Recent comments by Tim Morgan in his blog.
The onset of economic contraction, even if it were to happen in a gradual and orderly way, will have profound political and social consequences. “Growth” has become a secular article of faith, and economic crises or hard times have often been the downfall of governments and regimes. Growth is often used as justification for policies which might otherwise be unpopular. Growth is routinely used to justify inequality. The crisis of 2008-09 was profoundly political (“making Main Street bail out Wall Street”).
A big question now is whether ‘the powers that be’ will recognize economic contraction and make a public admission of its reality. I don’t myself see how they can, at least until ‘everyone knows’ that the economy is getting smaller. Populists/’brownshirts’ can come from either side of the political spectrum. I spent one term at Cambridge studying the theory and history of revolution, and it has seldom seemed as relevant as it does now.
I have the advantage (not that it’s an enjoyable one) of having numbers in front of me, generated by SEEDS. These show a relentless fall in prosperity and an equally relentless rise in the real cost of essentials. Surely governments, corporations and financials could arrive at similar numbers if they chose to do so? My model might, of course, be wrong, but the world is already looking a lot like the picture painted by SEEDS, and ever less like the one pictured by the orthodoxy.
Why, then, don’t decision-makers seem to have equivalent information? With governments, I think its because they don’t tend to ask questions unless they expect to like the answers and, in any case, their horizons don’t extend beyond the next election. In non-financial corporates, I can imagine nobody wanting to “tell the chief”. In finance, though, I suspect it’s because everyone expects a bail-out if things go wrong.