The Long Downturn?

That's the title of an article by Robert Brenner of UCLA in which he argues that the Great Recession is more than a financial meltdown. As his title indicates, it has been coming for some time due, at heart, to overcapacity which has led to reduced profitability.

He doesn't say where his numbers come from but one table shows the decline in world economic health from 1960 to 2007. Some examples:

• GDP growth year to year - In the 1960s the U.S. GDP grew 4.2%, a rate not matched in the ensuing decades; in the period 2000 - 2007 the annual growth was 2.3%. Germany is even worse; 4.4% to 1.2%.
• Labor productivity as measured by GDP per worker - From 2.3 to 1.7 for us and from 6.7 to 1.2 for Germany.
• Real compensation per employee - How he measures this I don't know but it went from 2.7 to o.6 for us and 5.7 to 0.2 for Germany.
• Profit rates - 14.6% in the 1960s for U.S. to 10% in the 21st century. Germany 17.7% to 9.5%.

And the list goes on to employment, plant and equipment, spending, all downward spirals.

I think he does have some, perhaps even a strong, basis for his claims. Clearly, we have moved very far away from the manufacturing economy of the post-WWII economy. Equally obvious is the decline of the middle class.

Brenner concludes that the administration's financial efforts over the past months have been directed primarily to saving the banks, rather than solving the deeper economic problems. He has a point.