by James Meadway
The working assumption, for governments and central banks across the world, is that at some point soon everything will get back to ‘normal’—our economies will return to either pre-pandemic or, sometimes, even pre-2008 crash levels.
These beliefs are reinforced by media economics commentary and across political parties.
But what if they’re wrong? The world’s largest asset manager, overseeing $10trn in assets across the globe, thinks we are, instead, entering a period of increased risk and uncertainty, defined by unavoidable recession and much higher inflation.
BlackRock—a well-connected, influential and hugely profitable pillar of global capitalism—made the predictions in its ‘2023 Global Investment Outlook’ report. It states: “The Great Moderation, the four-decade period of largely stable activity and inflation, is behind us.”
Instead, BlackRock forecasts a new regime with a “brutal trade-off”—falling living standards for the many becoming profits for the few.
This reality, of a world undergoing fundamental transformations and disrupting our settled modes of existence, has so far barely entered the economic mainstream.
For BlackRock to break with this consensus might, potentially, be one of the first signs of a broader shift in how major institutions in the Western economies view the world.
Annual food inflation in the UK rose to 13.3 percent—an all-time high—last month, according to trade body the British Retail Consortium, ahead of the official government figures out later this month.
This situation—though slightly worse in the UK due to a flawed Brexit deal and the falling value of the pound (critical as a major food importer)—is common across the globe. Even as wholesale energy prices have dropped from their summer 2022 peak, the price of food everywhere is soaring. United Nations’ forecasts show a major risk of widespread famine in the Global South over the next year, with harvests continuing to underperform.
This global spike in prices over the past 18 months was initially described by the economic establishment as “transitory.” Then, as inflation continued remorselessly upwards, familiar explanations reappeared: notably, excessive worker power (but real wages in the Global North are still falling) and excessive printing of money through quantitative easing (but we’ve been running QE since 2009).
The economic profession as a whole, and institutions such as the major central banks, have typically written down the obvious evidence of global instability as temporary factors, rather than something more systemic.
This means we’re trapped with central banks that still think pushing up interest rates to induce a recession is a smart way to bring down inflation. Governments are committed to holding down wages and salaries while allowing profits to explode.
But BlackRock believes the world is now “shaped by supply that involves brutal trade-offs”—in other words, the world economy is less effective at supplying goods and services than it was.
The after-effects of the pandemic have caused supply chain problems, as we all know, but they also think an ageing population means fewer workers, pushing up the cost of labour; that “geopolitical tensions” will disrupt global supply chains; and that the shift to net-zero carbon emissions will involve “demand and supply mismatches.”
Put all this together, and BlackRock thinks inflation will come down to the 2 percent level we’ve been used to only if central banks are prepared to ‘crush’ their economies into a severe recession. Since that’s unlikely, inflation will stay much higher than we are used to—combined with a miserable recession over the next year or so.
Massive Profits for the Lucky Few
But BlackRock’s predictions don’t cover everything.
Its report misses the longer-term effects of Covid—both in terms of the impact on healthcare and, as we’re currently seeing, continuing waves of infection.
It also misses, critically, the wider ecological impacts of climate change, biodiversity loss and resource depletion.
It is possible to imagine a world where peace returns rapidly to Ukraine, and the subsequent disruptions to global food and fertiliser trade are reduced. It is not possible to imagine a world where climate change and ecological destruction are thrown into reverse—indeed, some of the effects felt today, notably, biodiversity loss, are irreversible.
This twofold combination has led ecologist Nicholas Beuret to describe a “climate supercycle” of food shortages and rising prices running well into the future. (A recent episode of my podcast ‘Macrodose’ examines the coming food shortages for UK farmers.)
And, finally, BlackRock misses the extreme profits that shortages over the last year have generated for a select few multinationals, such as those supplying oil and gas.
It’s the last part that’s critical. A more unstable world affects everyone, but it will affect everyone differently.
For most of us, on the wrong side of food price hikes and extreme weather, the future is not great. But for the lucky few, shortages have been turned, through price rises, into massive profits.
James Meadway directs the Progressive Economy Forum. This article was published at OpenDemocracy.net. It is reprinted here under a Creative Commons Attribution-NonCommercial 4.0 International licence.
Sanders Denounces Manchin-Romney Attack on Social Security
by Kenny Stancil
Sen. Bernie Sanders (I-Vt.) on Saturday slammed Sen. Joe Manchin’s (D-W.Va.) widely panned proposal to explore slashing Social Security benefits as part of a debt ceiling pact with Republicans.
In an interview with Fox Business at the ruling class’ annual gathering in Davos for the World Economic Forum, Manchin suggested that members of both major U.S. political parties “work together” on solving the nation’s so-called “debt problem.” Although Manchin didn’t explicitly demand cuts to Social Security and expressed opposition to GOP calls for privatization, he singled out the program for intervention, saying that Congress “should be able to solidify it.”
Given that Republicans are currently threatening to tank the global economy unless Democrats agree to reduce social spending, Manchin’s unilateral call for appeasement has set off alarm bells.
What’s especially concerning to progressives is that the corporate-backed lawmaker is the co-author, alongside Sen. Mitt Romney (R-Utah), of the TRUST Act, a bill that would enable Congress to create bipartisan “rescue” committees for the nation’s trust fund programs—including Social Security and Medicare—and give the panels 180 days to develop “legislation that restores solvency and otherwise improves each.” Measures put forth by the bipartisan committees would be fast-tracked for floor votes in both chambers of Congress, with no amendments allowed.
Not only is Social Security legally incapable of adding to the federal deficit, but budget analysts have shown that the program is financially sound, requiring just a small increase in payroll tax revenue to ensure full benefits beyond 2035.
“The last thing we need is another commission to propose cuts to Social Security and Medicare,” Sanders (I-Vt.) tweeted Saturday.
“The last time we had one, it proposed cutting Social Security benefits for middle-class seniors by up to 35 percent and cutting tax rates for billionaires,” Sanders added, referring to the notorious 2010 Bowles-Simpson Commission, on which Manchin and Romney’s bill is based.
Former Clinton White House Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson (Wyo.), the Obama-appointed chairs of that commission, both endorsed the TRUST Act in 2021, calling it “important and vital.”
Historically informed critics, by contrast, have condemned Manchin and Romney’s legislation as “a Trojan horse to cut seniors’ benefits.”
Sanders’ staff director Warren Gunnels provided additional historical context on Saturday, linking to a 2012 essay in which the senator explained that in addition to seeking to cut wealthy households’ tax rates and current retirees’ Social Security benefits, the panel also proposed raising the retirement age to 69 years, slashing veterans’ benefits, increasing interest rates on student loans, and eliminating 450,000 federal jobs, among other harmful measures.
On Wednesday, Manchin asserted that his and Romney’s bill could be used to secure a debt ceiling deal with House Republicans, many of whom have vowed to not lift the country’s borrowing cap—an arbitrary and arguably unconstitutional figure set by Congress—unless Democrats agree to shred vital social programs.
The U.S. government’s outstanding debt officially hit the statutory limit of $31.4 trillion on Thursday, at which point the Treasury Department started repurposing federal funds.
Treasury Secretary Janet Yellen told congressional leaders last week that “the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time,” possibly through early June. She implored Congress to “act in a timely manner to increase or suspend the debt limit,” warning that “failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”
Notably, Capitol Hill’s deficit hawks do not support reducing the Pentagon’s ever-expanding budget or hiking taxes on the rich to increase revenue. On the contrary, the first bill unveiled by House Republicans in the 118th Congress seeks to rescind most of the Inflation Reduction Act’s roughly $80 billion funding boost for the Internal Revenue Service—a move that would help wealthy households evade taxes and add an estimated $114 billion to the federal deficit.
A 2011 debt ceiling standoff enabled the GOP to impose austerity and also resulted in a historic downgrading of the U.S. government’s credit rating, but the country has never defaulted on its debt. Economists warn that doing so would likely trigger chaos in financial markets, leading to millions of job losses and the erasure of $15 trillion in wealth.
Knowing that a painful recession is at stake, “many leading Republican lawmakers are demanding that their new House majority use the debt limit as leverage to force the Biden administration to accept sweeping spending cuts that Democrats oppose, creating an impasse with no clear resolution at hand,” the Washington Post reported last week.
Manchin claims to have spoken “briefly” with House Speaker Kevin McCarthy (R-Calif.) about the TRUST Act. Asked about the White House’s opposition to attaching any policy concessions to a debt ceiling agreement, Manchin said he believes the Biden administration will change its tune and negotiate with Republicans.
Alex Lawson, the executive director of Social Security Works, told Common Dreams earlier this week that President Joe Biden should “reiterate his commitment to only signing a clean debt limit increase, and specifically rule out a closed-door commission designed to cut Social Security.”
Lawson’s sentiment was echoed Saturday by Gunnels, who wrote on social media: “I’m old enough to remember that the disastrous Bowles-Simpson ‘fiscal commission’ came very close to passing Congress some ten years ago. Bernie led the fight against it. It was a bad idea then, it is an even worse idea now.”
Rather than allowing a bipartisan commission to propose devastating cuts, Sanders argued, “we must instead expand Social Security.”
Surveys have shown that U.S. voters are strongly opposed to cutting or privatizing Social Security and want Congress to expand the program. Last year, Sanders and Sen. Elizabeth Warren (D-Mass.) led the introduction of the Social Security Expansion Act, which would lift the cap on income that is subject to the Social Security payroll tax and boost the program’s annual benefits by $2,400.
According to Data for Progress, 76 percent of likely voters—including 83 percent of Democrats, 73 percent of Republicans, and 73 percent of independents—support imposing, for the first time, payroll taxes on individuals with annual incomes above $400,000 per year to fund an expansion of Social Security benefits. Currently, annual earnings above $160,200 are not subject to the Social Security payroll tax.
Kenny Stancil is a staff writer for Common Dreams. This work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
New Brett Kavanaugh Documentary Sparks Call for DOJ Probe
by Brett Wilkins
The surprise premiere of a documentary revealing “shocking new allegations” of sexual crimes committed decades ago by U.S. Supreme Court Justice Brett Kavanaugh sparked new calls on Monday for Senate and Justice Department investigations.
Doug Liman’s “Justice” premiered Friday as a last-minute addition to the lineup of the Sundance Film Festival in Park City, Utah. According to Free Speech for People, the film “includes important new details about specific allegations of sexual misconduct by Kavanaugh” and “also reveals disturbing new evidence of misconduct by Kavanaugh and his associates” surrounding the right-wing justice’s 2018 Senate confirmation hearings.
This includes “evidence that Kavanaugh may have knowingly perjured himself” and that the justice’s associates engaged in what his friend referred to as “a cover-up.”
Kavanaugh—the second of three right-wing justices appointed to the nation’s highest court by then-President Donald Trump—was accused of sexually assaulting Christine Blasey Ford, who is now a Stanford professor, when they were in high school. Kavanaugh also allegedly exposed himself without consent to Deborah Ramirez, a Yale classmate, during a college party. He has denied both allegations.
“Justice” producer Amy Herdy said during a post-premiere Q&A in Park City: “I do hope this triggers outrage. I do hope that this triggers action, I do hope that this triggers additional investigation with real subpoena powers.”
To that end, Free Speech for People wrote to U.S. Attorney General Merrick Garland as well as to Senate Judiciary Committee Chair Dick Durbin (D-Ill.) and Ranking Member Chuck Grassley (R-Iowa) seeking a probe of Kavanaugh based on details in the film.
“Some of these details were sent to the FBI during its brief, compressed investigation into similar allegations during Kavanaugh’s 2018 confirmation hearings, although the FBI did not follow up or interview the relevant witnesses,” the group said Monday in a letter to the senators.
The letter states: “Most disturbing, however, is new evidence of conduct by Kavanaugh and his associates (perhaps even before his accusers came forward) concerning the 2018 Senate hearing itself. For example, the film shows a 2018 text message discussion amongst mutual acquaintances of Kavanaugh and Deborah Ramirez, regarding Ramirez’s soon-to-be-public allegations that Kavanaugh had exposed himself to her. According to the text messages shown in the documentary, Kavanaugh asked a mutual friend to go on the record to defend him. Another friend referred to it as “a cover-up.” This indicates consciousness of guilt—and therefore evidence that he may have knowingly perjured himself in the confirmation hearings—and a potential conspiracy to obstruct and defraud the Senate by coordinating a false information campaign.”
The Washington Post reports that “the FBI’s national press office did not have a comment on the documentary but reiterated that their services in a nomination process are limited to fact-finding and background investigations.”
“The scope of the background investigation is requested by the White House,” an FBI spokesperson told the Post in a statement. “The FBI does not have the independent authority to expand the scope of a supplemental background investigation outside the requesting agency’s parameters.”
Speaking about the women who stepped forward to share their stories in the film, director Liman told The Guardian: “This was the kind of movie where people are terrified. The people that chose to participate in the movie are heroes.”
“Wall Street Loves Layoffs”: Tech Slashes Jobs, Rich Investors Demand More Carnage
by Jake Johnson
Amazon, Microsoft, Google, and other major tech companies have moved in recent days to lay off tens of thousands of employees, slashing jobs across the board amid mounting fears of a Fed-induced recession.
But the sweeping job cuts—more than 18,000 at Amazon, 10,000 at Microsoft, and 12,000 at Google—were apparently not enough to satisfy ultra-rich investors, some of whom have taken large stakes in tech companies with the intention of forcing layoffs and other cost-cutting as a way of boosting profits.
“The decision to cut 12,000 jobs is a step in the right direction, but it does not even reverse the very strong headcount growth of 2022,” billionaire hedge fund manager Christopher Hohn wrote in a January 20 letter to Google CEO Sundar Pichai.
“I believe that management should aim to reduce headcount to around 150,000,” Hohn added, urging the tech behemoth to slash tens of thousands of additional jobs.
Elliott Management, a large U.S. investment firm, recently opened a multibillion-dollar position in the software giant Salesforce, which announced earlier this month that it will be cutting roughly 10 percent of its workforce—around 8,000 jobs.
Bloomberg reported Monday that Salesforce “will probably be urged by activist investors” such as Elliott “to cut more jobs, make changes to the board, and spin off big acquisitions in search of greater profit.”
“Investors greeted the news Sunday that Elliott had taken a multibillion-dollar stake by sending shares up 3.1 percent Monday to close at $155.87—the highest price since the company announced co-Chief Executive Officer Bret Taylor’s departure on November 30,” Bloomberg added.
The shares of other tech companies staged similar rallies in the wake of layoff announcements. The music streaming company Spotify announced Monday that it is cutting 6 percent of its global workforce—and the firm’s stock surged as a result.
Facebook parent company Meta and Google parent company Alphabet also saw their stocks rise following their layoff announcements, which were met with outrage by employees and labor organizations.
“In one email, Alphabet executives took away the livelihoods of 12,000 of our coworkers,” the Alphabet Workers Union tweeted Monday. “They are now being forced to find jobs along with the 200,000 other tech workers laid off in the last 14 months.”
Some Google employees didn’t realize they were laid off until they arrived at the office and found that their access badges were deactivated.
The Athena Coalition, an alliance of local and national groups representing U.S. workers, called Amazon’s job cuts and the company’s decision to shut down its AmazonSmile charity donation program “sacrificial symbols for Wall Street, exposing again the world’s second-wealthiest company’s indifference to workers and all people.”
On top of the tech layoffs, the online furniture retailer Wayfair said last week that it plans to slash 1,750 jobs, news that sent the company’s share price more than 20 percent higher. Days later, JPMorgan analysts upgraded the stock, sparking another rally.
“Wall Street loves layoffs,” Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, tweeted Monday.
Whether the spate of Big Tech layoffs signals more pain to come for the broader U.S. economy or is largely the product of industry-specific challenges remains to be seen, but the job cuts have heightened anxiety about the labor market as a whole as the Federal Reserve continues to raise interest rates, explicitly targeting workers and their wages.
Though the U.S. unemployment rate remains at historically low levels, hiring has slowed in recent months and wage growth has cooled substantially, intensifying calls for the Fed to stop raising rates.
“[I]t’s a deliberate political choice by the Fed to provoke a recession, for political and cultural reasons,” progressive strategist Robert Cruickshank wrote last week. “These layoffs didn’t have to happen, and people should be furious at the federal government for not stopping it.”