Sherry Ortner in On Neoliberalism highlights the human hardship and suffering involved in “economic restructuring” and “polarization of wealth” that is caused by the massive dislocations of late capitalism/neoliberalism/globalization.

She adds that the making sense of these economic upheavals involves:

A sense of humiliation and abjection, a great deal of magical and irrational thinking, as well as a certain clear-eyed sense of injustice and the necessity for standing up to it when it is not too dangerous to do so – all of these and many other ways of understanding/experiencing/reacting to/dealing with the pitilessness of neoliberal theories and practices can no doubt be found, in various mixtures, in most parts of the world.

It is going to be hard times for people in the US and southern Europe. Will China's growth and its demand for mineral resources protect Australia?

In the London Review of Books Benjamin Kunkel highlights how a financial crisis has a very clear pattern:

The flow of credit, at one moment lavished to all comers on the flimsiest pretext of repayment, at the next more or less dries up. In the resulting conditions of uncertainty, those without ready cash, forced to cough it up anyway, can be pushed into fire-sales of their assets, while those who do have cash prefer to save rather than spend it, so that the economy as a whole sinks toward stagnation.

It's so very familiar. The next stage, given the lack of rising American consumer incomes upon which global growth relied (eg., China's exports to the US) is accumulation by dispossession (Greece).

I'm scared.

its going to be a rough ride, even for Australia.

Commodities (eg., iron ore etc) will go down in price because of reduced demand, given the diminishing prospects for global growth and demand. China's weakness is that its economic growth is primarily export based and is geared towards the big spending western consumer. The latter--especially in the US--- are indebted and are not spending.

We in Australia will feel the ripple effects of this.

"The positive side of capitalism---higher standards of material living and well-being ---is now being punctured by a phase of substantial disruption and upheaval that will cause economic hardships and gross injustices."

That's capitalism's history.

Lyn,
just think of all those bargains--its a good time to buy for punters. Let speculation rule.

Nan,
when I saw that headline I just rolled my eyes. With a series of structural problems, different problems in different nations, let alone the structural problems of the eurozone, and no political will to do anything about any of it, gold looks like the safest place to park for a while yet.

Still scared.

How things have changed... or maybe they haven't...

Less than twenty years ago, how the powerful were gloating! The Soviet Union had fallen. Their experiment had been undermined by chronic inefficiency and corruption. Capitalism... built on freedom, individualism and creativity was clearly the superior system! Our citizens were "consumers" and our society was an "economy". What could go wrong?

Now, I'm not university educated or particularly well-read, but I remember thinking that some of us were getting a bit over-enthusiastic. Then I saw the way the MSM demonised the anti-globalisation movement. Hounded into oblivion.

I couldn't understand the way the tech boom/bust was so quickly forgotten. And the way the US Federal Reserve splashed the cash around seemed a bit foolish. The Enron/Andersen fiasco was portrayed as a minor hiccup in an otherwise flawless system. A few perp-walks and the issue went away.

These things didn't seem right to me... with my high school education.

But I guess the wizards and moguls knew better, eh?

The finance system didn't maintain good risk practices, the illusory nature of a whopping load of capital was rammed home with the "Global Financial Crisis", and the governments bailed out the finance industry.

Now... many governments owe money ... will the finance industry cough up? No.

The screwup has been socialized, and with austerity measures, the wealthy who screwed up /still/ end up relatively wealthier, starving any new players in markets or governments.
It seems if you are a financier you get relatively richer than the average person (it's relative wealth that gives power, not the absolute amount) whether you do your job properly or completely screw up.

Wasn't that a stunning quote offered by Anon, of Sherry Ortner?
They, big capital formations exogenous and endogenous to formal states have tried to rock and roll, the stakes and consequences appear to be high.
But what shabby movements crypto brownshirt populist movements have been, becoming symbiotic and parasitic of "civilisation" with big capital and nation states happy to whip uncertainty within competitors.
You can think of Goldman Sachs, Lockheed, Murdoch, comment on the $ hacking of the global economy twice in four years and on an industrial scale makes one muse, a bit close to a 1933 moment.
I think Gary's comment feels "gut" fair, though.
In fact, its a great thread when a warning can't go amiss.

For years now, we have seen the steady increase of inequality particularly in the Anglophone countries, yet how many commentators have seriously tried to examine the consequences of this for economic growth? Why is it so hard to connect the dots?

As well as inequality, there is also the issue of fraud. Lots of people have complained about the essentially fraudulent nature both of the US housing bubble and of the weird financial instruments invented to finance it. Jamie Galbraith (JKG's son) made a speech about it:

http://my.firedoglake.com/selise/2011/08/01/james-k-galbraith-the-final-death-and-next-life-of-maynard-keynes/

His view is that the whole international financial system is essentially and irretrievably fraudulent.

In a article by Geoff Winestock in the AFR---"The Great Debt Divide"--- Sinclair Davidson from the IPA is quoted thus:

The cuts in the Congress debt deal are too small and it would give the economy a boost to cut more. The private sector is too frightened to invest because the government is crowding them out.

So the core problem is that the government is too big. The solution is reduce the size of the government with a near stagnant economy. This solution, presumably will inspire confidence in the private sector and corporations will start investing big time because they are no longer crowded out by big government. It is more likely that banks, anticipating the contractionary effects down the line, will be even more reluctant to lend.

Davidson avoids saying what should be cut to reduce the deficit. Sack more teachers and police? Reduce the military budget because its level of military spending is unsustainable given its economic decline? Privatize social security? He also avoids saying that the budget cuts would reduce demand in the immediate years and whether or not the cuts would reduce US interest rates or the exchange rate.

The view that "Austerity will restore growth" is economic gibberish---an example of what Joseph Stiglitz calls bad ideas. The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance. So the single best remedy would be to put America back to work. The recent debt deal is a move in the wrong direction.

I'm beginning to think that the US mortgage robosigning scandal is going to seem less bad, in retrospect, than this sort of "crowding-out" robowriting (ie. Winestock quoted in Gary Sauer-Thompson's comment).

See Krugman for an antidote. One could start here:

http://krugman.blogs.nytimes.com/2011/08/04/wrong-and-right/

The Reserve Bank of Australia continues to maintain in its August Statement of Monetary Policy that the central scenario in Australia was for inflation to accelerate above its 2-3 % target band next year.

We could say that there is a disconnect between the Reserve Bank's thinking and the realities of the global financial markets and the global economy. The latter is close to recession.

The Reserve Bank didn't see the global financial crisis coming either.

The Federal Reserve in the US is also preoccupied with inflation even though the real problem is that what the US needs is fiscal stimulus to offset consumer deleveraging and failure of businesses to invest. Is there a loss of lost faith that central bankers can or will intervene successfully emerging?

Joseph Stiglitz says that central banks are political institutions, with a political agenda, and that independent central banks tend to be captured (at least “cognitively”) by the banks that they are supposed to regulate.

Most of the economic talking heads that appear on the TV screen are cheerleading to restore confidence in the market. The stock market meltdown is only a blip, a little self correction. The recovery is on course.

They appear as zombies to me.

"If the global financial system had been patched up reasonably well (according to Wall Street), then the global economy is not on the mend."

In the US the Republicans will do whatever they can to prevent the economy from improving before Nov. 2012. Their priority is to ensure that Obama loses the presidential election. From the Chinese perspective there is a very severe risk to the full faith and credit of the United States due to potential political gridlock in the Congress.

China must be worried about America’s ability to perform its critical role as the anchor of the global financial system.

gordon,

the concentrated financial power poses a threat to our economic well-being. They use their power and prestige in the US and Europe to reshape the political landscape.

They have no intention or incentive to change their behaviour towards excessive risk taking.

In the US we have a Democratic administration demanding cuts to Medicare and Social Security in order to protect the military budget from further reductions. This is necessary in order to have the national defense the US needs to protect itself in a dangerous world; ie., the US is at war with Islamist extremists who attacked them on 9/11.

Over at The Drum we have Steven Kates, a senior lecturer in economics in the School of Economics, Finance and Marketing at RMIT University in Melbourne, writing:

The carbon tax, just to take one example, is being introduced because the Government needs the revenue. Maybe they'll give back half as they say, but they will very definitely keep the other half.

Bizarre. There's no mention of greenhouse gas emissions causing global warming! What are we to infer? That it is a fiction?

Kate, a free market economist, s then continues with a point he has made before --- namely, the stimulus packages that were put in place after the Global Financial Crisis have been a disaster everywhere they have been applied. He says:

Public sector investment has replaced (crowded out, as we economists like to say) the private sector. In no sense should this be seen as a recovery and until these facts on the ground are reversed, any talk of Australia being on a strong upwards trend is premature to say the least. We have been dependent on rising resource sector prices and an increase in demand by the Chinese for maintaining living standards. How doubly bizarre therefore was the introduction of a mining tax which sought to plunder our one major area of growth. But so desperate has the government been to find the money to return its budget to surplus it was willing to put our one genuine economic success story at risk.

His argument is that the reality was that Australia was never heading for the slowdown from the global financial crisis Treasury foresaw, and its panicked overreaction and subsequent over-the-top stimulus expenditure have served Australia very badly.

There's nothing about the government propping up the banks at the expense of competition.

The subtext is that interventionist regulators are bad news. Kates is basically attacking Keynesian economics from the perspective of the Austrian school which holds that the idea that the boom and bust cycle is natural and inevitable. So unemployment, as in economic recessions and depressions, is traced back to state intervention in the market, which effectively blocks the natural balance---left to its devices, the market will adjust efficiently.