By Satur C. Ocampo
At Ground Level | The Philippine Star
A tempered sense of euphoria, spurred by developments in the US economy (the world’s largest, with gross domestic product at $16.245 trillion), qualifies the assessment that the global economy’s growth would pick up in 2014 and “finally overcome its hangover” from the 2008 financial-economic crisis.
Tempering the euphoria is the acknowledgment among economists, analysts, and political leaders that growing income inequality, joblessness, and mass poverty — all interrelated — cast a dark cloud over the expected recovery.
Add to that the worldwide impact of Pope Francis’ landmark November 2013 apostolic exhortation (Evangelii Gaudium) wherein he denounces free-market “dictatorship” and “trickle-down theories” that perpetuate economic and social inequality.
For one, the Pope’s indictment of unbridled capitalism appears to have influenced the US Senate last Tuesday into voting, 60-37, for an emergency extension of unemployment insurance, shortly before President Obama addressed a jampacked crowd of unemployed Americans at the White House.
“The (US Federal Reserve) stimulus revived the American economy after the biggest crisis since the Great Depression (1930s), and the US economy is leading the global recovery,” Reuters reported last Monday in the Economic Outlook section of the International New York Times.
It cited the International Monetary Fund’s forecast that the US economy could grow by as much as 3% this year and help the world economy to expand by 4%.
Just recently, IMF managing director Christine Lagarde announced that in three weeks “we will be revising upward the global forecast for economic growth,” saying she saw “a lot more certainty” in US economic growth.
At the same time, Lagarde cautioned that “as financial conditions in advanced economies normalize, the risk of heightened volatility in financial markets may create new challenges to emerging market economies.” (The Philippines identifies with such economies.)
However, in the INYT “Breakingviews” corner, Reuters commented:
“The huge fiscal and monetary stimulus that is helping revive economic growth in developed economies (US and Europe) favors the privileged directly and trickles down only slowly to the middle class, the poor and the unemployed. That tension will worsen.”
The trend toward income inequality, Reuters noted, became more pronounced in 17 member-states of the Organization for Economic Cooperation and Development from the mid-1980s to 2008. That was the period, it needs pointing out, when neoliberal globalization policies (liberalization, deregulation, and privatization) were pushed aggressively by the US and other rich states.
While Reuters fudged on what happened globally after the 2008 crisis, it categorically stated that in the US “the very rich have done very well… central banks’ policies have resulted in gains on financial and real estate assets, especially for people rich enough to take on the risks of leverage.”
And as recovery is on the way, Reuters projected this situation:
“The less well-off face more time out of work, more years in the work force, and less real income than they would have expected before the crisis. A recovery that does not feel like one will lead to an increasing sense of grievance.”
Nobel Laureate economist Joseph Stiglitz’s recent commentary on the US and European economic recovery reflected that of Reuters.
He described unemployment in Europe as “stubbornly high” (average: 12.1%) and US long-term unemployment as “far exceed(ing) its pre-crisis levels.” He capped his commentary with a devastating indictment of American economic and social policy and market economies.
“It is possible, even likely, that 2014 US growth will be rapid enough to create more jobs” at least to reduce the 22 million unemployed Americans wanting to work, Stiglitz conceded.
“But we should curb the euphoria,” he advised, because a “disproportionate share of jobs being created are low-paying, so much so that the median income (those in the middle) continues to decline. For most Americans, there is no recovery, with 95% of the gains going to the 1% (the very rich). ”
“America’s new problem is long-term unemployment, which affects nearly 40% of the jobless, compounded by one of the poorest unemployment insurance systems among advanced countries,” Stiglitz pointed out (referring to the program that Obama had been pushing and which the Senate voted to extend).
Moreover, the official US unemployment rate is low (7% in November) because many dropped out of the labor force after failing to find jobs over several months of searching, Stiglitz explained. Upbraiding US industries for being poor at retraining laid-off workers, he added, wryly:
“American workers are treated like disposable commodities, tossed aside if and when they cannot keep up with the changes in technology and the marketplace. The difference now is that these workers are no longer a small fraction of the population.”
Why has the problem plunged to such depths? Stiglitz was clear:
“None of this is inevitable. It is the result of bad economic policy and even worse social policy, which waste the country’s most valuable resource — its human talent — and cause immense suffering for affected individuals and their families. They want to work, but the US economic system is failing them.”
“So, with Europe’s Great Malaise continuing in 2014 and the US recovery excluding all but those at the top, count me dismal,” Stiglitz concluded, adding, “On both sides of the Atlantic market economies are failing to deliver for most citizens.”
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January 11, 2014