The U.S. government continues to boast about its "unprecedented, longest running economic expansion in history." And it is true that the anticipated bursting of the "bubble economy," which we had anticipated was just around the corner has not occurred, and this despite the fact that the elements for open rececession seemed to be in place in 1998 following the collapse of the Asian tigers. State capitalism has demonstrated the resiliency to postpone its economic day of reckoning. On the one hand, much of this economic wonder is based on deception – the manipulation of economic data to paint an artificially rosey picture – and on policies designed to foist off the worst aspects of the global economic crisis on the peripheral countries of world capitalism. On the other hand, the degree to which there is economic growth in the U.S., or, more accurately, the absence of open recession, it hardly makes a difference from an historic perspective. The global economic crisis of world capitalism, a crisis of chronic overproduction, continues to deepen inexorably, regardless of the vicissitudes of the trade vicissitudes of the traditional business cycle that the bourgeoisie focuses on in its propaganda.
As early as the mid-80’s, the ICC pointed to the existence of hidden recession, and "vampire recovery," which despite the lack of an open recession, defined by the bourgeoisie as two consecutive quarters of negative economic growth rates, continues to weaken the global economy at the historic level. In this sense, the appearance of economic prosperity in the short run, only aggravates the inherent contradictions of capitalism in the throes of an historic crisis for the long run. In any case, even using the bourgeoisie’s own statistics, we can see that despite the "recovery," the economic picture is hardly rosey. The recovery, such as it is, is confined only to a few sectors, and is based primarily on an explosive expansion of credit and a tremendous increase in the trade deficit, which is running at a record setting $29 billion per month (an annualized rate of $348 billion). This is important to note because, though state capitalism still has the capacity to maneuver, its maneuvers tend to accumulate more powder in the keg, which will make the explosion that much worse in the longer term.
Masking the Real Level of the Crisis
We have previously demonstrated on numerous occasions how the bourgeoisie has deftly managed to redefine how its much vaunted economic statistical measures are calculated and altered economic benchmarks, so as to paint a falsely optimistic economic picture. These manipulations include:
- recalculating the unemployment rate to include only those workers without a job who actually applied for work within the previous month and to discount discouraged workers who have no job and have given up looking for employment;
- to include members of the armed forces as part of the workforce to dilute the unemployment rate,
- to count as "employed" anyone working 10-hours per week (defined as a job) and hence to ignore the level of "underemployment" in the economy;
- to overstate the level of employment in the economy by counting every parttime job of 10 hours or more as a job – thus workers scrambling to make a living with three parttime jobs , count as three separate jobs;
- changing the benchmark for inflation. In 1971, Pres. Nixon imposed wage and price controls because an inflation rate of 4.4% wasse an inflation rate of 4.4% was considered intolerable. Today 4% inflation is considered "natural inflation." If the problem won’t go away, just declare it is no longer a problem.
- changing the benchmark for unemployment.In the early 1970’s, an unemployment rate of greater than 6% was considered crisis level and automatically triggered extended unemployment benefits; in 1978, the Humphrey-Hawkins bill set 4% unemployment as the national target of acceptable unemployment. Today 6% is defined as natural unemployment in the economy, and an unemployment level of 4.5% is considered a "labor shortage." Again, if you can’t solve the problem, it is easier for the bourgeoisie to turn reality on its head.
- recalculating the formula for determining the official unemployment rate in 1994 and again in 1997. Allegedly this was done to make the measure more "accurate," but of course it was due to these statistical shell games that the bourgeoisie has been able to claim the lowest unemployment rates in 30 years. Even though the footnote to the unemployment statistics in the World Almanac notes that the changes in rate calculation are so great that unemployment figures from 1994 to the present are not directpresent are not directly comparable to earlier periods, the Bureau of Labor Statistics itself grinds out press releases making direct comparisons anyhow.
We can get a more accurate picture of real unemployment in America today by taking a deeper look at the bourgeoisie's own statistics. For example, the official unemployment level is 6,200,000. The bourgeoisie keeps this number artificially low by not counting people who haven't looked for a job in the past month. According to the government, "persons not in the work force who want a job" number 4,568,000. In addition there are 3,665,000 who are forced to work parttime because they can't find fulltime employment. If we add these categories together, true unemployment in America stands at 14,433,000 or slightly more than 11%.
True Unemployment in the U.S.Officially unemployed 6,200,000 Persons not in workforce who want a job 4,568,000 Forced parttime workers 3,665,000 Total unemployed 14,433,000 Official unemployment rate -- 4% True unemployment rate 11+%
Source: Bureau of Labor Statistics, Monthly Labor Review, January, 2000
Falling Wages and benefits means a decline in Workers’ standard of living
Despite the bourgeoisie’s hype about unprecedented boom, wages for male workers in 1999 were actually 1.8% lower than in 1989 after adjustment for inflation. A study by the bourgeois Fiscal Policy inflation. A study by the bourgeois Fiscal Policy Institute on the situation in New York state, found that workers’ real incomes declined by 8% since the late 1980s. For the poorest 40% of New York families, real income fell between 13 and 15%. In New York City, average real income declined by nearly 20%. At the same time, the typical working class family in New York has had to put in 256 more hours of work per year (equivalent to more than six additional full-time weeks) than it did in 1989 for the dubious privilege of earning 20% less.
An examination of the deterioriation of key fringe benefits paid to workers over the past 20 years gives an even more accurate picture of the falling real wages (the previously mentioned statistics only account for inflation) and show a serious decline in the standard of living during the period of the "unprecedented boom" over the past eight years. For example, in 1980, 99% of workers employed by medium and large companies in the U.S. received paid holidays. By 1997 that percentage had dropped to 89%. In 1980, 100% received paid vacations, by 1997 that figure had dropped to 95%. (Imagine having a fulltime job with no vacations!)
In 1980, 62% received paid sick leave; by 1997 56%. The deterioration is much more drastic in terms of insurance and retirement coverage.surance and retirement coverage. In 1980, 97% of those employed in medium and large companies participated in medical care plans at work; by 1997 only 76%. In 1980, only 26% were required to pay an employee contribution to medical plans for self coverage, and 46% for family coverage. By 1997, 69% were required to pay for self coverage and 80% for family coverage. The average monthly amount that workers had to contribute for self coverage increased by 350% since 1984, from $11.93 per month to $39.14, and from $35.93 for family coverage to $130.07 per month in 1997.
In 1982, medical coverage after retirement was available for 64%, but 1997 this figure had decline to only 33%. In 1980, 84% of the workers at medium and large companies were assured defined retirement pension benefits, by 1997 only 50%. The Clinton administration’s so-called "reform" of social security has increased the age of eligibility for old age pensions from 65 to 66. If one considers that the average life expectancy of American males is 73.4 years, then this amounts to better than 12% reduction in social security benefits. It is indeed a strange economic boom in which the condition of the working class continues to decline steadily.
Stock Market Reflects Economy’s Ill Health
Likewise, the gyrations on the stock markets belies the propaganda of capitalist prosperity. The stock markets have zigged and zagged for a good year and a half, but since the beginning of the years everything is down. With the NASDAQ index losing nearly 30% of its value in between March 13 and April 14, as highly touted technology stocks plummeted precipitously, even bourgeois commentators have tired of using the dismissive "correction" cliché to hide the seriousness of the situation. In the first place the soaring stock markets were never a reflection of economic health, and the difficulties of the market in the period of state capitalism no longer carry the same economic impact as they did in the previous period. We have had an horrific global economic crisis for more than three decades without the harbinger of a panic on Wall Street.
Under the sway of the global economic crisis of overproduction in the past thirty years, we have seen the spectacular elimination of entire sectors of the economy, the spreading of industrial desertification, the amputation from the world economy of whole regions of the planet, and the collapse, one after the other, of the economic "models," variously termed "dragons" and "tigers," of capitaluot;tigers," of capitalist growth. In addition, the collapse of stalinism in eastern europe has not translated into a utopia of solvent, new markets capable of absorbing capitalism’s overproduction. The spectacular diversion of capital from the spheres of production into the stock market is a consequence of the crisis of overproduction. As the ever shrinking market proves incapable of facilitating the realization of surplus value, capital is pushed towards all kinds of speculative schemes, creating a virtual casino economy. In the context of this orgy of speculation, the stock market has more and more resembled a huge pyramid scheme, where fortunes are made, at least on paper – literally out of thin air – and lost equally easily in the blink of an eye. Investor’s earnings bear no relation to the economic performance or value of the company, i.e., its performance, but rather are gained from the inflated stock prices paid by new investors who buy their stocks.
The price/earnings ratio for internet companies often runs at astronomical levels ranging between 100 and 200! The precipitous drop in internet stocks demonstrates yet again that while the bourgeoisie can cheat the law of value for a while, it cannot do so forever. The speculation on the stock market in high value stocks that had no relation to ththat had no relation to the profitability of the companies involved was just one way of cheating the law of value. Many of these wonder companies are will soon go under, demonstrating the fictitious nature of the "new economy" so highly promoted in bourgeois propaganda. The degree to which workers have been drawn into these get-rich quick schemes or are counting on pension funds linked to the stock market performance, the current stock market volatility will contribute to increasing pressure on workers’ standards of living.
From the working class’s perspective, the economic situation continues to worsen, whether there is boom or recession in the short term, because of the continued worsening of capitalism’s global economic crisis.