Year Four of the Silent Depression

Year Four of the Silent Depression

L. Carpenter: Silent Depression

AS OF May 2011, governmental (and intergovernmental) institutions have prevented a 1930s-style depression. They’ve saved the financial system. Nonetheless, the Western industrial world is crumbling.

I call our situation a silent depression, analogous to the silent depression of 1974–84, which French economists called la crise. During la crise, there was massive deindustrialization in the heavy industries that had formed the postwar mode of production, and satiation where there had been rapid growth in the consumer durables that were its mode of consumption. La crise became normal, a second stage of postwar capitalism. New leading industries developed—information technology, speculative finance—and with them a new mode of consumption based on debt and income inequality. That stage of capitalism worked for a while, then turned desperate after 2000. High technology became less revolutionary, and high finance lurched from bubble to bubble; the rich couldn’t eat up all that the economy could produce. That stage came to an end in 2007–8.

Like its predecessor, the current silent depression means that not enough jobs are created to provide full employment. Since over two-thirds of workers in OECD countries are employed in the service sector (a figure even higher in countries like the United States and France), that’s where jobs have been destroyed. That sector isn’t going to pull us back to full employment. Most of the new jobs created in it and other sectors are part-time and precarious. To get us out of this mess and into a new stage of capitalist accumulation, new modes of production and consumption must be constructed out of new and recycled materials.

Most of my friends in France and the United States don’t say this, thought not because they aren’t hurting. Those who are self-employed (journalists, translators) have lost clients. Salaried workers have lost their jobs, or are at risk of losing their jobs. Many have children who are having difficulty finding a place in society, or they experience the effects of cutbacks in medical care and the annoyance of trying to talk to insurers or providers of what once were growing service industries. But they stop short of saying that the survival of their societies is seriously threatened.

That is why the economic and social project of the French Socialist Party (PS) for the 2012 elections is so interesting. It’s premise is that the economy needs to be straightened out, and it proposes a new model for development—a model that aims for growth, innovation, and durability. This isn’t the kind of growth the United States underwent in the last stage of capitalism: starter mansions and SUVs, fueled by consumer debt. It’s not growth driven by massive increases in consumption, directly or indirectly, like what France tried from 1974 to 1976, after which the need to protect its currency forced leaders to be “fiscally responsible.” Even in those years, government deficits played a supporting rather than lead role in public discourse. Now the PS doesn’t oppose the center-right’s targets for deficit reduction. But it maintains that deficits are inevitable and must support modest growth, which is needed to cut into mass unemployment. They propose to raise potential growth of GDP from 1.5 percent to 2.5 percent a year—modest and balanced growth, not growth on steroids.

The hallmark of the PS’s projet is investment, directed into the sectors that can lead to an ecologically sustainable future, like energy. France is already (though belatedly) investing somewhat in generating electricity from wind and from solar panels. The French are also looking to second-generation biofuels (not ethanol). These industries were keys to the 2007 national conference in France on sustainable development, partly implemented and opposed by most of the corporate sector and the EU. The big catch, of course, is nuclear energy. France is a world leader in nuclear energy construction, which generates most of its electricity, but the PS’s potential allies among the Greens are either cool to or virulently against nuclear energy. So the program straddles the issue; you can’t get out of the already-built plants but shouldn’t build more, and in addition to finding new sources of energy you have to conserve it (which will require investment, too).

The projet outlines a policy on agri-business, too; France has high-quality agricultural products, and land that’s suitable for growing ecologically sound fruits and vegetables, close to market. It also emphasizes innovation in the pharmaceuticals, health, biological fields; France’s chemical industry has stayed competitive, and health care has been a leading sector, in the last stage of capitalism. Finally, the program looks to “forms of mobility for the future.” That’s a rag-tag slogan for more Internet, public transportation, a TGV rail line to Berlin, and improving the rail system in order to shift more freight to it.

These priorities are common sense. They build on existing niches that center-right governments encouraged. Even President Sarkozy turned to state-sponsored investment packages in 2009, when he felt that he had to do something dramatic to get the economy moving. A monorail loop circling Paris, linking up “poles of economic development” and some of the working class suburbs north and east of Paris, will be built in some form (and the PS would be well advised not to change that). The PS plan has the disadvantage of not being so dramatic, but the advantage of piggy-backing on years of experience: it proposes “strengthening” the Center of Strategic Analysis (CAS), a policy advising institution, which could be used to suggest additional targets for investment.

The CAS is what’s left after successive governments dismantled the Commissariat général du Plan, an important institution of postwar reconstruction. The PS statement hints at restoring some of the Plan‘s original methods for carrying out indicative (as opposed to mandatory) planning. Under Jean Monnet, the Plan brought together working groups of civil servants, businessmen, and trade unionists to help identify priority sectors and mobilize support for investment in them. Indicative planning worked, I believe, because civil servants and the reconstruction cabinets put investment funds into the Plan’s priorities. The banks and the hedge funds certainly aren’t going to invest in most of the PS’s priorities, but France already has several public investment vehicles, from the Caisse des depots et consignations (founded at the conclusion of the Napoleonic era) to the Fonds strategique d’investissement that Sarkozy established (copying, in a very undernourished form, the sovereign funds of the emirates and the Far East).

The PS also proposes establishing a National Investment Bank (Banque publique d’investissement) that will piggyback on these existing sources of funds. The French have a relatively high savings rate and often place their savings in safe, low-interest accounts such as the bank of the post office and the Livret A, which provides money for social housing. The PS plan would turn one of the most important of these accounts (the CODEVI) into a savings account for industrial expansion. The benefit of such a savings account to the planners is that it would mobilize French small savers, providing a measure of popular support while not peddling securities to the global funny-money speculators. (When Sarkozy wanted to borrow money for development in 2009, he stubbornly insisted on turning to the big banks and foreign lenders, not his own citizens. One reason why Japan’s currency has stayed strong despite a very high national debt is that most of their national debt is held by their own citizens.) The National Investment Bank would make loans to mid-sized companies, which economists, with an eye on Germany’s success at exporting, feel that France lacks in sufficient numbers. The Bank’s loans would come with strings attached, designed to serve social purposes—reducing CO2 emissions, paying suppliers and sub-contractors in a timely manner, establishing equal pay for equal work, paying low dividends, and keeping executive pay from being outrageous. In recompense for being socially responsible, the small companies would receive preferential treatment for public orders.

The other mechanism for “encouraging” investment is tax policy. The PS proposes manipulating the corporate tax, making it lower for companies that reinvest in productive capacity and higher for the finance sector (whose mega-profits and right to print money crowd out real physical investment nowadays). This form of manipulation won’t add to public deficits; the break that it would give to the little guys would come from the big boys.

AS YOU can see, the PS projet tries to fry two fish in the same fryer: development and social justice. Social justice goes hand in hand with getting France out of the silent depression and into a new mode of production and consumption, following a stage of capitalism that has generated immense inequalities of income and status: good times for the rich, crumbs for working people; too much money in the wrong places, not enough money in the right people’s hands; hyperactivity for those who printed money, psychological depression for the rest. The silent depression has compounded these inequalities. Once the threat of a new Great Depression had been neutralized (by increased public deficits and national debts), the predators cried for deficit reductions—financed, of course, by cutting public services for working people. Sarkozy’s government has cut the number of school teachers, researchers, police, hospital workers, and other civil servants each year in office, in a constant attrition of what could be the “jobs of the future.” Such cuts are counterproductive and demoralizing—a double whammy, in France and all across the industrialized world, cannibalizing the system that I need to live.

The system has to be rebuilt. Will these two tools—investment and tax policy—be strong enough? In 1981, François Mitterrand was elected president with the mandate to get France out of la crise. His plan was to modernize nationally owned heavy industries (new and old) to drive the economy. It worked reasonably well, in a difficult economic context, but his government was forced to backtrack within three years, because it couldn’t raise enough investment funds and had to devalue the franc. That u-turn permanently scarred the PS; the scars are visible in its latest project. The projet is more modest than Mitterrand’s, trying to avoid the wrath of financiers and speculators rather than take them head-on. If a president truly committed to reconstructing the system were elected, perhaps these proposals could mobilize innovative smaller companies to invest in the PS’s priorities, and thereby play them off against the politically powerful corporations that do not want anything resembling this model of development. Modesty is sometimes justified in the face of wrathful opponents. Budget deficits have to be brought down, because of the EU, the IMF, and the speculators. But not forever, and not with the methods that those bullies have demanded we use.

The PS’s modesty extended into its May Day pamphlet this year, a virtually unreadable document featuring six propositions taken from the projet, including the National Investment Bank. The handout presented the Bank as a means to prevent companies from leaving France and to shore up industry and small companies, not as the centerpiece of a new model for growth. (And you had to be persistent to actually read this particular proposition—a dark turquoise “background” obscured the print). The other five propositions included a cumbersome proposal to slow down rent increases (rather like New York’s rent stabilization), plus 150,000 units of social housing to reduce a chronic shortage of affordable living spaces; even more cumbersome proposals to slow down the increase in electric bills; national conferences three times a year among the government, the trade unions, and the employers’ representatives to discuss the minimum wage and the way that national wealth is shared; penalties for companies that fired workers (but only those that paid dividends); and 300,000 subsidized jobs for new entrants to the labor force (over five years).

Compare that with the shock treatment that a center-right government provided at the start of the previous economic crisis in 1974: packages of early retirement and unemployment benefits to get older workers out of the job market and free up jobs for new job entrants. Those benefits paved the way for what became a real right to collect one’s pension at age sixty. Sarkozy attacked that right last fall, winning a crushing victory over the unions and the millions that turned out for nine massive demonstrations. The PS handout didn’t try to rally the victims of that assault, which undoubtedly contributed to the psychological dimension of the silent depression. Why? Because the PS only wants to undo part of what Sarkozy did. Nor did it try to rally those who are depressed by cuts in hospitals and other public services. The May Day leaflet complained that the minimum wage has only kept up with official inflation for the last five years—but the promise of national tripartite conferences hardly addressed that complaint!

PEOPLE ARE mad and frustrated. Indignez-vous! (translated in English as Time for Outrage!) was the title of a pamphlet that sold hundreds of thousands of copies last fall. Its author is Stéphane Hessel, a veteran of the anti-fascist Resistance who after the war helped draft the Universal Declaration of Human Rights. Hessel is ninety-three years old, utterly charming on television, and modest in the face of those who urge him to make a fortune out of his popularity in order to create a foundation to publicize his ideas–but his pamphlet disappointed me. Hessel starts from the premise that the national bargain created in 1945 by de Gaulle and the Resistance is being destroyed, which is true. But he modestly leaves it to his readers to decide what to get mad about. His own anger is directed on behalf of Palestinian independence and the rights of illegal immigrants in France. As far as the rights of illegal immigrants are concerned, the Confédération générale du travail (a national trade union) is sponsoring a campaign for obtaining working papers for those who have managed to get jobs and are becoming part of the nation, which the PS doesn’t oppose. But it’s not a big rallying point for French workers and can’t be the main thing to get angry about. Last fall that cause turned out a few hundred demonstrators, not millions.

The PS has no place for that anger. Where is it going? To the far-right National Front. Not many working people are National Front militants, but the latest opinion polls suggest that 36 percent of manual workers (ouvriers and ouvrieres) would vote for the FN in the first round of the 2012 elections. (The same poll, taken before the arrest of Dominique Strauss-Kahn, indicated that 17 percent would have supported the once-presumed PS candidate, and 15 percent Sarkozy.) Here the PS’s modesty is glaringly inadequate. They have to offer more to the ouvriers on the minimum wage, preventing exploitation, and rebuilding the old working-class suburbs. If they don’t rile people up, the anger will continue to turn inward, becoming depression—the psychological dimension of the silent depression.

Other people are angry over air and water pollution and other environmental causes–and at the government’s failure to carry out many of the promises made to the 2007 Grenelle Conference on the Environment. The PS strategy apparently is to dampen down their anger. None of the six propositions featured in the PS handout were environmental (even though Europe Ecologie–Les Verts, the Green electoral coalition in France, also handed out pamphlets on May Day). The PS has approached and then recoiled from the Greens for forty years—agreeing that environmental degradation is real but criticizing them for being soft on social justice. Will Greens accept the National Investment Bank and the PS’s model for economic development, or will they think it is too wishy-washy? The PS’s apparent strategy is to let the environmentalists go for now and then make deals with the Greens in the second round of the 2012 elections.

The PS projet is much more coherent and thoughtful than previous party documents; the party is clearly trying to prevent its own candidate from running on his or her own propositions and ignoring the need to construct a new model of economic and social development. But the Socialists must begin fighting the silent depression now. Dominique Strauss-Kahn’s indictment for rape shows the perils of waiting until the elections of 2012 (the fifth year of the silent depression) before beginning to construct a new economic and social model for France. And his indictment shows the wisdom of PS General Secretary Martine Aubry’s insistence on drafting the projet before choosing a presidential candidate. Put ideas first, then build toward the elections. I doubt that DSK would have put the National Investment Bank into his own list of propositions. His lieutenants and the pollsters were pressuring the party into endorsing him, to draw votes from the center-right at the expense of an alliance between Greens and the PS. With DSK gone, the centrist Jean-Louis Borloo, minister of ecology up until the fall of 2010, might be a reasonable partner for a government committed to a new model of development.

Luther Carpenter is a historian and Dissent editorial board member.