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Streetwise Professor thinks we might be seeing evidence of a capital strike.
After the US economy began to recover rather robustly in the mid-1930s, a series of ill-considered government policies, notably a tax on undistributed profits, a big increase in marginal rates on high incomes, the Wagner Act, and a Fed contraction of the money supply led to a substantial contraction in 1937. The depression within the Depression.
One notable feature of the 1937 episode was the so-called “Capital Strike”, a sharp decline in corporate investment.
The imminency of Obamacare and Frankendodd, and the continued failure to address seriously the country’s fiscal situation, with the associated uncertainty about taxes and spending, may be creating a modern-day version of the capital strike. The WSJ reports that growth in investment expenditure has slowed to a standstill, and that many large companies are slashing investment plans. The article places the blame on the “Fiscal Cliff”, but in reality, this is overdetermined, as they say. There are multiple factors at work, and all in the same bearish direction: the regulatory friction (epitomized by Obamacare, Frankendodd and the EPA) is a major drag on growth, and a major source of investment-killing uncertainty. Indeed, I would put the least weight on the Fiscal Cliff as it is conventionally portrayed: that conventional portrayal is almost purely comic book Keynesian in nature, focusing on “aggregate demand”. IMO, the handling of the expiration of various tax reductions and the potential for sequestration is relevant not because of AD-a slippery and largely chimerical concept-but because of what it portends about the future course of government spending, and in particular the appetite to deal with entitlements and transfer payments.
If what the WSJ reports is indeed a harbinger of a modern day capital strike, that would be consistent with my broad forecast in my post-election post. A protracted period of stagnation/slow growth. Which will only exacerbate the fiscal situation and increase the risk of a rollover/funding crisis.
As if we really should need another Ghost of Christmas Future to warn us, take a look at Japan right now. Just saying.
Similar thoughts from Jonathan Tobin.
Polls have consistently shown that far more Americans still blame George W. Bush for the country’s economic difficulties than those who were prepared to place responsibility on the man who has been president for the last few years. That fact, along with an economy that wasn’t very good but still not as terrible as many thought it might be, was enough to re-elect Barack Obama earlier this month. In doing so, Obama became the first president to successfully run for a second term, while blaming his predecessor for his own failures, since Franklin Delano Roosevelt, who buried Alf Landon in 1936 by running against his predecessor Herbert Hoover.
That was quite a trick, but President Obama should be wary of emulating FDR in every respect. As Amity Shlaes wrote yesterday in Bloomberg News, Roosevelt’s second term provides some ominous precedents for an Obama second term. As our colleague John Steele Gordon wrote earlier this year, it may always be 1936 for liberals who believe conservatives are doomed to perpetual defeat. But what the president and his supporters should be worrying about is whether 2013 turns out to be a repeat of 1937, when a country mired in the Great Depression suffered another economic setback that heightened the country’s misery. As Shlaes points out, signs abound that the “Great Recession” that Obama claimed to save the country from during the campaign may be about to get worse. …
In London’s Telegraph, Janet Daley warns that the second term of obama could lead to a permanent no-growth economy.
Forget about that dead parrot of a question – should we join the eurozone? The eurozone has officially joined us in a newly emerging international organisation: we are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America).
So here we all are. Like us, the member nations of the European single currency have embarked on their very own double (or is it triple?) dip recession. This is the future: the long, meandering “zig-zag” recovery to which the politicians and heads of central banks allude is just a euphemism for the end of economic life as we have known it.
Now there are some people for whom this will not sound like bad news. Many on the Left will finally have got the economy of their dreams – or, rather, the one they have always believed in. At last, we will be living with that fixed, unchanging pie which must be divided up “fairly” if social justice is to be achieved. Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking anything away from any other group, there will indeed be an absolute limit on the amount of capital circulating within the society.
The only decisions to be made will involve how that given, unalterable sum is to be shared out – and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal – virtually the only – significant function of political life. Is this Left-wing heaven? …
NY Times reports on discoveries in South Africa that point to an early creation of sophisticated tools by modern humans.
At a rock shelter on a coastal cliff in South Africa, scientists have found an abundance of advanced stone hunting tools with a tale to tell of the evolving mind of early modern humans at least 71,000 years ago.
The discovery, reported in the current issue of the journal Nature, lends weight to the hypothesis that not only did anatomically modern Homo sapiens emerge in Africa but also, to a previously unsuspected extent, their cognitive capacity for abstract and creative thought and the conception of increasingly complex technologies associated with modern human behavior.
The report describes the stone tools as microliths, thin blades about only an inch long that could be affixed to wood or bone. These tipped projectiles were either arrows propelled by bows or, more likely, spears launched by atlatls, wooden extensions of the throwing arm that act as a lever, imparting greater speeds and distances to the weapon. This technology, the researchers said, may have been pivotal to the success of Homo sapiens as humans left Africa and entered Eurasia some 50,000 years ago, encountering Neanderthals who were limited to hand-thrown spears.
The new evidence appeared to answer some critics who have contended that previous findings of early modern human behavior in Africa have been spotty and short-lived — a “flickering” pattern of experimentation with little or no continuity over time and across regions. The rock shelter excavations at Pinnacle Point, near MosselBay, east of Cape Town, show that this micro-blade technology continued over 11,000 years, until 60,000 years ago. The report says the technology was also “typically coupled to heat treatment” processes in shaping sharp and durable blades that persisted for nearly 100,000 years.
In their article in Nature, the researchers conclude, “Early modern humans in South Africa had the cognition to design and transmit at high fidelity these coupled recipe technologies.”
One of the authors, Curtis W. Marean, director of the research and a paleoanthropologist at the Institute of Human Origins at Arizona State University, said, “Every time we excavate a new site in coastal South Africa with advanced field techniques, we discover new and surprising results that push back in time the evidence for uniquely human behaviors.” …