Paul Jay speaks with Tom Ferguson about solutions for rising unemployment levels and melting stimulus.


Story Transcript

PAUL JAY: Welcome back to The Real News Network. We’re in Boston, Massachusetts, with Tom Ferguson, who teaches at the University of Mass. Boston. Thanks, Tom. So unemployment is reaching—

THOMAS FERGUSON: We’re at 10.2 percent now.

JAY: —the broader definition is 17 percent.

FERGUSON: Yup.

JAY: And it’s still going up, so we’re not that far from 20 percent.

FERGUSON: Sure.

JAY: Yet we’re told we’re in the beginning of a recovery. The stock market’s up. Bank profits are up. Profitability in many sectors of the economy are up. So is this the beginnings of a new upward cycle? Or are we in a little bit of a blip because of stimulus money and some kind of market bubble? And are we actually going to go into more deeper depression?

FERGUSON: Here I am reminded of the famous Yogi Berra, the comment where prediction is very difficult, especially of the future. I mean, but, you know, if I’m pressed on this, what I’d say is what you actually have right now is something like a mini bubble going away. The Federal Reserve, after all, has cut interest rates virtually to zero. I mean, there’s a lot of money around, and it can’t earn anything in any kind of bonds, much. And so an awful lot of money’s around, just in effect chasing stocks or commodities. Now you do—you have this—it’s a somewhat complicated story. The bottom line in this is the Fed pegs interest rates close to zero. The Chinese peg their currency roughly to the dollar—I mean, it’s a basket, but the dollar dominates it. So the Chinese and a lot of Asian currencies then follow down. The Chinese are also doing their own little version of a mini bubble economy, and they are actually doing a large Keynesian stimulus. They’re running the economic policies there on the stimulus side that the Obama administration should have run, and then all the folks are trying to tell you it can’t work. Go to China and you can see this. You know, what was their last growth rate? It’s something like 8 percent or so. I mean, it reminds me of the old controversies in the 1930s about whether economies could grow. And, you know, the Soviet Union’s growth rates—and I’m not making a pitch for the Soviet Union. We know what was going on in the ’30s, and it was no worker’s paradise. But they did get high growth rates, and the contrast with the sort of capitalist world in the 1930s was very striking. You know, that contrast is not developed enough right now where [inaudible] the Chinese economy [inaudible] state sets out to get the growth rate up, they’re doing it. And it’s not all bubble, even though I think this is—. Anyway, that pulls up world commodity prices, and it pulls up a lot of Third World—you will forgive me if I mention even Canada in this context, which is a hugely commodity-producing country—they all get some pull out of that. So that tends to make the world figures not so terrible. And, you know, the Obama stimulus, while too small, was there, and it did turn, you know, what was a—was it -8.5 percent growth rate in the last quarter around to about zero in the first quarter? That, you know, did you a fair amount of good, I mean, by comparison with where you would have been without it. So here’s where I’m going. You can—for a while you can bubble this thing back up with money in the US while the world growth rate doesn’t look so terrible, and you can get a commodities boom, and you can speculate in that. You just have to look at oil prices to sort of see how that comes. But when you look at how does this continue, you find, well, the federal stimulus is running out. The consumers are net—their borrowings are down, actually, almost record levels. They drop every time they report now, every month, every quarter. The only way you keep profits up right now is you’ve been cutting staff at enormous levels, which gives you what you got just a few days ago, that huge increase in output while a massive drop in labor costs. Now, that will give you profits, you know, as long as—at least till your customers run out. But that’s the problem. I mean, it’s not clear—you know, private spending’s not going to pick up on that, consumer spending’s not going to pick up on that, and when the state spending runs out, everybody knows the rocket, that’s the Wile E. Coyote moment at which they look down into the canyon and realize—boom. That seems to me how they negotiate that is very much up in the air.

JAY: Are we getting to a point in the United States, in terms of restructuring America, where the country learns to live—who the country is in this sentence is still to be determined—with 20 percent unemployment?

FERGUSON: I hope not. I mean, and here I would be slightly cheerful. Look at the election results that we just—. You know we started earlier today talking about those recent elections in New York, Virginia, New Jersey. The rule here, what could be Tom’s first rule of depression politics: if you’re in, you’re out if you don’t do anything.

JAY: But they can have in, out, in, out, in, out and 20 percent unemployment.

FERGUSON: Well, yeah. They could put a swivel chair in the Oval Office and the Congress. No.

JAY: I guess what I’m asking is, as long as the unemployed are relatively passive and they’re not really worried much about social unrest, can they not live with this for a while?

FERGUSON: It’s not clear to me that people aren’t worried about social unrest. Let’s wait and see a little bit. I remember this discussion in 2004, and my reaction was wait a couple of years and things are likely to get a lot hotter. And there was a landslide against the Republicans in 2006, and then that enormous movement for change—never mind that it petered out and was in some sense not fulfilled in 2008. But it was there. I suspect you’ll see this revived. I rather—no, I don’t think people are willing to take 20 percent unemployment.

JAY: What do you say to—many of our viewers are in fact unemployed. In fact, you know, we depend mostly on donations, and it’s remarkable to see the e-mails we’re getting of people lowering—”Can I lower my monthly donation from $10-$2, ’cause I just lost my job?” What do you say to people who are unemployed? What should they be doing?

FERGUSON: They need to—you will forgive my plain English—they need to besiege their elected representatives offices in the short run, and I think some efforts to organize. It’s about time some unions got busy organizing the unemployed. I mean, the SEIU and other unions need to start actively working on that. I mean, that was a moment in the early ’30s that did change the tenor of politics a bit. That’s my reading of the Depression history. And I think folks are being at the moment too polite to the Obama administration. They have effectively just accepted nothing as, well, you know, it’s all a difficult environment. No, it’s [inaudible] It wouldn’t be that hard to sort of put a serious bank bill through. And, I mean, I’m not somebody—I know this is a minority view, but I said it back even six months ago, and I’m saying it now. You watch. In January or so, all these blue dog Democrats, as they contemplate running with 10.5 percent unemployment, they’re going to discover their inner Keynes, and all these folks who were telling you the deficit was too big, watch and see if you don’t get a second stimulus. They may not call it that, they may call it an adjustment or something like that, but they’ll be—and it won’t all be in the supplementary budget for [inaudible] either. No, I think you’ll see some efforts to head off unrest. But, no, I don’t think we are going to sit and accept 20 percent unemployment.

JAY: Thanks for joining us. Thank you for joining us on The Real News Network.


Thomas Ferguson

Thomas Ferguson is Professor of Political Science at the University of Massachusetts, Boston and a Senior Fellow of the Roosevelt Institute. He received his Ph.D. from Princeton University and taught formerly at MIT and the University of Texas, Austin. He is the author or coauthor of several books, including Golden Rule (University of Chicago Press, 1995) and Right Turn (Hill & Wang, 1986). Most of his research focuses on how economics and politics affect institutions and vice versa. His articles have appeared in many scholarly journals, including the Quarterly Journal of Economics, International Organization, International Studies Quarterly, and the Journal of Economic History. He is a long time Contributing Editor to The Nation and a member of the editorial boards of the Journal of the Historical Society and the International Journal of Political Economy.