By JEFF MACKLER
Only fools believed that the U.S. stock market would head in any direction but sharply downward when trading resumed six days after the horrific Sept. 11 terror bombings in New York and Washington, D.C. But fools there were!
The Sept. 14 “Nightly Business Report” on television cited a “gentleman’s agreement” between Federal Reserve Board Chair Alan Greenspan and several major U.S. brokerage houses.
Greenspan, to stave off a major collapse when the stock market was set to reopen on Sept. 16, first huddled with elite corporate traders and then announced, in advance of the market opening, a half percent cut in the Fed’s benchmark lending rate. This was the eighth rate cut in 2001, none of which have proved capable of reversing the recessionary trend.
In return, the brokerage houses were to back off, according to the Sept. 18, New York Times, “from issuing negative investment opinions on individual companies.” The same houses supposedly pledged to refrain from short-selling stocks, a method employed to reap profits as stocks decline. Major corporations similarly “promised” to buy significant amounts of their own shares on the open market.
Any finally, “economic specialists” and media personalities urged the general public to rush into the stock market as a “patriotic gesture,” an act that would supposedly signal confidence in the U.S. economy and government.
Hype and bluster aside, when the market closed on Sept. 16, it recorded the largest point decline in history. The Dow Jones industrial average dropped 685 points, or 7.1 percent, to its lowest level since December 1998. The next three days recorded an additional drop of 500 points
The Standard and Poor’s index, the measure of 500 corporations that comprise the heart of the U.S. economy, fell 5 percent to its lowest level in three years. And the technology-heavy Nasdaq lost 6.8 percent on the day to register a 70 percent loss since March of 2000.
Spinning the catastrophe in an effort to avert further losses, The New York Times reported on Sept. 18, “Never before has a day in which the stock market tumbled so far seemed like a good day. But yesterday was a day unlike any other. The losses were smaller than expected, and they reflected a surge of buying by ordinary Americans who were evidently convinced that it was patriotic to be bullish.”
America’s ordinary “patriots” were sadly taken for a ride as they paid good money for overpriced stocks that, as the day proceeded, were slashed furiously in value.
New legislation to benefit the rich
Many on Wall Street were not as confident-sounding as commentators for The New York Times. “There is no question that this terrorist event will kick us over into a recession,” warned David Jones of the Aubrey G. Lanston brokerage firm.
But the terror bombing was not the real cause of the market’s downfall. The deeply troubled U.S. economy has been in free fall for some time now.
Last month’s Congressional approval of a $1.7 trillion tax cut, largely for the rich, proved insufficient to stimulate a U.S. and world economy chiefly characterized by massive overproduction and ever declining average rates of profit.
Finding the $1.7 trillion infusion (to be expended over the next 10 years) wholly inadequate, Congress set out to prime the Keynesian pump further with additional hundreds of billions in tax cuts for the corporate elite. Looting the so-called surplus in the Social Security system was the prime objective. The cuts were announced the day before the terror bombing.
Now the corporate looters are preparing legislation to further line their pockets by eliminating the capital gains tax outright, a move they dared only to dream of in years past.
Having reduced yesterday’s “unprecedented” surplus to zero, and with the country now running in the red, the Bush administration’s Congressional Budget Office admitted that the $9 billion they expected to take from Social Security in June would today be “much higher.”
But the scale of corporate disaster exceeds anything imagined by government or corporate executives. The immediate Congressional infusion of some $50 billion into the CIA and military industrial complex following the bombings amounts to a trifle when weighed against the unprecedented sums corporations have lost.
Last month, for example, a single corporation, the fiber optic cable and communication equipment manufacturer, JDS Uniphase, announced losses of $40 billion in a single quarter. Its national and international competitors, also faced with saturated markets worldwide, announced lower but similarly stunning reversals in the tens of billions of dollars. Tens of thousands of jobs in these industries have been eliminated.
The combination of the massive decline in the stock market and the looting of Social Security portend future reductions in the retirement programs of millions of American workers.
On Sept. 20, government and airline officials announced huge layoffs in the airlines industry, with 70,000 workers to be fired by the major airlines (20,000 each by American and United), and as many as 30,000 to be placed on the block by the Boeing Corporation, the leading airplane manufacturer
But a significant portion of the layoffs were expected before the New York and Washington, D.C., terror bombings. Like most of the major highly competitive industries in the U.S. and worldwide, massive competition and declining profits have compelled increasing numbers of mergers and consolidations designed to win the deadly capitalist game of survival of the fittest.
TWA, recently swallowed up by American Airlines, planned major layoffs long ago, and negotiated major wage, benefit, and retirement cuts with compliant union bureaucrats, supposedly in return for continued operation.
The Labor Department announced in early September that the nation’s official jobless rate had “unexpectedly” risen by nearly a half percent to 4.9 percent. Prior to September, the monthly rate of job losses for 2001 was 135,000. The marked rise in September indicates that this rate has now tripled or more.
The rate of firings is expected to increase in coming months. Davis Wyss, economist at Standard and Poor’s, predicted in the Sept. 20 San Francisco Examiner, “We’re looking at an additional 1 million in job losses between now and the end of the year.” The year’s totals may well record that 2.5 million workers were fired by capitalism’s “patriots.”
Government figures, however, are not accurate measures of real unemployment, since Labor Dept. statistics are manipulated to exclude workers who are no longer eligible to collect unemployment insurance, having exceeded the 26-week limit.
In government double-speak jargon, you’re only unemployed if you’re collecting unemployment insurance! When the number of part-time and occasional workers whose income is far below subsistence is added to the real figures, the U.S. unemployment rate is similar to that of Western Europe-where double-digit rates have been reported for decades.
Each month, government leaders hype the media by touting this or that sector of the economy that is supposedly not in decline. Last month it was consumer spending, the index that supposedly points to overall economic stability. But with the rapid rise in unemployment associated with growing numbers of plant closures, production cutbacks, and ever-declining corporate investments, Americans are spending less and less, as the new figures will readily demonstrate.
Similarly, Alan Greenspan points to the “wealth factor,” a government invention designed to explain why consumer spending has not sharply declined. This still unmeasured criteria is supposedly an economic reflection of the fact that the market value of homes is at a high point in U.S. history, creating the illusion that homeowners have more money, in the form of home equity, to spend than they actually earn.
A part of this equity, according to Greenspan, will be liquefied-that is, converted through bank loans to cash that will be spent on purchases that boost the general economy.
But government figures now demonstrate a “softening” in the price of homes, not to mention the fact that many of those who bought at inflated prices can no longer afford to pay the bloated mortgage payments that were within their reach when they had jobs. Mortgage foreclosures and bankruptcies are on the rise to say the least.
Domino effect in unemployment
Despite the sharpest decline in federal interest rates in U.S. history, few corporations have moved to use cheap money to invest in new technologies that in past decades were the prime factor in winning a larger share of the world market and, at least for a time, reaping superprofits. Economic growth slowed to a near standstill, 0.2 percent last month, as compared to 5.7 percent the same time a year ago.
Despite the fact that the world’s capitalist governments are backing their own ruling classes with subsidies of every kind imaginable, ferocious national and international competition, accompanied by unprecedented megamergers and concentration of capital, have reduced average profit rates to levels comparable to the period preceding the 1929 Great Depression.
While a 2.4 percent increase in corporate investment was projected for 2001, the figures were revised downward in early September to a 2.0 percent decline. Manufacturing has declined for the past 14 months. From the capitalist vantage point, it makes no sense to invest in new plants when state of the art facilities must be closed.
Profit margins have narrowed and/or disappeared, with major players registering massive losses while lesser competitors are driven out of the market outright or absorbed by the few giants remaining in each field.
The domino effect is now noted by every economic commentator. When Qwest Communications fired 4000 workers on Sept. 19, major corporations that sell to Qwest, including Lucent, Nortel, and Ciena, were expected to follow suit and announce a new round of layoffs.
Under the irrational capitalism system, where profit is the absolute ruler, the introduction of modern labor-saving devices means ruin to the world’s workers. The notion that technological progress should serve the interests of all humankind is unknown in the capitalist world. To remain competitive human labor must be expendable, and environmental standards must be rendered irrelevant.
Unimpeded access to natural resources and world markets are a matter of necessity for capitalism, to be conquered by any means necessary or perish. Those who block access, including U.S. capitalism’s major competitors in Europe and Japan, have been or will be subjected to trade wars, or other economic reprisals.
The existence of international institutions like the WTO, FTAA, IMF and the World Bank is far from a guarantee that capitalist justice will be done in the world market. At best these institutions are designed to attempt to mitigate the fundamental contradictions in the system itself.
As these contradictions-including ever shrinking markets, growing crises of overproduction, and declining profits-reach the breaking point, the gentlemanly rules of negotiations and compromise give way to wars of every form. The increasing economic and military interventions of the chief imperialist player, the United States, on every continent is a measure of the growing tensions in world capitalism.
In response, all major U.S. competitors have launched their own arms productions programs. Europe, in particular, like the United States, sees its future depending in part on military might to defend its economic interests against all comers.
The inevitable result will be war-unless, of course, the world’s working people, in alliance with the oppressed everywhere, use their vast majority power to challenge the warmakers and exploiters and struggle for a viable socialist alternative, where social production satisfies human needs instead of corporate profit.
The mounting crises have brought ruin and horror to vast portions of the underdeveloped world. While partially delayed for some time in the imperialist centers, the same horror is today coming home as increasing millions are faced with bleak prospects.
Need for a fighting labor leadership
The labor misleaders dominating U.S. trade unions today see no prospect for a fightback other than deepening their “partnership” with labor’s class enemy.
A Sept. 20 syndicated Washington Post article, titled, “Strange alliances forged after attacks,” indicates the stance of labor’s top bureaucrats, AFL-CIO President Thomas Donohue and Secretary Treasurer John Sweeney. Both joined with corporate America’s leading public promoter, the U.S. Chamber of Commerce, to, in Sweeney’s words, “work together to enact a program of national investment to rebuild shattered lives and shattered infrastructure.”
Sweeney and his fellow trade-union fakers see labor’s future tied to capitalist prosperity, while capital sees its future tied to extracting additional billions from working people and throwing those they no longer require into the ranks of the jobless.
A break with class collaboration on the labor front and a renewed struggle against the inherent evils of capitalism-war, racism, poverty, and environmental destruction-require a fight for labor’s independence from the Democratic and Republican parties as well as class-struggle polices to challenge the bosses at the point of production.
In order to rebuild and reinvigorate a labor movement that has experienced decades of bureaucratic ossification, the emerging generation of youthful fighters will make the struggle for union democracy a top priority.
Having wrested the unions-labor’s basic fighting institutions-from their misleaders, working people will build their own parties to challenge the twin parties of the ruling rich while organizing an historic drive to unionize the vast majority, whose solidarity and power have so far been untapped.