Hope in Audacity: Thinking Beyond Stimulus
Posted: August 12, 2011 Category:
Gathering in Toronto in June 2010, G20 governments congratulated themselves for the coordinated macroeconomic stimulus and financial-market intervention that prevented a global depression in 2008-09. In the same breath, governments announced their intention to retreat from counter-cyclical measures and embark on fiscal consolidation, a move that trade unions at the time rightly warned was hasty and ill-considered.
One year later, the rashness of this decision is now clear. August’s financial volatility originated in continued worries over sovereign debt, but intensified on the basis of sluggish growth and fears of a second slump. On the heels of the recent downward revision of US GDP growth, Fed officials are reducing growth forecasts while economists put the risk of a renewed recession in the next 12 months at anywhere between 30 and 50%.
What is remarkable this time around is the widespread pessimism regarding the availability of macropolicy levers to meaningfully counteract the slowdown. If concerted government action in 2008-09 avoided another Great Depression – if not a Great Recession – there now appears to be little confidence that a prolonged period of stagnation can be avoided, to say nothing of a double-dip recession.
For trade unionists, the pessimism regarding conventional policy instruments should be an invitation to raise creative and far-reaching alternatives to the status quo. To be sure, the fight to create good jobs now remains critical, and there’s an urgent need to find ways of stimulating demand. Yet the present moment comes as another opportunity to insist on more ambitious reforms if we are going to address the failures of the current economic model. Congressional Republicans have certainly heeded Rahm Emanuel’s words that “you don’t ever want a crisis to go to waste,” and trade unionists could certainly do the same.
Looking beyond monetary stimulus, progressive economists have pointed out that public-sector investments financed by borrowing at low interest rates– where governments have access to low rates -- could generate higher potential growth in the medium and long term. This could include public investment in transportation infrastructure and mass transit, high-quality childcare, and early childhood education. Buttressed by tax reform focused on growth, a public investment-led strategy could be promoted as improving debt sustainability in the medium run. And there is certainly a growing appetite in many quarters for increased taxes on high earners to support programs for low-income families.
At the same time, there is increasing recognition that over and above fiscal and monetary policy decisions, the entire neoliberal growth model has failed and alternatives are needed. As many have observed, the model itself has rested on the transfer of power and income from labour to capital, producing inequality that is increasingly understood as perpetuating financial instability and unsustainable growth. Proposals for economic reforms coming forward now would usefully incorporate fundamental changes to neoliberal labour market regulation, trade and investment rules, and in particular, the size and organization of financial markets in acknowledgement of this pervasive imbalance.
Amidst the 2008 financial crisis, there were calls for reconceptualizing finance from the standpoint of social needs and public priorities. Robert Kuttner has also raised the notion of public ownership of credit rating agencies, among other ideas. Securities transaction taxes backed by capital controls remain an essential mechanism for discouraging the speculation and frenetic trading that is driving asset bubbles and market volatility.
Labour law reform and measures to strengthen trade unions as redistributive mechanisms should be at the centre of alternative economic policy as well, as should an ecological program to support a just transition to a green economy. To date, these proposals have been developed with varying levels of research and evidence. However, they desperately need to be on the agenda, and in the current marketplace of ideas, there’s a favourable opening for fresh thinking.