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In the roundtable discussion about our current economic crisis on ABC News' This Week 9/5/10, Noble Prize winning economist Paul Krugman made a very telling statement:

What we need is more demand. I've been looking at the polling and other things from 1938. This actually kinda resembles 1938 when FDR cut back too soon and the economy went back to recession, people were deeply pessimistic. They said that it's never going to recover, the budget deficit is too big, it's going to last for a decade or more, just more demand won't do it, budget deficits are, we need to cut that budget deficit. Then we were, in a way, very fortunate. The war came along and took off all the restrains and we had a recover and it was not structural, we just didn't have enough demand.

I know that most politicians and the economists who work for them insist that this is a recession and not a depression, whereas the growing ranks of those in the unemployment lines may beg to differ.

Now it would appear that the Great Depression that so devastated the U.S. in the 30's has gone the way of Pluto. It has been demoted to a double-dip recession, which is pretty much what we have now. But that's just an aside. That's not why I'm quoting Krugman.

He sees the problem now as one of a lack of demand. This was also the problem in what I will continue to call the Great Depression. It is a problem that is inherent in capitalism and one that necessarily becomes more and more critical as capital becomes concentrated in fewer and fewer hands. Karl Marx called it the crisis of over production. The majority of the people become so poor that they can no longer afford what they produce no matter how badly they need it. Goods build up in warehouses, workers are laid-off, then they can't afford to buy stuff either so even less product is sold and the vicious cycle continues until demand returns for some reason.

Paul Krugman also tells us what created the demand that finally broke the Great Depression: we were, in a way, very fortunate. The war came along...

I have heard World War II called many things. This is the first time I have heard it called 'fortunate'. But economically speaking, he is exactly right. While FDR's 'New Deal' brought some relief to millions, it took a World War to break the back of the Depression, and we have been dependent on War for our economic 'health' ever since.

With the drop in government spending at the end of WWII, the U.S. went into an 8 month recession from February to October 1945. and then another 11 month recession in 1948/49. Fortunately for the economy, by then the Cold War with it's massive spending on Weapons of Mass Destruction, was rapidly being developed. Perhaps the Recession of 1949 showed that a Cold War wasn't enough. Fortunately for the U.S. economy, the Korean War started in 1950 and the economy got better.

In the Korean War, the U.S. mowed down civilians who were merely trying to flee the fighting, bombed cities out of existence, and we now know, made the use of biological weapons [ see The Crimes of Empire, p. 134] as part of our fighting doctrine, and actually used biological agents including the plague, anthrax, scarlet fever and encephalitis against Koreans and Chinese. Anyone with a slightest doubt about the incredible barbarity and criminal conduct of the U.S. military in the Korean War really owes it to themselves to watch this excellent BBC documentary Kill Them All on Google Video. Obstinately, we entered the Korean War because the communist insurgents that had been fight against the Japanese and for Korean independence since 1910 were looking likely to win. We killed no less that 2 million civilians and probably another million Korean combatants on both sides. But our economy did bounce back.

As soon as the Korean War ended, the U.S. economy again began to falter. The Recession of 1953 lasted 10 months and sparked a massive increase in national security spending. In spite of this increased Cold War spending, there was another recession in 1958 for 8 months and then just two years later, a 10 month recession that ended in Feb. 1961. By November of that year Kennedy was already stepping up military aid to South Vietnam, a Buddhist country created by the French in 1955 and run by, Diem, a Catholic from New Jersey. Of course U.S. military aid is never just money that you can spend as you see fit, i.e. you can't use it to buy AK-47s just because it is a better rifle and fewer of our allies will die if they are armed with it. You buy M-16s because that's how we make our money. We're not funding war to simulated demand for somebody else's economy. The U.S. had already been bankrolling 80% of the French effort from '48 till their defeat in '54. After that, we started carrying all of the load.

Clearly that wasn't enough. Even with all the artificial demand created by our Cold War and our murderous hot ones, the economy was falling into recession every 2 or 3 years. Five recessions occurred between the end of WWII and the beginning of the Vietnam War. Like the Korean War, the Vietnam War was a racist war conducted by the U.S. in a very barbaric manner. I have already detail how we murdered as many as 4 million civilians in my documentary Vietnam: American Holocaust. If you don't think that the Vietnam War was a racist war or warrants the title holocaust, and you don't think the question important enough to spend 87 minutes watching my doc., I suggest you at least look at this picture of how the U.S. troops treated Vietnamese bodies. And if you don't think the practice of throwing Vietnamese POW's out of helicopters was routine, I can provide you with at least four independent sources for that too.

But on a brighter note, all this meanest did result in one of the greatest periods of economic prosperity since the Great Depression, almost 9 years without a recession. In spite of the war now going full bore, there was a slight recession in 1969. Then when the Vietnam War started to wind down, and the troops started coming home, we fell into a much more serious funk with the 1973-75 recession in which unemployment hit 9%.

There was little appetite for war among most Americans in the direct aftermath of Vietnam, and while the military budget never slowed down, President Jimmy Carter was a decent man who sought to replace war with it's moral equivalent. The result was that the economy again began to falter and Ronald Reagan was able to ride into the Whitehouse on the Recession of 1980.  The recession continued until November 1982 and unemployment reached almost 11%. Reagan was only able to turn that around with a whole series of mean little wars in many places and massive increases in the military budget. By the time he left office the military budget was 43% higher than it was at the height of the Vietnam War, but he also gave us eight years without a recession. When the Soviet Union fell apart there was suppose to be a 'peace dividend', instead we got another recession.

When we didn't have the Soviet Union to kick around any more, and the War on Drugs failed to generate enough demand, the War on Terror fortunately came into focus. It is almost as if they loaded the old Cold War propaganda into the word processor and did a find: communism, replace: Islamic terrorist, replace all, and they were off and running with a new motivation for the old spending and then some.

And so it goes for the U.S. economy. Since the Great Depression it was required war for it's very survival. Blood sucking capitalism is not a metaphor to be taken lightly. Our relative prosperity has been built on a foundation of corpses, and it is systematic, so went Obama comes into office behind the warmonger Bush, he has no choice but to continue and even expand his policies. With the country in what increasing looks like a depression to me, and unemployment around 10%, he dare not bring the troops home, or stop the drones from flying and the babies from dying. Our capitalist economy requires this at this late stage of its life.  

Paul Krugman missed one important difference between our economic situation now and that of 1938. In 1938 we were a country at peace. We hadn't played the war card yet and that could and did bail us out. Now the economic situation is very similar except for this very important difference: Today we have wars going on in Iraq, Afghanistan, Pakistan, Yemen and Somalia. We are preparing them against Iran, North Korea and Venezuela.  We spend 48% of the entire world military budget and we are still heading into a depression.

Capitalism is going down. It is already past its expiration date. It is rotting alive now. The main question we have to address is whether we will go down with it or go forward without it.

I don't hate America but I do hate what capitalism has done to her.

Originally posted to Linux Beach on Mon Sep 06, 2010 at 09:37 AM PDT.

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Comment Preferences

  •  Not quite required ... (12+ / 0-)

    Since the Great Depression, politicians have fooled themselves into believing war is necessary for economic survival. As we see now, war is not the key element - manufacturing is. If war in and of itself kept the economy purring, we would not be in the midst of the second great depression. War only works as an economic stimulus IF the war spending fills the wallets of the population of the country waging the war. Since nearly all of the money for manufacturing the stuff we use in war (from vehicles, to protective vests, to bullets) goes to pay workers in other countries, and applied research and development monies for the development of new tech goes only to a small number of specially skilled workers in a few companies, war is no longer a stimulus in our economy. Under our current economic structure, war is simply a larger drain for the money to flow down.

    In addition, those who have fooled themselves about the role of war in the economy have also blinded themselves to the importance of tax policy that drastically discourages hoarding at the top while providing significant incentives for investment in job creation - within our country - by those who would otherwise hoard.

    Beware the everyday brutality of the averted gaze.

    by mataliandy on Mon Sep 06, 2010 at 09:52:12 AM PDT

  •  Well stated, and scary. (7+ / 0-)

    Perhaps the only part of your diary I don't just automatically agree with is the "80%"  U.S. support for the French attempt to retake Indo-China.
    For many years I've operated on the assumption that it was 90%; remember, Europe couldn't even feed itself, the Marshall Plan was doing that. Where else could the funds come from to support expeditioary forces.
    The 90% figure, btw, is from Frances Fitzgerald's Fire In the Lake.

    Pancho needs your prayers it's true, but save a few for Lefty, too. Townes van Zandt

    by DaNang65 on Mon Sep 06, 2010 at 09:55:37 AM PDT

  •  History repeats itself but never the same way (5+ / 0-)

    twice.

    The sweep of fascism across Europe before and after the collapse of 1929 and slowly enveloping war in the 1930's wiped out the US' main economic competititor of the day - Europe. Rising production of military armaments for our own purposes was augmented by arms sales to our allies. And we had little government debt when Roosevelt took office.

    The top tax rate under Eisenhower was 90%, speeding debt repayments for WWII and the cost of the Marshall Plan for Europe and underwrote the costs of the welfare state.

    None of those conditions exist today.

    Now we have obscenely low tax rates and our tax code is littered with loopholes you could drive an aircraft carrier through. We've destroyed and outsourced our production capacity until all we have left to export is weapons. And even they are partially outsourced to other countries.

    War has exhausted our treasury and it was all in service of a foreign/economic policy that facilitated the destruction of domestic production.  War leads to more war and our return to the #1 position as the worlds arms exporter is simply the downpayment for more wars, in service of a New World Order.

    A bankrupt foreign/war policy in the service of failed, 'bipartisan' economic policy that spreads war like oil across the seas and makes us more vulnerable and poor at home.

    What a fucking failure!

  •  Corporate accounting methods are screwy (1+ / 0-)
    Recommended by:
    kurt
    when they concentrate on reaching for quarterly profits instead of developing long term models to create and manufacture products in this country that people need.

    It is as simple as that..it is as simple as developing business models that create products that people need.

    I also believe that it would not be a bad idea to turn back the clock and not persue more modern technology that is complex, but to return to a form of technology that was easily managed and maintained by the average person.

    The Model T was a simple machine.. The early Mercedes Benz ran on alcohol..that is where we need to go..we need a Manhatten project to develop an economy that works for people .. Wall Street is not capable of being a part of this process because their demands for profits are unrealisitic and there are insatiable appetites there for money and power.

    The world can just go slower and we can all work it out without allowing the Military Industrial Complex plunge the world into a deep hot war that will result in sorrow and pain.  Time to do it differently..that is my suggestion.

    •  Lot of people would like to go back to an (0+ / 0-)

      earlier form of capitalism but you can go that. Development moves forward not backwards. The monopoly capitalism of today was the necessary development of the competitive capitalism of yesterday.

      .it is as simple as developing business models that create products that people need.

      You mean like housing? Because there are more homeless people everyday, together with the overstock of housing. In Victorville they tore down new never lived in houses to reduce this stock of 'excess housing' while thousand live on the street. This is your capitalism in full development and you are living in Fantasyland.

      •  I would like to live in a slower world, so I do. (0+ / 0-)

        I don't drive a car, I take the bus.. it takes a little longer but I get to where I want to go.

        The mortgage industry is designed to turn paper over and over again.  That is how they make profit.  It is all paper and fractional banking or allowing the banks to issue debt many times more than they have reserves.  That is probably at the core of our problem.  Other nations did not allow the mortgage industry to take hold of our counties in the way they have..but the assessors have been known in recent decades to falsify the value of property to give the counties more taxing power which causes mortgages on the same house to rise in value falsly..not good.  

        The destruction of housing, look at the housing..it is built not to last anyway so it does not surprise me that bulldozers are reducing it to splinters..I looked at the construction of new houses and said to myself, this civilization is not meant to last.  It is meant to disappear and that is what is happening.   We subjects of the governing order are merely here to pay taxes and support the military industrial complex which creates profit for the folks who bring us war after war after war.

  •  The U.S. economy has been war-or-munitions- (1+ / 0-)
    Recommended by:
    Clay Claiborne

    production dependent since the early 40s. Every so often, we find it necessary to revisit that well (although this time we've tarried there for a record-breaking near-decade). America depends on war. It doesn't matter which party runs the place, and that's not going to change for a very long time, if ever. So itty-bitty countries everywhere, especially those with oil or other strategic resources had better look out.

    As a scientist, Throckmorton knew that if he ever were to break wind in the echo chamber, he would never hear the end of it. --Bulwer-Lytton Contest entry

    by Wom Bat on Mon Sep 06, 2010 at 11:36:02 AM PDT

  •  What About Clinton & The Hi Tech Boom? (2+ / 0-)
    Recommended by:
    PBCliberal, kurt

    Don't remember any major wars during that period, but then again, we had those people on the run for a while, remember BCCI?

    •  The two major funding sources during that time... (2+ / 0-)
      Recommended by:
      kurt, Clay Claiborne

      1. Investment in vaporware. Much of the tech boom came from investors who didn't really understand technology and funded lots of ridiculous things, spurred on by some really smart things becoming popular and ultimately making lots of money (Amazon, Google, etc). Once the fools and their money were separated, the music stopped and there weren't enough chairs.

      2. Selling off America We exported manufacturing making money off the intellectual property rights of the manufactured devices and the management of the foreign labor pools. We then sold these management-based brands and real-estate aplenty to foreign investors. That's something you can do only once.

      If it were true, they couldn't say it on Fox News. -6.62 -5.90

      by PBCliberal on Mon Sep 06, 2010 at 12:34:22 PM PDT

      [ Parent ]

    •  What About Clinton & His War Against Iraq? (0+ / 0-)

      Remember the 9 year bombing campaign against Iraq. Remember the sanctions. See Genocide by Sanctions Estimates are that 1.25 million Iraqi's were killed by sanctions.

      Remember Albright's 1996 interview with 60 Minutes' Leslie Stahl (5/12/96):

      Stahl: We have heard that over half a million children have died. I mean, that's more than died in Hiroshima. And, you know, is the price worth it?

      Albright: I think this is a very hard choice. But the price--we think the price is worth it.

      Worth what to who, we might ask. In my book that makes Clinton a baby killer times half a million. Nothing else in his presidency even comes close.

  •  Required reading: (0+ / 0-)

    The Report from Iron Mountain on the Possibility and Desirability of Peace

    Best. Snark. Evah.

    Busting the Dog Whistle code.

    by Mokurai on Mon Sep 06, 2010 at 12:08:47 PM PDT

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