Paul Krugman states the obvious in today's New York Times:

Wages are falling all across America.

Some of the wage cuts, like the givebacks by Chrysler workers, are the price of federal aid. Others, like the tentative agreement on a salary cut here at The Times, are the result of discussions between employers and their union employees. Still others reflect the brute fact of a weak labor market: workers don’t dare protest when their wages are cut, because they don’t think they can find other jobs.

Whatever the specifics, however, falling wages are a symptom of a sick economy.

Krugman, like the classically trained economist that he is, then proceeds to explain the consequences: declining wages when combined with preexisting debt will result in economic stagnation for the indefinite future. And, of course, he advocates the expected interventionist Keynesian solutions: more stimulus, more decisive action on the banks, more job creation.

Poor Paul. No one sent him the memo from Summers and Geithner to Obama wherein they explained that the relentless process of global asset destruction is so extreme that the prospect of any recognizable economic recovery is slight. Similarly, financial institutions are already aware that they will no longer be promiscuously extending credit as they did during the bubble, and, hence, they will never again make such outsized profits in this manner.

In other words, no one has let Krugman in on the dirty secret that the pie has been permanently shrunk as a consequence of the bursting of the bubble, and that finance capital has planned accordingly. The imposition of austerity upon American workers is now express policy within the worlds of government and finance. Policymakers have already considered Krugman's Keynesianism and rejected it. Other measures like relief for distressed homeowners in bankruptcy court and the Employee Free Choice Act have no future as they would divert resources away from a distressed financial sector intent upon using the crisis to intensify control over the global economy.

If only Krugman had more friends specializing in political economy. As I explained back in July 2007, the roadmap is easy to follow:

. . . but what about the people who are losing their homes? What is going to happen to them? The answer is, as we all know, it is going to be brutal. Many of them are going to be pushed into the rental market for the rest of their lives, and many are going to have to leave the locations where they currently reside because even the cost of rent is going to be too much for them. So, we are looking at the prospect of two migrations, one from houses to rentals, and the other from expensive parts of the country to less expensive ones. Furthermore, quite a number of communities built for home owners will rapidly become rental ones. Some may even resemble ghost towns, as it becomes impossible to fill all of the homes with residents.

Left academics would say that the socioeconomic life of the US will subtlely display more and more features of sub proletarization, as more and more people in the lower middle class and even the middle class find themselves forced to migrate internally within the country (an economically generated group of internally displaced people?) and live under conditions of financial insecurity. Analogizing them to global migrants is a stretch, demeaning their struggle for survival, and, yet, many Americans face a future of insecurity in all aspects of their lives.

Unfortunately, as usual, I was too optimistic. As described by Krugman, the victims of this economic downturn will not be limited to those who lost their homes. Everyone who works for a wage is going to be asked to subsidize the preservation of a global neoliberal financial system through an even more ruthless expropriation of labor. Paul Volcker, an Obama advisor, alluded to it in December. I still encounter liberal friends who tell me that a social movement is about to erupt any day now that will force Obama to shed his neoliberal garb in order to don more fashionable FDR clothes. Hope springs eternal until the money runs out, I guess.

Labels: Bailout of Finance Capitalists, Credit Crunch, Global Recession, Neoliberalism, Sub-Proletarianization of America