While Occupy Wall Street continues to grow, and attempts to find a coherent voice, we might wonder what happened to the recovery?  More than a year ago, analysts were predicting a solid rate of growth in most sectors of the American and core European states, but instead what we've seen is a continuation of high unemployment, slowly but steadily rising prices on key commodities, and a disturbing expansion in long term trends.  These last include the widening phenomenon of failing "healthy businesses," that is, businesses that entered the recession with relatively low debt burdens, and the erosion of wages and benefits throughout all sectors. 

What we're obviously experiencing--and nobody wants to seem to admit it--is simple stagnation.  Neither a second-dip recession, nor the big fall-off predicted by some believers in "long waves" have occurred.  Instead we are stuck in a holding pattern, with businesses, especially small and medium sized outfits, struggling under the burden of trying to make up for almost two years in lost sales and payments from clients, while at the same time attempting to rebuild productive capacity in a climate where everything from supply chains to real credit remain unstable or unavailable.  Both the World Bank and all the major ratings firms predict far slower than expected growth for at least the next couple of years, and the concerns about the Eurozone and the ability of leaders there to find and decide on a solution continue to drag down investments (never mind that the Dow is happy to see even a contingent deal go through, the Dow has never been tied to any particular version of "reality" other than its own).

The worst part of the current situation is that in real terms of growth what the major capitalist countries would have to be doing right now in order to make up for the enormous losses of the recession would be to produce at something like three or four times the rate of growth that we were experiencing before the slump, which was itself a considerable step backwards from the more productive economy of the 90's.  Even this optimal state of things would only make up for a small part of the true loss in value from the recession.  And besides, since the 90's large parts of business in America went into finance, insurance, marketing, real estate speculation and other unproductive activities.  The recession came at about the worst possible time, and the loss of value was even bigger due to the rigged composition of the economy.  Conservative estimates of lost value--which hover around the 12 to 15 trillion dollar mark--suggest that the current malaise could last for many years, perhaps even a decade.  Problems with rebuilding whole constellations of businesses in a climate where it's still hard to get real credit (and not the kind sold on the cheap for "restructuring" old debt) and problems with policy direction (including the continued pathological attachment to austerity) make the future seem much more troubling.

In short, there is no political will for further stimulus, and there is no reason to think that anything other than a massive expansion into some new area of productivity--something that would produce even greater results than the initial hi-tech boom--or the opening up of a big  new market--like the one-time liberalizing of the Chinese economy--would be enough to regain sufficient value to reverse the up and down trend of job losses, cost-cutting, and healthy failures.  In fact it's more likely that all these things will increase with time, as the recession revealed some awful pre-existing conditions in the global economy, none of which have been addressed by a global financial class set on continuing high unproductive profits in speculation at the expense of everything else.

The most disturbing of these revelations came in the immediate wake of the collapse of Lehman Brothers when it was discovered that the real rate of profit increase had been artificially pumped up for some time.  This is a fact that has gotten almost no attention in the subsequent media coverage of the economic crisis, either here or in Europe, but it is probably the single most important insight to take away from the collapse.  From about 2003 to 2008 overall corporate profits appeared to be skyrocketing, and markets responded accordingly.  This in spite of the fact that on the ground big companies were experiencing a tug and pull effect of globalization--something noted by economists like Anwar Shaikhh and commentators like John Ralston Saul, but almost never mentioned by the official economists of the system and its institutions, or the various mouthpieces for globalism in the popular media.

When a company expands rapidly into new markets, either through sales or production or both, and regardless of whether it finds local capital to cooperate with it, it goes through a period of temporary losses, sometimes very large losses incurred in retooling, retraining, relocating and readjusting to new supply chains and local sub-contracting for everything from basic supplies to new facilities construction.  These costs were often offset by taking out lines of credit from institutions that were more than happy to fuel the globalist trend so long as they made a good return.  And since lower labor and materials costs and simplified production and streamlined factory-to-store delivery systems seemed to offer a solid investment, there were very few companies turned down for the duration of the big global boom.  This really didn't get going until the mid 1990's, spurred on by China and the relaxing of a host of financial regulations to help offshore money as well as production.  Weird theories about "weightlessness" and "burden-free" organizations helped to hide the huge costs. 

All the interruptions meant that the real productive profits of many of these companies remained relatively minor or just plain flat throughout much of this period.  Even though the paper profits of these firms, which were rewarded by Wall Street for taking the offshoring route, went through the roof, the process exposed many of them to long-term debt problems and repeated attempts to find newer and ever cheaper locales for their operations.  The result was that the on-the-ground economy got further and further away from the financial representation, with more and more debt being built into the system at all levels.  Combined with the after-effects of a "corporate governance reform" movement that actually ended up consolidating more power and more money in the hands of finance, and the inability of many domestically tied businesses to perform at the same astounding rates as partially offshored ones, the wonderful experiment in globalisation quickly turned into a disaster. 

The long-term crisis trends in global capital--including especially the tendency of the rate of profit to fall--were exasperated by this movement, and the recovery, such as it is, continues to be expressed as little more than a period of extended stasis for most workers.  Already released by the end of the "cold war" logic and the massive arms expenditures it made possible, the effects of the crisis trends were amplified through the partially globalised system, which is now busy collapsing back into regional blocs of capital.  Meanwhile stock markets have fully recovered (their instability is a permanent feature, not just an after-shock of the recession), but the profits being made there can hardly be fed back into productivity without causing a general collapse again.  The abstract world of speculation and hedge maneuvers is, paradoxically, the safest place to be right now.  And a global financial elite thinks that's just fine.  For the rest of us, the "recovery" looks and feels an awful lot like more of the same...

Next: EXHAUSTION