“ZERO JOB GROWTH LATEST BLEAK SIGN FOR U.S. ECONOMY,” reads the lead headline of the Sept. 3 New York Times. The article expresses the deep pessimism of the U.S. ruling rich that no solutions are in sight.
The government’s new report on hiring—a better term would be “firing”—released the day before, according to The Times, “provided fresh evidence that the recovery has fizzled without gaining momentum, prompting another round of relentless diminution of economic expectations.” The “diminutions” consisted in the president’s estimate that unemployment would remain at the present 9.1 percent rate until at least 2013.
There has been nothing resembling a real recovery for working people since the U.S. and world economic crisis erupted in 2008. Even in the speculative or casino sectors, wherein the financial elite scramble to find ever new devices to make money in the stock market and other Ponzi-type adventures not related to the production of commodities for the market, the recovery has been essentially non-existent.
The stock market’s wild gyrations stunned and perplexed even the most experienced Wall Street pundits when a few weeks ago the market broke all records and experienced four “swings” that daily registered rises and falls in the Dow Jones Industrial averages in excess of 400 points. These were matched in terms of percentage gains and loses by all other U.S. stock exchanges. Down by some 1200 points from the Dow’s April 2 high of 12,400, the markets more generally reflected the panic of big capital.
The official unemployment rate of 9.1 percent announced by the Bureau of Labor Statistics for August squares with the union busting, annihilation of existing contracts, plant closures, speed-up, pay and pension and health-care reductions, mortgage foreclosures, and plant closures imposed by the corporate elite. Last year’s massive layoffs in the nation’s major industries like auto and construction have been matched and exceeded by state layoffs and shredded contracts in the public sectors.
Of course, the official and real unemployment rates are two different matters. Add in those who are no longer counted in the statistics, those who have given up looking for work—discouraged workers—and those who are compelled to live on below subsistence part-time work at near minimum wages, or less, and the figure leaps to perhaps 20-25 percent or more. The government formally admits to a 16.1 percent out-of-work figure.
The same Times article strikingly refers to the Federal Reserve’s “limited arsenal of tools” to rejuvenate the economy. For decades the term ”limited arsenal” was excluded from the nation’s general economic terminology. The Federal Reserve’s chair was endowed with near-magical powers to regulate the economy to guarantee its steady growth and stability.
In recent years, these generally consisted in lowering federal interest rates to provide cheap money to banks and corporations to supposedly encourage their investment in industries that produce new jobs and hence a steady supply of commodities for the market. The steady decline in such investments has been the general trend in the past several decades as banks and corporations understand that, in a world of unprecedented and globalized competition, profit rates in the industrial sector have registered steady declines, with major U.S. corporations like General Motors, and thousands of others, going bankrupt.
Today’s corporate owners prefer to invest their money in the bubble-driven speculative or financial sectors—where big fortunes were made seemingly out of thin air—or abroad, where labor and production costs are qualitatively lower than in the U.S.
It has been frequently noted in recent months that U.S. corporations today sit on some $2 trillion in cash, but nevertheless decline to invest in the American economy. It’s not a lack of patriotism that explains this apparent contradiction, but rather a lack of profits.
In today’s increasingly integrated world economy, U.S. multi-national corporations find it qualitatively more profitable to invest in poor nations, where near slave wages and tax breaks result in profits far in excess of what can be obtained at home. But when U.S. competitors follow suit and seek the same advantages of low-wage labor abroad, the initial gains soon evaporate, and undercutting one’s competitor’s prices becomes increasingly more difficult.
The “race to the bottom” eventually takes its toll on all workers, but the capitalists themselves have no choice but to drive each other out of business in order to remain in the profit/accumulation game.
Corporate profits are supposed to be taxed in America, but only when they are repatriated to the U.S. But compliant government policies have increasingly allowed corporations to avoid taxation by legislative devices. To encourage corporations to bring their profits home for investment in the domestic economy, for example, legislation is in progress to declare “tax holidays” in which taxes owed would be forgiven or reduced to qualitatively lower rates.
Grateful corporations, who in truth own the legislators as well as their multi-national companies, readily comply, but only long enough to quickly return to their low-wage operations abroad. Meanwhile, others simply avoid all taxation by declaring that their corporate offices are no longer located in the U.S. but rather in tax havens like the Cayman Islands or Barbados.
One of the monetary measures increasing employed today to supposedly re-balance or “save the system, “quantitative easing,” was hotly debate during the Aug. 9 meeting of the Federal Reserve, where divided bankers could not agree on any solution to capitalism’s crisis other than to guarantee that they would maintain federal interest rates at near zero levels until at least 2013. This would allow banks and other corporations to borrow with impunity based on the premise that they can profit by investing the government’s money at higher rates of return, but again, largely in the speculative sectors of the economy. Casino capitalism rides again!
“Quantitative easing,” or QE, is not the norm in capitalist functioning. It is employed when interest rates are so low (“cheap money”) that government managers have no other means to prime the pump of a failing economy—supposedly to encourage corporate investment in job-producing endeavors. QE consists of the Federal Reserve essentially creating fake money via electronic transfers to purchase various bonds and other “assets” from banks or from the government directly. The banks turn over these “assets,” whose real value is questionable and therefore difficult to sell, like subprime mortgage-based financial instruments.
The Troubled Asset Relief Program (TARP) was akin to QE, wherein the government bailed out failing banks to the tune of $1 trillion. Similar bailouts to the rich have continued in various forms, totaling some $17 trillion or more since the crisis began.
Last year the Federal Reserve’s QE policy pumped an additional $600 billion into the economy by purchasing U.S. Treasury notes that were used to pay off government debts to nations like China and Japan. All these measures consist of the Federal Reserve or the government essentially printing paper money or bonds, or fake money via electronic transfers, for which there are no commodity equivalents. In truth the process is closely tantamount to an individual writing checks on an account with no funds.
This is illegal in the world of personal finance but the norm in today’s government functioning in the U.S. and around the world.
The British Central Bank has followed the U.S. policy. The weaker capitalist nations, who can’t effectively compete in world markets, are the first to suffer, when their debts eventually exceed their ability to pay. Hence the near bankruptcy of nations like Greece—with Spain, Ireland, and Portugal not far behind. A default on their obligations to the more powerful capitalist nations, to the tune of trillions of dollars or euros, would send the entire system into a crisis that all agree would threaten the system’s essential cohesion.
The European solution to date has been twofold: to re-negotiate the loans of the defaulting or near-defaulting nations, with the more solvent ones absorbing the risks of future default, and to ensure that these loans are repaid by imposing draconian austerity measures on the world’s peoples—as in Greece, where decades of social gains in pensions, wages, and health care have been stolen.
A New York Times article entitled “Banks Hard-Sell Greek Bailout Plan” makes this explicit. “In the case of the proposed second bailout for Greece—the one that is supposed to make private interests feel the financial pain along with taxpayers—the biggest banks in Europe are on the road now promoting the plan. It’s not that the banks are suddenly masochists. It’s that this first major bond restructuring in Europe’s long-festering debt crisis is shaping up as a much better deal for the banks than for the Greeks it is supposed to be helping.”
No nation has been able to escape capitalism’s inherent contradictions. War and austerity are its solutions, the consequences be damned.
“There is work to be done, and there are workers ready to do it,” said President Obama during his Labor Day speech to the Detroit AFL-CIO, where the sellout labor chiefs pledged their ongoing support to labor’s greatest public enemy. “Labor is on board. Business is on board, ” said the posturing president. And, in anticipation of Congress’s return to session next week, Obama continued, “We just need Congress to get on board. Let’s put America back to work.”
Empty rhetoric in the extreme! President Obama has proven to be U.S. capitalism’s strongest weapon, exceeding George Bush in literally every attack on U.S. working people, with his abandonment of the Environment Protection Agency’s already inadequate planned “stricter limits on air pollution” being the latest example of subordinating the interests of the many to the corporate few.
> The article above was written by Ian Wolff, and first appeared in the September 2011 print edition of Socialist Action newspaper.