Yule Heibel on 2008-10-06
To underscore the validity of what Florida is saying here, watch the video of SoCal news, "What the meltdown looks like" (on trash-outs): http://tinyurl.com/3jryu9
This link has been bookmarked by 1 people . It was first bookmarked on 06 Oct 2008, by Yule Heibel.
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06 Oct 08
Yule HeibelGreat entry by Richard Florida, which underscores the connection between suburbanization, reliance on cheap gasoline, consumption, and using housing/ real estate as a "piggy bank" that one could always raid to get money to buy more stuff. See entry, and annotations/ highlights.
I added a comment, in response to an existing comment by Wendy Waters, and then a second one in response to Kwende Kefentse.creative_class economy financial_crisis mortgage_crisis richard_florida suburbs
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Most experts agree this is the worst financial meltdown since the Great Depression. The stock market is down almost 25 percent so far this year. Housing prices in the United States are off more than 20 per cent since their peak in 2006. Manufacturing output is falling and consumer confidence has slipped.
<!-- /Summary -->Martin Feldstein, former head of the National Bureau of Economic Research, past chairman of the Council of Economic Advisers and a Harvard economics professor - usually a voice of calming reassurance - wrote in The Wall Street Journal: “Sliding into recession, monetary policy already at maximum easing, and fiscal transfers impotent … an unenviable situation, to say the least, for any incoming president.”
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Where did this financial mess come from? And what does it mean?
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The easy answer is to blame the housing market.
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Banks and financial institutions, so the story goes, are clogged with this bad debt, now dubbed toxic waste. This is the kind of thinking behind the U.S. financial bailout: Remove the toxicity and all will magically be well again.
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The real reason is that the roots of the current crisis are tied to the fundamental nature of the postwar model of economic development called “Fordism.” That model drew a tight connection between assembly-line mass production and mass consumption - ultimately fueled by massive suburbanization.
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Fordism emerged as a full-blown economic and social model during the 1930s, marked by president Franklin D. Roosevelt’s New Deal programs, and flourished after the Second World War, when government policies brought about the rise of longer-term mortgages and a new system organized under the now infamous Fannie Mae to purchase those mortgages and thus lubricate the system.
Add to that massive tax breaks for homeownership and gargantuan subsidies for highway construction and infrastructure, and a whole new model of suburban-fueled mass consumption was born - family after family purchased new homes, filling them with TVs, appliances and all manner of furnishings, while also purchasing record numbers of cars to get to and from work.
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Yule Heibel on 2008-10-06
I also blogged this, here: http://tinyurl.com/52hr33
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While Fordism looks stable on the surface, it suffers from a fatal flaw: It’s impossible for consumption to keep up with the ever-growing pace and efficiency of production. This is particularly true of recent times, when a great deal of production has been sent to China, India and other places where labour is cheaper. It’s hard for the working and middle classes to consume more when their wages are essentially stagnant. Low-wage workers in emerging economies do not have the income to fill the gap. And while the ranks of the rich have grown, the wealthy are a relatively small group that can buy only so many luxury cars, designer products, homes and yachts.
That’s where credit comes in. Those new fancy mortgage instruments were meant to turn homes into veritable “piggy banks” that could be used to finance bigger and better cars and homes and toys.
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Almost a century ago, Austrian economist Rudolf Hilferding identified this basic contradiction of modern capitalism in his monumental work Finance Capital. Capitalist economic development stands on a shaky foundation, he argued - workers always produce more than they can consume, more even than society as a whole can consume.
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Yule Heibel on 2008-10-06
- we always produce more than we can consume: so, can we get around to producing the "right" things, or is that impossible?
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As one leading blogger, Yves Smith at Naked Capitalism, recently put it: “Since consumption has come to depend on growth in indebtedness, a reversal, however painful, is necessary. Our excesses have been so great that there is no way out of this that does not lead to a general fall in living standards.”
There you have it. The financial crisis is in reality a much deeper crisis of our underlying economic model and our way of life. It’s a crisis of the way we have come to define ourselves.
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Regardless of how or when the financial markets are restored, credit will be much harder to get - the age of the house as piggy bank is long gone.
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