Thursday, March 24, 2011

Libyan Oil and Consumer Demand

Auerback makes a few critical points in his recent article,The Economic Policy Behind Intervention in Libya Chases Its Own Tail (HT: Naked Capitalism). Forgive the banal usage of "we" to associate oneself with the ruling clique, and we have a viable polemic against US fiscal and foreign policy:
"We seem to have developed a very basic rule of thumb when it comes to these wars of choice: if an insurgency threatens oil supplies directly or indirectly, we move. If it doesn’t, we don’t. Hence Syria can kill thousands of insurgents (as they did in the early 1980s) and we do nothing. Yemen doesn’t have oil facilities; so we do nothing. In Bahrain we have a huge base and unrest has repercussions for the Shiite part of Saudi Arabia where the oil is. We move via the Saudis. In Libya there is oil. Again, we moved.
"In short, we are out of policy levers to help the economy, especially now that we’ve unilaterally taken the fiscal policy option off the table. All of a sudden War #3 makes sense: We’re in Libya to make sure that the oil keeps flowing, because a high oil price depresses what’s left of consumer demand. In the meantime, as this nugget from The Hill illustrates, we’ve quickly blown through the budget “savings” proposed by the GOP, as we’re spending about $100 million a day in Libya. And oil prices have continued to rise as a consequence of perceived dangers to oil production facilities brought about by the escalation of this conflict."
What's interesting about this is the roundabout manner in which the GOP tries to acquire consumer demand: since they can't expand working-class entitlements, they try to expand oil industry inventories, with the hope of lowering oil prices and freeing up consumer discretionary spending. It may seem bizarre, but the Democrats are more than willing to go along with this schematic, and it may be hard to frame this war as anything but a bipartisan handout to oil.

Somewhat surprisingly, some GOP have attacked the president re:constitutionality of the conflict, but the fiscal irresponsibility - eloquently emphasized above - proves an underlying tendency of the "Republicrats": to expand spending wherever it can benefit preeminent capital the most, irrespective of the fundamental truth: that a well-functioning economy requires production for consumers  rather than production for capital. Forgetting that, it might make sense to think that handouts to the owners of the means of production are a viable stimulus tactic - but this really de-incentivizes production by offering a faster way to profit (graft with government) and lowering consumer buying power, by cutting back consumer entitlements in the context of a shrinking real wage and high unemployment.

One might think that they're actually deliberately trying to destroy the social basis upon which capital functions in the US.

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