an Interview with Sam Webb, by pa
Published on Political Affairs pa, December 09, 2009.
… SAM WEBB: What is new about the present economic crisis actually has several different sides to it. First is, what brought it about. And in this regard the financial sector and financialization played a major role in bringing the country to economic ruin. There have been other financial difficulties and problems over the past 20 or 30 years. If you made a list of them, people would be surprised at the length of the list. But those problems didn’t bring the country to near collapse. In the present case, the financial sector and financialization did bring about almost total economic devastation.
The crisis was triggered by the housing sector, and the bubble in the housing sector is in no small part explained by the new financial instruments and mechanisms that allowed investment bankers and mortgage companies to make enormous profits. It was triggered there, but once it was triggered, because of the interconnectedness of the financial sector, it led to a near meltdown of the financial structure, and not surprisingly this had profound consequences on what some call “the real economy.” That I think is one new aspect of it.
The other new aspect is how this particular cyclical structural downturn unfolded. First of all, it is deeper than previous crises, going well beyond the the crisis of the mid-70s and the Mexican financial crisis of 1982, for example. Another new aspect of it is that we could well be locked into a situation of very slow growth going forward. I know there are a lot of differences among economists about that, but that could well be the situation. I don’t know if we are going to replicate what happened in Japan when they had nearly a decade of lost growth and stagnation – each country is different and has its own features, but it could well be that we are entering a period of very slow growth, and I think everybody agrees that employment and job creation, even if there is some growth in the GDP (Gross Domestic Product) and other economic indicators, are going to lag far behind, so that high unemployment will probably be a long-term structural feature of the economy. I think that these are the new things that are happening.
As in any capitalist economic crisis, I think the current crisis is connected to some of the underlying contradictions in the economy between over-production and the relative buying capacity of consumers, but this one does have some new features, and it is important to see these new features, because I think they determine the scope of the crisis and the prospects for recovery … //
SW: To simplify, there are two levels as I see it. First, we have to be a part of the way people are responding to the immediate impact of this crisis. I just got back from Cleveland where I was working in a neighborhood on Rick Nagin’s election campaign. The people there are just struggling to survive, and we have to help at that level. They are trying to get food to eat; some people are trying to get shelter, others are trying to keep the real estate agent or the bank away from the door, so there is that level of trying to help people in the immediate survival situations they are in. Then, on another level, we have to be a part of the broader coalition I spoke of earlier, which is led by the labor movement and many other people’s organizations. I think we have to be a part of that. We need to play a vigorous part in fighting for immediate action, but I also think we need to bring some of our views and ways of thinking into that broader movement, such as the need for more radical economic reforms to address the present crisis we are in and the new features of the economy I mentioned. I think we need to work on both those levels, and as we work we need to continue to find ways of bringing the two levels of activity together. (full interview text).