By JOHN POTTINGER
Faster than a speeding bullet. More powerful than a locomotive. Able to leap off tall buildings in a single bound! Superman? No, it’s the U.S. and the world capitalist economies. Or is it?
As more states and more counties mandate stay-in-place orders more and more people are out of jobs to the tune of perhaps 13 to 20 percent, compared to ten percent unemployment at the nadir of the 2008 Great Recession. Additional millions were rendered partially employed. As for the Gross Domestic Product (GDP), an optimistic forecast (optimistic is a relative term) by Warwick McKibbin, an economist at the Australian National University who modeled the SARS pandemic, estimated that the coronavirus might kill 236,000 people in the US while shrinking the GDP by 2 percent.
But if the Centers for Disease Control and Prevention numbers are correct 1,000,000 people could die and the GDP could fall by 8.4 percent.
Goldman Sachs, not to be outdone, said GDP could drop 24 percent for the second quarter. (Goldman Sachs counts dollars not lives.) Donald Trump suggests the same. “Restart the economy by Easter, he states (NYT, March 25.) Profits before people!
For now, millions of people staying home with no paychecks. It means schools, libraries, restaurants, bars, all sporting events, concerts, dentist offices, barbers, hairdressers and many more are closed. Better this, of course, than Trump’s unthinkable back to work solutions – at the peak of the curve, no doubt!
The pandemic also brought on a stock market crash which means among other things that people who were going to buy a house or to a lesser extent a car or SUV, won’t be able to do so because their down payment had been in the stock market. On the up side the air is cleaner because no one is driving or flying.
So what’s the response from the federal government? Well the Democrats and Republicans knee-jerk response is to throw money at the big banks. The New York Federal Reserve is offering $1 trillion for overnight loans and $1 trillion more in 14-day loans. All for the corporate elite at near zero percent interest rates. The Fed is also buying $500 billion in Treasury bonds and snapping up mortgage-backed securities – all with printed paper money, as usual.
Meanwhile on Capital Hill Congress plans a $2 trillion stimulus package; $425 billion for “distressed companies,” $75 billion to airlines and hotels, $100 billion for hospitals, $150 billion to state and local governments, $350 billion in loans for small businesses, oh, and yes, $1,200 to workers who make up to $75,000, plus $500 per child. Don’t spend it all in one place.
So quite unlike Medicare for All, the bourgeois press and the bourgeois politicians seem to think turning on the tap and printing money is now OK. While $1,200 checks are a start and more money for the poor and unemployed is good, where will the rest of the cash go?
Will the airlines spend it on wages or perhaps on buying a “distressed competitor?” Will it prioritize jobs that produce real value or the further concentration of finance capital to eliminate competition to drive up declining profit rates?
Where’s the $500 billion the Fed spent on Treasury bonds going? Are they going to tip the waiter or fund the big corporations’ line of credit? Will printing more money lead to inflation or perhaps an asset bubble more likely to burst? Ernest Mandel had the answer in his “Marxist Economic Theory Vol. 2,” page 527, “The increase in the public debt has simply replaced (concealed) direct currency inflation. Instead of appearing in the form of an increased amount of fiduciary money* in circulation, it appears in that of an increase in the fictitious capital** constituted by public debt securities. But the total stock of currency is swollen exactly as if there had been an issue of paper money.” In other words, all this money being thrown at the bourgeoisie over the course of time will end up in speculation – in capitalism’s ever increasing casino-like economy of over priced shares, mortgage-backed securities, assorted financial instruments, and who knows what. The capitalist could invest in making widgets but with mass unemployment who will buy them?
What now? In the short term working people need a moratorium on all evictions, foreclosures, rent, mortgages, utility payments, debt payments, credit card payments and student loan payments. But we will never be really safe until the banks and big corporations are nationalized under the control of working people, where we can collectively and democratically construct a planned economy that operates for human need not capitalist profit. We need a workers’ government that plans for socialism and for that we need a revolutionary party. Join us!
* Fiduciary money is money backed by trust between the payer and payee, like the $20 bill that was in your pocket until you were lay off.
** Fictitious capital is value, in the form of shares, debt, speculative instruments, etc., above and beyond what can be realized in the form of commodities. With average profit rates derived from workers’ labor power consistently in decline over the past several decades, capitalists increasing invest their profits not in new production that creates real value but rather in banks and related financial institutions that “invest” in speculative instruments that have little or no correspondence to the production of commodities.