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More and more comparisons between today’s market plunge and the Great Depression of 1930s are being made and are needed. This article from Monday favorably compares the collapse of the Dow Jones Industrial Average, the most important measure of industrial economic activity.
It’s interesting to note that Phil Dow, “market strategist for RBC Dain Rauscher & James” admits the possibility that we are witnessing “the end of capitalism.” He denies that this is the case, since “people will start buying cars [and houses] again“. He’s trying to be optimistic of course, but it’s hard to imagine anything more depressing, considering that members of the UN Intergovernmental Panel on Climate Change (IPCC) are now warning that greenhouse gas emissions are rising much more rapidly than their worst-case projections.
A new way of life is on its way that does not rely on consuming ever-increasing mountains of industrial products, and that’s cause for celebration. [alex]
Dow Jones decline rate mimics Great Depression
by Dawn Kawamoto
Originally published by CNET, March 2, 2009.
With the Dow Jones Industrial Average falling below the psychological watermark of 7,000 on Monday, investors may be wondering how it all stacks up against the stock market crash of the Great Depression.
It’s not looking good.
In the here and now, the Dow has dropped 52.5 percent since its high of 14,279.96 on Oct. 11, 2007, to its low point of 6,779.62 during intraday trading on Monday. (Update 1:16 p.m. PST: At Monday’s close it was 6,763.29, a drop of nearly 300 points from the previous close.)
And in taking a similar period of a year and five months in the late 1920s, it’s a case of deja vu.
The rate of decline is mimicking that of the Dow during the Great Depression.
Back on September 3, 1929, the Dow hit a high mark of 381.17. And over a similar length of time, it fell 54.7 percent to 172.36 on January 2, 1931.
“It’s very troubling if you have a mirror image,” said Phil Dow, market strategist for RBC Dain Rauscher & James. Read the rest of this entry »
Anatoly Karlin at Sublime Oblivion has compiled some provocative graphs which suggest that the global peak of oil production has played a large causative role in the global economic meltdown of the past few years. Right off the bat we should look at how skyrocketing oil prices caused global food shortages and price inflation for other necessities, but also how the rising gas prices hurt US Real Estate markets and burst the subprime mortgage bubble. We know how that damage was compounded into the financial crisis and got us where we are, but what hasn’t been studied is the role of oil in originating the breakdown, not to dismiss the role played by lax regulatory oversight, financial mismanagement or straight-up theft by large banks and speculators.
I look forward to this argument on the role of oil being expanded and enriched by an anti-capitalist framework. [alex]
Excerpts from Oily Origins of the Economic Crisis.
Anatoly Karlin, February 18, 2009.
In an article some months ago I suggested that “perhaps this crisis is simply an unconscious recognition of this inconvenient truth?” – namely, the peaking of oil extraction and all that it implies for the continued survival of a financial system built on assumptions of continuous economic growth. In other words, the fashionable approach of focusing on exotic financial instruments, regulatory failures, etc, if a case of mistaking the forest for the trees.
The Oil Drum had a nice graphical summary. According to the author, Gail the Actuary, the chain of causation runs thus:
This explains the extreme severity of the crash – record GDP growth at a time of plateaued oil extraction in the 2005-2008 period was patently unsustainable, so a very big “correction” could not have been unexpected.
And it is quite a correction.
As of the September-November average, global industrial production was plummeting at an annualized rate of -13% and merchandise trade by a truly remarkable -43%. And it is obvious the collapse accelerated since then…
Already far worse than during even the worst month of 2000-2001, the last and only global slowdown for which the IMF has data.
…
Another Oil Drum blogger, Phil Hart, wrote about the dramatic rise and fall in oil prices in terms of simple supply and demand curves…
Oil demand and supply.
His thesis is that because of the geological limits to oil supply, the marginal cost of providing ever more oil is generally low until it reaches some point – say, 85mn barrels a day – and then veers off into the sky (i.e. becomes very inelastic). Demand is also inelastic, since modern society basically runs on oil. Hence there comes a time when the demand curve reaches a point when its intersection with the supply curve – i.e., the market price – starts rising exponentially. Read the rest of this entry »
One of Philadelphia’s larger newspapers puts Paul Glover, local currency and mutual aid-based health care advocate, on its cover story. As always, Paul makes wise and witty proposals to help us solve our economic and ecological woes, and now people are finally listening!
My favorite solution: “Neighborhood watch instead of neighborhood watch TV.” [alex]
Prepare for the Best
A guide to surviving — and thriving in — Philadelphia’s new green future.
Published: Jan 28, 2009
CityPaper
The Dark Season closes around Philadelphia. Wolves howl, “Tough times coming!” Young professionals with good jobs study budget cuts, watch stocks flail. Career bureaucrats are laid off; college students wonder who’s hiring. Old-timers remember when Philadelphia staggered through the terrible Depression years without jobs or dollars, while crime and hunger rose. Some districts here never escaped that Depression — they’re still choosing between heating and eating.
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As usual, the future will be different. Philadelphia’s responses to global warming and market cooling, high fuel and food prices, health unsurance, mortgages, student debt and war will decide whether our future here becomes vastly better or vastly worse. Whether we’re the Next Great City or Next Great Medieval Village. Imagine Philadelphia with one-tenth the oil and natural gas.
But to hell with tragedy. Let’s quit dreading news. Take the Rocky road. There are Philadelphia solutions for every Philadelphia problem.
Imagine instead that, 20 years from now, Philadelphia’s green economy enables everyone to work a few hours creatively daily, then relax with family and friends to enjoy top-quality local, healthy food. To enjoy clean low-cost warm housing, clean and safe transport, high-quality handcrafted clothes and household goods. To enjoy creating and playing together, growing up and growing old in supportive neighborhoods where everyone is valuable. And to do this while replenishing rather than depleting the planet. Pretty wild, right?
Entirely realistic. Not a pipe dream. And more practical than cynical. The tools, skills and wealth exist.
Mayor Michael Nutter foresees we’ll become the “Greenest City in the United States.” So it’s common-sensible to ask, “What are the tools of such a future?” “What jobs will be created?” “Who has the money?” “Where are the leaders?” “How will Philadelphia look?” “What can we learn from other cities?”
Some of the proposals sketched here can be easily ridiculed, because they disturb comfortable work habits, ancient traditions and sacred hierarchies. Yet they open more doors than are closing. They help us get ready for the green economy, and get there first. Big changes are coming so we might as well enjoy the ride. You have good ideas, too — bring ’em on.
From “Yes We Can” to “Now We Do”
As President Barack Obama says, “Change comes not from the top down, but from the bottom up.” Philadelphia’s chronic miseries suggest that primary dependence on legislators, regulators, police, prisons, bankers and industry won’t save us. They’re essential partners, but the people who will best help us are us. Read the rest of this entry »
A massive wave of layoffs was announced yesterday by 12 major US corporations, including Caterpillar, General Motors, Home Depot, Sprint Nextel and Pfizer. Microsoft also announced its first-ever mass layoffs of 5,000 workers. Overall, more than 75,000 jobs are being cut from the workforce after Unemployment levels were reported as 7.2% in December, the highest level in over 16 years, with no end to the bleeding in sight.
As more and more workers fill the unemployment rolls, it’s time to ask: where will future jobs come from? While government and corporate bigshots plan yet another “economic stimulus” and bailout of the banks, what long-term jobs can we realistically create right now?
Lots of answers present themselves if we look through the lens of peak oil, and start replacing our oil-based economy with a people-based economy. Instead of relying on greenhouse gas-producing fossil fuels, we can tap into the power of human labor, which happens to be our greatest renewable resource.
Certainly there is a need to employ millions to weatherize homes and build and install solar panels and wind turbines (which Obama may address), but there is also a huge need to re-tool Detroit automakers to STOP producing gas-guzzling individual cars, and start making buses, trains and other forms of public transit. Bicycles are also desperately needed, so we need workers to build them and more to repair them too.
We also need lots more doctors and nurses if we make health care universally available, and social workers and therapists to help deal with the psychological trauma our population has suffered from militarism and soulless consumerism. Since many of these jobs require education and training, we need to hire lots more teachers, and we also need education to be a lot more affordable to so more people can access these kinds of careers.
Perhaps the largest gains in the job sector can be achieved by shifting food production away from mega-scale agribusinesses and fossil-fuel intensive monoculture and factory farms, towards community-based, local, organic, family farming and free-range livestock raising. By breaking up the huge corporate farms into family-size and community-size plots, we can repopulate rural America (and stop suburban sprawl), produce better, healthier food, respect animal rights, and create millions of new landowners. Simultaneously we can follow the example of Cuba and turn our blighted inner-cities into gardens, by utilizing permaculture and organic community-run agriculture, which would reduce crime and poverty in our decaying urban areas, bring quality food to places currently plagued by malnutrition, and create millions upon millions of rewarding and meaningful jobs.
How will we finance it? Simple. Disassemble the huge financial firms and multinational corporate banks whose greed caused this economic crisis and create thousands of local banks and credit unions, run by people in the community (even more jobs!) Taxing the rich would help a lot too, and we can cut tons of wasteful government spending on things like the wars in the Middle East, excessive prisons, and nuclear, biological and chemical weapons. The money is right there, we just need to redirect it to things that actually help people instead of killing them.
This of course requires a revolutionary change in the economic and political structure of the United States, which means average people like you and me having control over the decisions affecting our lives, instead of remaining at the whim of wealthy elites who in the current crisis have shown themselves unable to run a lemonade stand, let alone the global economy.
[alex]
Deluge of layoffs hits U.S. economy
January 27, 2009
By Jerry Hirsch and Maura Reynolds
Scott Olson, Getty Images
A worker walks between Caterpillar earth-moving equipment at a road construction site near Joliet, Ill. The company has announced that it will cut nearly 20,000 jobs as the recession reduces demand for its products.
Companies including Home Depot, Caterpillar, Pfizer and Sprint plan to cut nearly 60,000 jobs, adding urgency to the need to agree on a stimulus plan.
U.S. companies slashed nearly 60,000 jobs Monday, adding impetus to the Obama administration’s efforts to reach agreement on a plan to pump $825 billion into the economy over a two-year period.
But it’s unclear whether even that massive influx of funding and tax cuts would be enough to get companies hiring again in the near term.
The cuts by firms including Caterpillar, General Motors, Texas Instruments, Home Depot, Sprint Nextel and Pfizer brought the total of jobs shed so far this month to 187,550, more than November or December and well over double the number of January 2008, according to employment firm Challenger, Gray & Christmas Inc.
Analysts believe that Obama’s strategy of pouring money into state and local governments could prevent layoffs and furloughs of public sector employees, including teachers, police officers and other government workers.
Economists have estimated that the plan will protect or create 3 million to 4 million jobs in the next two years.
But the U.S. economy lost 2.6 million jobs last year and could lose 2 million more during the first half of this year. Read the rest of this entry »
Interesting to see how second-tier nations are facing such dramatic upheaval, it seems the crisis is being somewhat deflected from the United States and other centers of global capitalism. In the long run of course, the US is LEAST prepared to deal with the energy shortage, and will crash hardest. For now though, the coronation of our new fresh president has kept the myth of American exceptionalism alive, at least for a little longer. [alex]
Riots in Iceland, Latvia and Bulgaria are a Sign of Things to Come
Our third global political column explores the start of an age of rebellion over the financial crisis – beginning in Iceland
by Roger Boyes
January 21, 2009
Icelanders all but stormed their Parliament last night. It was the first session of the chamber after what might appear to be an unusually long Christmas break.
Ordinary islanders were determined to vent their fury at the way that the political class had allowed the country to slip towards bankruptcy. The building was splattered with paint and yoghurt, the crowd yelled and banged pans, fired rockets at the windows and lit a bonfire in front of the main door. Riot police moved in.
Icelanders vented their fury at the political class's handling of the financial crisis by staging angry protests in Reykjavik
Now in the grand sweep of the current crisis, a riot on a piece of volcanic rock in the north Atlantic may not seem to add up to much. But it is a sign of things to come: a new age of rebellion.
The financial meltdown has become part of the real economy and is now beginning to shape real politics. More and more citizens on the edge of the global crisis are taking to the streets. Bulgaria has been gripped this month by its worst riots since 1997 when street power helped to topple a Socialist government. Now Socialists are at the helm again and are having to fend off popular protests about government incompetence and corruption.
In Latvia – where growth has been in double-digit figures for years – anger is bubbling over at official mismanagement. GDP is expected to contract by 5 per cent this year; salaries will be cut; unemployment will rise. Last week, in a country where demonstrators usually just sing and then go home, 10,000 people besieged parliament.
Iceland, Bulgaria, Latvia: these are not natural protest cultures. Something is going amiss.
The LSE economist Robert Wade – addressing a protest meeting in Reykjavik’s cinema – recently warned that the world was approaching a new tipping point. Starting from March-May 2009, we can expect large-scale civil unrest, he said. “It will be caused by the rise of general awareness throughout Europe, America and Asia that hundreds of millions of people in rich and poor countries are experiencing rapidly falling consumption standards; that the crisis is getting worse not better; and that it has escaped the control of public authorities, national and international.”
Ukraine could be the next to go. The gas pricing deal agreed with Moscow could propel the country towards a serious financial crisis. Russia, too, is looking wobbly. A riot in Vladivostok may have been an omen for things to come. What will happen when the wider economic crisis translates into higher food prices? Or if Gazprom has no choice but to increase domestic gas prices?
Governments have so far managed to deflect attention from their role in the crash, their slipshod monitoring, by declaring themselves to be indispensible to the solution. This may save the skins of politicians in wealthier countries who can credibly and expensively try to prop up banks and sickly industries. But it does not work in countries that are heavily indebted, with bloated and exposed financial sectors. There, the irate crowds are already beginning to demand: why hasn’t a single politician resigned? What has happened to ministerial responsibility? Who will investigate government failure?
Good questions, it seems to me, in these unquiet times.
Jobs with Justice and the Institute for Policy Studies recently released a comic book that explains the current economic crisis. It provides a decent explanation of the crisis of capitalism without using that language, and it does mention peak oil, but does not in any meaningful way explore the effect the energy crisis has had on the economy already. Regardless it’s a pretty amusing and cute piece of radical literature. [alex]
Check it out: http://economicmeltdownfunnies.org/
In a recent New Yorker piece, Naomi Klein astutely observes that “The crash on Wall Street should be for Friedmanism what the fall of the Berlin Wall was for authoritarian Communism, an indictment of an ideology.” One hopes so. The financial system’s collapse in 2008 offers a rare opportunity to question certain underlying assumptions about our state capitalist economy and its neoliberal ideology.
For the last few years I’ve been writing about neuroscience research which shows that the human brain is hard-wired for empathy, the ability to put oneself in another’s shoes. This is the discovery of the mirror neuron system or MNS, a finding some scientists believe rivals what the discovery of DNA meant for biology. The technical details showing how morality is rooted in biology, hardwired into our neural circuits via evolution rather than handed down from on high, lie beyond this article. But our understanding is increasing at an exponential rate and it’s compelling. Earlier this year, UCLA neuroscientist Marco Iacoboni’s superb book, Mirroring People (NY: Farrar, Strauss and Giroux, 2008, paper) made this important research accessible to the lay public.
However, this is not to underestimate the barriers to the public’s appreciation of these findings. At the apex of misunderstanding is the cynical, even despairing doubt about the existence of a moral instinct for empathy. From doctrines of original sin and Ayn Rand to Alan Greenspan and David Brooks, certain intrepretations of human nature have functioned to override empathic responses. In the words of famed primate scientist Frans B.M. de Waal “You need to indoctrinate empathy out of people in order to arrive at extreme capitalist positions.”
We know that cultures are set up to reward some people and disadvantage others. Capitalists maintain domination, in part, through subtly but actively creating society’s prevailing cultural norms. Antonio Gramsci’s writing reminds us that this control is achieved through the mass media, education, religion and popular culture as subordinate classes assimilate certain ideas as “common sense.” It isn’t that individual deviations don’t occur within the interstices of society but generally they don’t threaten elite control.
If we assume that the human brain or more specifically, the aforementioned mirror neuron system, is the implicit target of elite propaganda, then the current economic meltdown provides an almost unprecedented opportunity for us.
Perhaps not since the 1930s have our citizens been more skeptical of received wisdom about our socioeconomic system. That is, the carefully manufactured narrative of market capitalist identity and its assumptions about human nature are now thrown into sharp relief.
Not only has economic reality made a shambles of the canonical model of Homo economicus but robust empirical evidence offers promising alternative responses to basic questions about human nature. Parenthetically, other highly regarded cross-cultural studies reveal that the self-interested behavior predicted by the selfishness axiom simply fail to materialize and cooperation is the norm.
Of course there are also predatory and cruel urges within our nature, complete with their own neural correlates and evolutionary origins. But now we know that organizing an alternative to our vicious system of “natural” hyper-individualism will enhance the opportunity for the empathic aspect of our nature to flourish. Social historian Margaret Jacobs captures my optimism with her insight that “No institution is safe if people simply stop believing in the assumptions that justify its existence.” Therein lies both our challenge and responsibility.
The End of Capitalism 
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