There is a significant shift to workers from employers underway, Nobel economist Peter Diamond tells MarketWatch.
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- The coming recession will be even more damaging than expected, IMF managing director Kristalina Georgieva said.
- Households’ real income will drop as rising prices and weak wage growth rattle their finances.
- The world will lose $4 trillion — the size of Germany’s economy — in output by 2026, she said.
The world is hurtling toward an economic slump, and the decline is set to do more damage than previously anticipated, Kristalina Georgieva, managing director at the International Monetary Fund, said Thursday.
The economy is in the midst of a “fundamental shift,” and there will be growing pains, Georgieva said in a speech at Georgetown University. High inflation has eroded household finances the world over, and central banks around the globe are rushing to raise interest rates and cool the price surge. That widespread tightening threatens to slow global growth to a standstill.
The IMF’s latest forecasts saw the world economy growing 3.2% in 2022 and 2.9% next year. Yet the “darkening global outlook” has prompted the organization to downgrade next year’s growth estimate in an updated report due for release next week, the managing director said.
The global economy is transforming into one with “greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters — a world in which any country can be thrown off course more easily and more often,” she added.
On a macro level, the slowdown will equate to a roughly $4 trillion loss in global economic output over the next four years, according to Georgieva. That’s the same size as the entire German economy. One-third of the world economy will experience back-to-back quarters of economic contraction either this year or in 2023, and even in countries where growth remains positive, it will still “feel like a recession,” Georgieva said.
At the household level, the impacts will be stark. Real incomes — earnings adjusted for inflation — will shrink as prices continue to climb and wage growth slows down. Financial stability risks are also on the rise, meaning households’ investment balances are likely to whipsaw as uncertainties cloud the market’s path forward.
A global recession would also weigh heavily on labor markets. Hiring broadly rebounded at a strong pace through 2021 and 2022 as vaccines rolled out and economies reopened. Yet rising interest rates are poised to weaken demand, which in turn will lead to lower revenues for companies. Firms will likely choose to cut costs by trimming headcounts, a trend which could drive millions into unemployment.
The Federal Reserve’s own projections see the US unemployment rate climbing to 4.4% in 2023. If correct, that would translate to about 1.5 million more Americans unemployed compared to earlier this summer.
Still, the bleak forecasts shouldn’t keep central banks from raising rates, Georgieva said. The hiking cycle will have some fallout, but letting inflation stay high would be much worse, she added.
“This is not easy, and it will not be without pain in the near term. But the key is to avoid much greater and longer-lasting pain for everybody,” the managing director said.
Targeted stimulus for low-income households is also necessary to protect the most vulnerable, Georgieva said. Aid against high energy prices could cushion some of the blow, but officials should avoid “indiscriminate” spending that would risk even higher inflation, she added.
The slow descent into recession will rock economies and likely displace millions from the global labor market. But as that damage emerges, policymakers can still act to mitigate some of the damage and set households up for a healthy recovery once the storm has passed, Georgieva said.
Read the original article on Business Insider
Among companies claiming the mantle of most responsible corporate citizen, the outdoor clothing chain Patagonia has always seemed a nose ahead. It hasn’t hurt that it’s tough imagining the ecocidal antichrist wearing a fleece vest and technical climbing pants as it pillages the earth. But Patagonia has also had the enduring myths of its founder, Yvon Chouinard, to ride on; how could we not believe the good intentions of a guy who supposedly once lived off of canned cat food just so he could read Thoreau and climb all day and night in Yosemite using gear he made himself?
Recently, Patagonia added to that mythos by outdoing itself. On September 14, the company announced that it would soon be giving away not just a certain percentage of its earnings to help protect the planet, but pretty much all of them. The entirety of the company’s stock will be transferred to trusts and nonprofits devoted to “fighting the environmental crisis and defending nature.” Corporate dividends will keep the business going while otherwise being directed toward environmental initiatives. “Compassionate capitalism” at work.
Cue neoliberal talking heads on both sides of the aisle waxing effusive about this new ceiling for market-based goodwill. To be sure, it’s an impressive relinquishment of private wealth for the supposed greater good. And among companies engaged in this type of thing, Patagonia surely is a cut above. But we do ourselves and our predicament no favors by pretending as though a capitalist enterprise giving away its profits is really going to help solve an existential problem that was caused, and continues to be worsened, by the profit motive itself.
The basics bear repeating: There is no form of capitalism — “compassionate” or otherwise, profit relinquishing or otherwise — that isn’t structurally incentivized to exploit and exhaust the capacities of both workers and the planet, and all while leaving a mess for someone else to clean up. It doesn’t matter if the product is SmartWool or smart phones: Capitalism is at heart an economy of “unpaid costs,” to quote the economist Karl William Kapp. Corporate profits — whether used to plant lilies or gild them — can only come from taking more than is given, and without replenishment or repair.
But isn’t Patagonia an exception? Isn’t it committed, as we read in painstaking detail on its website, to minimizing its expropriation of nature through all manner of recycled and “sustainably sourced materials”? In degree, maybe not. In kind, definitely not. Even the most ethically minded for-profit companies participate in an economy of market share and competition that, directly or indirectly, encourages this race to the exploitative bottom. Regardless of what Patagonia is doing with its profits, it still has to remain competitive in order to make them. And that, as capitalism requires, means continuing to bleed land and labor dry.
It’s also important to remember that Patagonia isn’t exactly small. The company has over 70 stores, keeps offices in seven countries, and at one time had contracts with 100 factories, all in support of one of the most polluting industries on the planet. The fact that it bends over backwards to excuse itself, for instance, in a 30-paragraph statement explaining how it’s trying — really trying! — to minimize the impact of microplastics pollution, changes nothing. It’s all talk after a point. Whatever Patagonia’s efforts are toward sustainability, they pale in comparison to the impact it makes on land and labor due to its size.
It should be no surprise that, despite the implicit mea culpa of its recent divestment, the company tries to downplay all of this. Seemingly everywhere on its website, it mitigates the sense of its corporate largess by using the classic leveling device of capitalist greenwashing: the carbon footprint — a concept invented by oil giant BP nearly 20 years ago precisely to deflect attention away from the disproportionately large ecological responsibilities held by corporations. But the carbon footprint device also allows Patagonia to frame its ecological responsibilities in relation to individual consumers as though those responsibilities existed on the same plane — as though the solution required of the company was merely reducing rather than changing its structural relationship to what was being reduced. Yet the sentimental “all in this together” manipulation runs thick: “If we have any hope of a thriving planet — much less a business,” they write, “it is going to take all of us doing what we can.”
Whatever Patagonia’s efforts are toward sustainability, they pale in comparison to the impact it makes on land and labor due to its size.
Then there’s the company’s use of the classic and equally manipulative Malthusian rhetoric of planetary limits: “Despite its immensity,” the company’s hands wring, “the Earth’s resources are not infinite, and it’s clear we’ve exceeded its limits.” The implication, both here and with the carbon footprint concept, is once again that we’re all equally culpable. Yet limits like these are political constructs, and those who invoke them in this way do so to conceal their inequitable contributions toward reaching them. There is no real “we” here, in other words. There are profit-driven corporations whose productive forces unleash immense creative-destructive power, and then there is the rest of us. The excessive consumption of millionaires and billionaires aside, if a limit has been exceeded anywhere, it is overwhelmingly because of corporations.
But the company’s most frustrating greenwashing is maybe its most subtle. In a statement on the recent decision, Patagonia writes that “instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.” Notice the sneaky substitution: The company is no longer “extracting value from nature” but simply “using the wealth Patagonia creates.” It’s a classic mystification concealing the fact that you can’t have one (corporate wealth) without the other (extracting value from nature). Using profits generated via capitalism to protect the planet will always be a matter of robbing Peter to pay Paul.
And quite literally. Because human beings are, of course, the other form of nature that capitalism — Patagonia included — exploits for value. In yet another long statement on its website, this one recounting its decades-long attempts to ensure more ethical labor practices, we learn about the company’s relationship with the Fair Labor Association, NAFTA’s role in tanking the American textile industry, and other matters. But by paragraph 16 in this substantial read, things still haven’t progressed very far: “The next big task,” the company writes after all of that, “will be to secure a living wage for all workers making Patagonia goods.”
A living wage. The next big task. In paragraph 16. As if this shouldn’t have been in the first sentence.
There is nothing about a living wage for Patagonia’s workers in the company’s recent bleeding-heart statement about its decision to give away its profit.
There is nothing about a living wage for Patagonia’s workers, of course, in the company’s recent bleeding-heart statement about its decision to give away its profits. We read about the planet multiple times, but not so much about people. Lest critics insist that one always implies the other, we should consider the fact that what the company sells in its stores is in part an ideology that insists otherwise. Patagonia is in many ways a technology company: It sells clothing that mediates our relationship with nature, allowing us to experience it more easily as something benign and conquered that exists for human consumption, not as something with which human survival is inextricably bound. This privileged, bourgeois conception of nature — nature as something “out there” to explore and enjoy, separate from human well-being — is bought for the price of a Patagonia sweater; it’s a class-inflected framework that insulates more privileged people — both literally and figuratively — from experiencing nature as involving and implicating human suffering.
But compare this, for instance, with how Patagonia’s garment workers in the Global South might experience nature. If they’re being deprived of a living wage, they are markedly more vulnerable to floods and fires, heat waves and droughts, all worsened by climate change. Nature for them isn’t so much pretty vistas to enjoy and consume as something that could further immiserate or kill them. That makes low wages every bit as much a cause of climate disasters as pollution from plastic plants pumping out raw materials for performance socks. And yet those wages probably won’t be going up much any time soon. After all, they’re a precondition of the fat dividends that will supposedly now be going to such great, green things. Greenwashing, built as always on the backs of the poor.
With its recent news, which will no doubt be a huge boost to sales, Patagonia is banking on all of us forgetting this. It is hoping that the ideology of nature it sells, underwritten by capitalism’s own incentives to hide its conditions of production, will prevail, and that the only thing its customers will think about when buying a new base layer is the wilderness they’ll possibly be saving, not the workers who will continue to be exploited just so the sham ethics of green capitalism can have another day in the sun.
We must resist this. How? Not by refusing to shop at Patagonia. That kind of consumer politics accomplishes nothing. Instead, we must remember in our movements, in our policy, and in the voting booth that it is capitalism’s mandate of endless accumulation that is killing our ecosystem, not what is or isn’t done with the resulting profits.