of stuff like video games), those born in the late 70s/early 80s, can barely remember what the last recession was like, let alone the major crises like 1929 and 1973. We simply didn't know that a capitalist economy works like this, and it certainly hasn't done so in our experience. No matter how much we're told that the party's over, the credit cards are still working regardless of the interest rates. We've always been told that the good days will last forever, that The Market Works, so the claims that it will stop giving up the goods just doesn't register. Until we start losing our jobs or until inflation makes a significant dent in the pocket (both of which will happen soon enough), the generation that has known nothing but neoliberalism is simply incapable of believing that buying new stuff won't make everything OK.
What's interesting about this story (the seemingly blithe consumer confidence in Britain) as far as I can see, is that people are still thinking like this. The call to tighten belts hasn't actually met with any response. My generation (the people doing much of the spending, I would imagine, given the high sales of stuff like video games), those born in the late 70s/early 80s, can barely remember what the last recession was like, let alone the major crises like 1929 and 1973. We simply didn't know that a capitalist economy works like this, and it certainly hasn't done so in our experience. No matter how much we're told that the party's over, the credit cards are still working regardless of the interest rates. We've always been told that the good days will last forever, that The Market Works, so the claims that it will stop giving up the goods just doesn't register. Until we start losing our jobs or until inflation makes a significant dent in the pocket (both of which will happen soon enough), the generation that has known nothing but neoliberalism is simply incapable of believing that buying new stuff won't make everything OK.
posted by owen hatherley at 11:59 pm
10 Comments:
Definately agree with your main point. It is sickening though to see around our area where they started building loads of new gaffs recently, including some earmarked for mixed-tenure housing, that instead of finishing them off (and therebye letting supply meet demand somewhere slightly closer to an affordable price), at the first sign of a dint in annual profits they are letting-off most of the lads working on the sites, restricting building to a few blocks for the time being, with the end result that prices stay stupidly high, unemployment increases and even less people are able to afford to buy a home.
http://www.bbc.co.uk/iplayer/page/item/b00c7ymd.shtml?filter=txdate%3A21-06&filter=txslot%3Aafternoon&start=1&scope=iplayerlast7days&version_pid=b00c7ym2
That'll cheer you up.
Neil
I've been proposing we resurrect the rationalist ration-ist in our heads for years, but does anyone listen? Do they buggery...
Anyway, I'm never really sure how important consumer spending is, I mean, obviously it is, a bit. But isn't the supposed 'confidence' is represents a vaguely floaty thing that city-types just use to reassure themselves? And don't the international speculators, property owners and oil folk really pull the strings here? (This is kind of like an argument about the difficulty of political impact, but made about economics - how much difference can we really make?).
It's true, though, that we have forgotten that 'this is what a recession looks like' - perhaps that could be a new chant - but I remember the pictures of bankers weeping into their hands. Oops, we're supposed to be thinking beyond Schadenfreude...can we start blowing up Estate Agents?
That'll cheer you up.
*gobsmacked*
The call to tighten belts in the midst of an economic meltdown is, of course, an excellent way of prolonging and deepening the economic meltdown. I'm of two minds about that. One mind, which is attached to a skinny and haggard body that likes to eat, thinks it is a bad idea. The other mind, however, a more Hegelian puffball kind of thing, which disdains my mortality (and turns up its nose at my erections, too!) thinks the whole economic scene during the last thirty years - the years of the Great Moderation, as it is called here in the states - has been a nightmare, all the way around. Or John Law's dream - which is the idea of a seemingly infinitely growing financial sector only vaguely attached to the goods and services it is supposedly an investment in or a bet on.
Yet it is attached by bonds that are stronger than pricing. That's the lesson of the property crash, although we've only had the first chapter of it. After all, the total notional value of derivatives at the moment is 226 trillion dollars, which is four times the global international product. That wealth is such a disaster waiting to happen. It is like watching the snow accumulate for an avalanche. MBIA lost, what, something like 2 to 3 billion dollars friday simply because it was revalued by Moody's and Standard and Poor. That kind of wealth can go fast.
IT's notion that even if the consumer takes it up the butt, the economy will do just fine was kicked around in the biz columns last July, when the first tremors were starting to be felt in the international financial markets. The idea was that the top ten percent, which had pretty much engrossed all productivity gains over the last five years, could support itself. That idea has not weathered well. Since 70 percent of real economic activity in the U.S. is consumer related, and 100 percent is based on the idea that somebody will pay the bills sometime. That was the flaw in the otherwise brilliant boom. Take a guy with no assets, no income, sign him up for a house at, say 135 thou (in dollars), loan him that money plus fees etc. with a zero percent introductory, then jack him to 9 percent after, say, 10 months. Alas, the overlooked thing was if he had no assets or income in the beginning, he might not have them to pay the jacked up interest rate. And he 's learned, through assiduous watching of Donald Trump's The Assistant, all you need to know about the art of the deal - which is four words: Fuck the other guy. So he'll walk, putting the keys in the mail, and thus will disappear more than the value of his loan, but the value of all the splits that were made out of it and the options on top of them, all the loafs and fishery which constitutes high finance. And it wasn't even a wholly bad theory - if the homeowner wasn't making a good income at the beginning, the very fact that he was able to buy the house injected the economy with money that, supposedly, would grow the economy, and thus he'd climb up to a higher paying job. Which is much like the physics behind perpetual motion machines. But then again, neoclassical economics is much like the physics behind perpetual motion machines.
I've always wanted a perpetual motion machine.
"I've always wanted a perpetual motion machine."
Neoclassical economics is ultimately more fun.
I don't know if they use the phrase "daisy chain" in the U.K. In Texas, that was the phrase used in the great S and L swindle of the eighties. A daisy chain is an interesting perpetual motion machine. Originally, it comes from the sexual underground. People make a circle, and a fucks b, who is to the left of him - or however you want to make up the musical chairs, then b fucks c, and so on around the circle. In the swindle, it was key to move out of the circle so that you wouldn't be fucked again. So you have property x, you sell it at an inflated rate to your friend Y, and he with another markup to Z, etc., until you've inflated the price of the property to some fabulous amount, and you sell it to sucker A. Who, too late, discovers that the value is entirely bogus when he or she tries to sell it.
Hmm. You know, the perpetual motion machine and the creative destruction machine are combined in the Great Moderation. This would be a machine to have, IT! One that perpetually took itself apart and put itself together. That's the ideal machine, the daisy chain of Eros and Thanatos. Who wouldn't want to have such a handy thing around the old residence? Didn't Jean Tinguely build one, in the long ago and far away? Except I believe his stopped when it destroyed itself. I imagine that, as it was destroying itself, it thought: I think I just need to tighten my belt a bit.
The whole economic scene during the last thirty years - the years of the Great Moderation, as it is called here in the states - has been a nightmare, all the way around
Well, yes. My worry was that somehow having however many trillion dollars in derivatives might actually work, on its own bizarre terms, that it somehow wouldn't crash. And I confess to being almost relieved that it has started doing so...
Some of us from our generation (1980 boy, here) are in the smug position of most certainly remembering the last recession. My father was made redundant in 1989, rendering our family's spending power to a level somewhere between frugal and bracingly ascetic. Having looked with suspicion on the very act of consumption ever since, in the way the naturist might wonder in a street full of clothed people and imagine secretly that, in fact, it is clothing which is the misguided lifestyle choice, I take comfort in the gathering storm.
I know they will still win, though, the people who have stuff. At least the gentle rocking of their little world will give them
a taste of want, or discomfort, or some sort of bloody life, anyway.
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