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Rebuilding real economies

Published Oct 17, 2012 12:00am


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This weekend, the British labour movement will be marching in London for a future that works. Two weeks later, in the United States millions of workers and their unions will be mobilising for our national election in critical states such as Ohio, Massachusetts and Wisconsin. These mobilisations may not seem surprising, but behind them lies a serious rethinking of the economic and political strategy on labour issues.

It was the UK and the US that gave birth to the economic ideas and the financial practices that led to the global economic crisis. Five years into the crisis, workers in both countries have paid a terrible price through lost jobs and incomes, while the incomes and assets of the wealthiest in both countries have largely recovered to their pre-crisis levels. But we have learned a few things.

The first is that working people cannot prosper in a financialised economy. The wealth generated by deregulated financial markets has turned out to be a dangerous illusion. When the bubble bursts and the illusion fades, financial elites end up holding all the wealth that remains. These elites then have no desire to fund the investments our countries’ real economies need to be more globally competitive. We have seen both faces of financialisation: credit bubbles promising infinite riches on the one hand, and savage austerity on the other. In the UK, budget cuts have reversed economic recovery and brought a double-dip recession. In the US, Republican Congressional obstruction in the name of balancing budgets has blocked President Obama’s American Jobs Act and prolonged recession-level unemployment. Austerity is the other side of the credit bubble, because in a financialised political economy the financiers expect to be paid, and have the political power to enforce that expectation, no matter what the cost to the real economy.

The AFL-CIO has endorsed President Obama for a second term because we see his economic vision pointing towards a future that works, while Mitt Romney and Paul Ryan represent the political power of the winners in the losing game of financialisation.

A future that works means public investment — in transportation, education, energy, and telecommunications. Public investment has to be paid for through fair taxes — starting with a crackdown on tax evasion by big companies and the super-rich and a financial transaction tax. A future that works requires restoring healthy consumer demand, not through credit bubbles but through wages keeping pace with rising productivity. And rising wages requires workers to have the right to bargain collective agreements with their employers.

In both the US and the UK the labour movement is prepared to work with elected leaders, no matter what party, who are prepared to lead the way towards a future that works, to oppose those who would continue the failed policies that brought us here, and to hold accountable those who would try to have it both ways. — The Guardian, London

Note: Damon Silvers is policy director of AFL-CIO, the US labour federation.


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Cyrus Howell Oct 17, 2012 12:26pm
"It was the UK and the US that gave birth to the economic ideas and the financial practices that led to the global economic crisis." . The author is way off track with this remark. Although investment banking in Scotland was invented centuries ago, the UK had nothing to do with the crises. It was totally the fault of unwise financial practices in the USA. The USA should totally be blamed. Britain just followed along falling into the same lending and financial tricks, and shaky real estate deals as were done in America, as did the rest of Europe. People paid off credit cards with second and third mortgages living off equity in their homes they though was real. The housing prices were tied to tax assessments that cities and municipalities and county governments were raising every year for 12 years. Real estate brokers told buyers houses were far more valuable than they actually were. Real estate was financed by government mortgages, commercial banks and insurance companies. Big real estate projects had always been deemed safe for insurance companies to invest in. They didn't see it coming. There was no way for federal mortgage companies to unload their bad debt. They were stuck. Wall Street collapsed trying to unload it's and customer's bad debt with credit swaps and credit derivatives, which was nothing but a game of musical chairs the equivalent of the past junk bond market - only worse. As a way to finance credit card debt people saw only what the wanted to be true. Lenders lost because properties were not worth what they were believed to be - on paper. It was real estate pricing that sunk the Titanic.