Economy on the Rebound? Ask the Folks without Jobs


When the U.S. Commerce Department reported on April 26 that the nation’s Gross Domestic Product (GDP) rose at an annually adjusted rate of 5.8 percent during the first quarter of 2002, the stock market gleefully registered a momentary advance. Analysts initially, and without foundation, concluded that the data signaled a sharp rise in the nation’s fortunes and an end to the recession.

Within an hour, however, the stock market reversed course and registered lows not seen since October. The Dow Jones industrial averages tumbled below the 10,000 mark, and the Nasdaq dropped to below 1700. Within a week the market dropped a half trillion dollars in value, an amount not seen since the reopening disaster following the Sept. 11 bombings.

“Economy’s growth belies weakness,” was the front-page headline in the next day’s April 27 San Francisco ChronicleThe Los Angeles Timesnoted that the economy “shows resilience but the outlook is clouded by a drop in consumer confidence and weakness in business investment.”

As it turned out, some 3 percent of the gain came from inventory adjustments, as merchants restocked their shelves to replace commodities previously sold at less than profitable prices. The consensus was that this portion of the “gain” in GDP was meaningless as a growth indicator. “The remaining 2.8 percent,” according to the Chronicle, “may not be enough to sustain a vibrant recovery and create large numbers of jobs.”

A closer examination of the Commerce Department’s figures showed that military and related government spending accounted for the lion’s share of the GDP gain. The $400 billion bipartisan war budget, plus additional hidden billions in government outlays for a variety of police agencies and security measures, were designed to prime capitalism’s flagging economic pump. With profit rates declining and plants closing in virtually every major sector of the economy, the ruling rich are in no mood to invest in new technologies when current state-of-the-art factories remain shut down.

Business investment in fact declined 5.7 percent during the first quarter, while a full 25 percent of the nation’s industrial capacity stood idle, a figure virtually unmatched in the past 20 years. Meanwhile, jobless claims hit a 19-year high, with continuing unemployment claims reaching 3.84 million.

Michael Evans, chief market economist for the Standard and Poor’s research firm, predicted that “the unemployment rate will rise for the rest of the year.” To give substance to his words, several days later it was revealed that the unemployment rate in April had bounded to an official rate of 6 percent-the highest level in almost eight years.

Massive layoffs today are the rule as unprecedented worldwide competition has compelled all major corporate players to retool and modernize to attempt to remain in the ballpark.

But as highly automated machines are introduced, more and more commodities are produced by ever fewer workers. As the resulting saturated world markets prove incapable of absorbing the increasing mass of new products, the world stands witness to a deepening crisis of overproduction and an associated decline in average profit rates. Despite massive government subsidies, the prospect of lower and often negative profit rates makes capitalists reluctant to invest in yet another generation of technological innovation.

As the system stagnates, of course, the bosses seek to make the workers pay. The Boeing Corporation predicts additional thousands of layoffs. Delphi is eliminating 6100 more jobs in the U.S. and abroad, bringing its yearly total to 17,540. Hewlett-Packard’s merger with Compaq is expected to result in 15,000 layoffs.

General Electric plans to cut 7000 jobs, and Arthur Anderson, whose corrupt accounting practices are likely matched by most others in the trade, will fire 7000. The trend is repeated in almost every industry-with no end in sight.

Unprecedented losses are also becoming the rule in corporate America. When several months ago JDSU Uniphase, a major player in the fiber-optic cable world, reported an historic quarterly loss of $40 billion, few thought that similar figures would or could be registered again. Just months later, however, AOL Time Warner recorded yet another catastrophe when it was compelled to announce a record first quarter loss of $54.25 billion. AOL originally hid the loss through an accounting trick wherein it overpriced its acquisition of Time Warner.

Government pumps money into corporations

Lies, hype, and prayer aside, there is little evidence to demonstrate a turnaround in the U.S. economy. The government was compelled to admit that its projected $70 billion deficit for the coming fiscal year was off by 100 percent. The actual deficit was $140 billion, putting a crimp in the Bush administration’s view that surpluses, not deficits, were in the offing.

But continued gifts to corporate America in the form of new business tax cuts remains a constant priority for Bush and his Democratic Party associates. From their vantage point there is no alternative other than to pump additional billions and even trillions of dollars into the corporate tills that have proved incapable of prospering on their own steam.

After granting the ruling rich a $1.3 trillion tax cut over the next 10 years, Congress is now reviewing legislation to make the gift permanent-that is, irreversible. Even if the previously expected surpluses, on the basis of which the tax cut was justified, do not materialize, workers’ tax money will continue to flow to the rich. In truth, the administration’s announced surplus proved to be nonexistent. It was based on looting the Social Security system and on spurious projections of a continuing economic boom.

A surprised George Bush was pressed to explain why his projected surpluses or modest deficits didn’t materialize. Bush claimed that as a candidate he had warned of deficits if the country faced war, recession, or national emergency. “In this case, we got all three, ” said Bush. “And we’re recovering from all three,” he added.

Bush’s claimed recovery is difficult to prove on paper and in the lives of American workers. The U.S. economy was in recession before he became president and before the Sept. 11 bombings. The bombings were merely used by Bush as a pretext for his “war on terrorism,” a euphemism for the extension of U.S. imperialism’s military and economic might across the globe.

War is profitable for the rich in capitalist society. It’s only the workers who do the dying. Government investment in the war industry guarantees excessive profits since in the production of war commodities-jet planes, tanks, aircraft carriers, and the like-there are few, if any, competitors anywhere. Additionally, war, especially when waged by the leading capitalist nations, serves to expand markets in areas previously blocked as well as insuring access to essential resources such as oil.

Oil is the chief resource that drives most all capitalist industry. According to Merrill Lynch, every dollar increase in crude oil prices takes $5 billion a year out of the economy. In the past five months the jump in crude oil prices from $16.36 per barrel to $25.72 sucked $46.8 billion out of corporate America’s bottom line.

The expanded U.S. military presence in the Middle East as well as in the former Soviet republics in Central Asia serves, among other purposes, to strengthen future access to oil

Similarly, U.S. support to the coup attempt in Venezuela was in part due to the fact that the Hugo Chavez government’s appointee to OPEC (Organization of Petroleum Exporting Countries) became head of this organization and led in engineering OPEC’s successful move to limit oil production while raising oil prices.

War and intervention are intimately associated with U.S. political and economic policy. They were central to bringing the U.S. out of the 1929 Depression, which lasted more than a decade. Their employment today are proof positive that capitalism’s options have become more limited.

Brokers lied to investors

When profits are at stake, nothing is sacred. The Securities and Exchange Commission (S.E.C.) investigation of the Merrill Lynch and Citicorp brokerage houses is a case in point. Merrill’s CEO has publicly apologized for advising customers to buy stock in corporations they knew to be in trouble. Pressed by these corporations to sell their stock or lose their business, Merrill chose to service its corporate benefactors even though they knew that their customers would be the losers.

In fact more than 90 percent of all brokerage houses told their clients to buy stock over the past two years while the stock market registered some of the most massive loses in history.

Fear among the rich about corporate lying is today widespread. Enron’s offshore operations, designed to hide massive loses, are indeed the norm.

Even the Commerce Department’s figures regarding a supposed 5.8 percent growth rate have been called into question. Analysts report, according to the Los Angeles Times, that “Intel Corporation, the world’s largest maker of semiconductors, has stopped telling the government about its orders, inventories and shipments, making it harder to estimate economic trends.” The Times concluded that the government’s data was therefore “corrupt.” Diane C. Swonk, chief economist of Bank One Corporation in Chicago, said, “It’s hard to know what to make of corrupt data.”

Intel stated that it refused to present data on its operations because “the statistics the government generates from them are meaningless.” While Intel might have a point, its failure to report the information that has previously been routine appears to be a telltale sign that like all corporations whose fortunes and stock prices are under siege, it too has something to hide.

While it is true that the wealthy and relatively few ruling-class families have prospered at the expense of the vast majority of the population, it is not true that corporate America always follows suit. Plagued by its inherent contradictions, like a wounded beast, it is struggling to survive.

And survival today means forced and voluntary mergers and acquisitions, absorbing or driving competitors to ruin, corrupt book-keeping, looting social services, massive layoffs, union busting, environmental pollution, racist scapegoating, and war.

Capitalism’s victims are receiving a hands-on education about how the system really works and for whom. In time, working people and their allies among the oppressed will take to the class-struggle road and begin the process of building a new society where the satisfaction of human needs as opposed to corporate profits is the operative principle.

The youthful fighters emerging in the renewed struggles against capitalist globalization and war will certainly be in the vanguard of the big battles to come.

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[Editor’s note: We reprint this article by the Committee for the Abolition of Illegitimate Debt (CADTM). In 1989, the Bastille Appeal was launched, inviting popular movements throughout the world to unite in demanding the immediate and unconditional cancellation of the debt of the so-called developing countries. This crushing debt, along with neo-liberal macro-economic reforms imposed on the global South, has led to an explosion of worldwide inequality, mass poverty, flagrant injustice and the destruction of the environment.