Less Bread More Circuses?

The Roman poet Juvenal stated that the common people were only interested in bread (income) and circuses (entertainment) rather than real freedom. With the advent of modern communications technologies, from the printed word to the Internet, the ability to provide the required entertainment has increased exponentially. In the postwar period, from about 1945 to 1970, the industrialized countries delivered both more income and more entertainment to the average citizen. Since that time, the mixture of globalization and neoliberalism has halted the increase in median incomes; in some cases median incomes have actually fallen (especially when less manipulated measures of inflation are used).

This trend has been hidden to some degree by a rapid increase in indebtedness in some countries that has allowed the average person to maintain, and even increase, their consumption levels. The increase in indebtedness has only been maintained by a near-continual decrease in interest rates over the past few decades. Since the 2008 financial crisis, interest rates have been kept at incredibly low levels, lending standards reduced and loan periods extended (e.g. for U.S. car loans). A return to more “normal” levels of interest rates and lending terms would cause a severe financial crisis given the high levels of indebtedness. With interest rates now so close to zero, the debt-cycle may be coming to a close given how close interest already are to the zero-bound. In the absence of increasing real incomes for the majority, this removes the ability for personal consumption to increase. The very slow growth of many of the industrialized economies following the 2008 financial crisis may now turn into a lack of growth or absolute economic contraction.

With such high levels of debt, such a contraction may rapidly turn into a major financial crisis and a deep recession. This is a possibility that the economic and policy elite will work hard to forestall. They will work to keep such a crisis at bay for as long as possible, even in the face of the slow impoverishment of the majority. The is the reality of Greece after many debt restructurings that have lead to massive reductions in incomes while protecting the banking system and allowing the rich to pick up public assets on the cheap. A future of continued austerity for the many while the financial power of the government is used to support the few. Such a process can continue for a surprisingly long time in the absence of an organized opposition.

The problem with such a course is that it continually undermines the demand side of the economy, as the consumption of the rich cannot offset falls in the consumption of the many. The economies of the industrialized nations will continue to stagger along at best, constantly in danger of falling onto a recession that will rapidly intensify. The underlying issues of falling incomes and rising debts needs to be dealt with. This will either be through a deep recession and widespread debt defaults, or through radically changed government policies that favour increases in median incomes and debt forgiveness. Without such remedies, the populations of the industrialized countries will be faced with less bread and an escalating level of circuses, the latter designed as a personal escape from the former, until the inevitable crash arrives. Only then perhaps, as with the “New Deal” of the 1930’s, will policies benefitting the many be enacted to stave of social revolution. The other possibility is one of intensifying levels of authoritarianism, as the protests of the many are violently dealt with, and fake right-wing populism is used to redirect the anger of the masses. Donald Trump being a prime example; he has certainly brought the circus to the White House.

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