During the 1990's the bourgeois media portrayed the US economy as an oasis of unlimited prosperity. Today this talk of a never-ending, booming economy is heard no more. The days of the "longest running economic recovery in US history" - as they used to call it - seem now to be gone. The debate now among bourgeois economists is not about the likelihood of a recession, but rather about how bad it will be, whether there will be a hard landing or a soft one. There are even some so-called pessimistic economists who say that there is already a recession, particularly in the manufacturing sector, the central industry of the economy.
An economy gone sour
Certainly there is not much to brag about in the present US economic situation. The official figures themselves can't hide an increasing deterioration of the economic indicators that the dominant class uses to measure the health of its system. For instance there is a virtual collapse of economic growth, from about 7% annual rate in the last half of 1999 to a 1.8% annual rate in the last six months of 2000. In the fourth quarter of last year, the rate slowed to a meager 1.4 percent, the lowest since the second quarter of 1995. So far for 2001, Federal Reserve chairman Alan Greenspan estimates that economic growth has declined to near zero. For its part, Wall Street, the 1990's miracle machine that produced riches out of thin air is lately looking quite humble. The same "analysts" that peddled the virtues of the stock market before are now referring to last year's plunge in technology and Internet stocks as "a bubble that burst." It is quite symbolic that the big losers of this explosion are the infamous "dot-coms," the Internet companies that were supposed to epitomize the bright future of the "new economy," that according to the fashionable mumbo jumbo of the bourgeoisie characterizes today's capitalism. For the last year these companies, many of which were an aberration, never turning out profit, have been going belly up one after the other, making the myth of a healthy American economy collapse like a house of cards.
The reality is that - as we have often insisted in the pages of Internationalism - the US "booming economy" has been from start to finish a sick organism, bred by an explosion of private debt, growing commercial deficits and a tremendous wave of speculation on the stock market, which helped sustain growth and created a façade of general prosperity.
As bad as the situation of the US economy is, the dominant class is still not calling it a recession. According to its definition, a recession will only start after two consecutive quarters of negative economic growth. The truth of the matter is that official recession, or not, the working class is already suffering - like always, bearing the brunt of the economic troubles of the bourgeoisie. On the job front it is a blood bath. January's layoffs -142,208- are the highest in 8 years, rising 6.4 percent over December's 133,713 job cuts. And these jobs lost are not MacDonald's or busboy jobs, but positions in sectors where, on average, workers can make a living salary. For instance in January the auto sector layoffs reached 34,959, while the telecoms, E-commerce and computer companies accounted for 44,851, about 32% of the total.
At the command of the state, the economic witch doctors of the bourgeoisie are hurriedly trying to breathe some life into the ailing economy. The Federal Reserve is busy playing its monetary games, dropping another ½ percent of its benchmark short-term interest rate at the end of January, on top of the half percent already cut at a few weeks before. The engineering of a reduction of a full percentage point in less than a month by the Federal Reserve under Alan Greenspan, who one bourgeois commentator put it, "never before…. moved this fast to rescue the economy from a slide," bears testimony to the worrisome situation. For his part, the new president, George W. Bush, is pushing for a tax cut, which will supposedly be central in jump-starting the moribund economy.
However, the bourgeoisie doesn't seem to be very optimistic about the immediate impact of either its monetary or fiscal policy in preventing the downward economic slide. The bourgeois analysts themselves are recognizing that the lowering of interest rates are at best encouraging people to play the stock market again, while the big banks, overburdened already by bad debts, are for the moment unwilling to open wide a flow of money that very likely will never be paid back. The irony of the situation is that in order to bring back some semblance of prosperity, the bourgeoisie has had to resort to a mechanism that the Federal Reserve had already found unsustainable and was trying to curtail when it started raising interest rates at the end of the 90's. Thus, faced with the present convulsions and the perspective that things will get worse rather than better, the bourgeoisie again resorts to a policy that will foster renewed speculation. Nor is there much enthusiasm for tax cuts among the bourgeoisie either. Some are arguing that it needs to be retroactive to have any impact in the slowing economy. Probably the real reason of this lack of enthusiasm is the fact that they know that, given the present economic troubles, the projected budget surpluses for years to come - the basis for the proposed tax cuts - may now never materialize at all. Of course the working class doesn't have much to be enthusiastic about in this tax cuts - the average 8 dollars more in their weekly paycheck they would get is nothing to cheer up about.
Thirty years of economic crisis
Nonetheless, despite the fact that the dominant class is more or less openly acknowledging that something has gone wrong with its economy and that things will only get worse, it is still promoting its mystifying way of looking at the world, only telling half truths. It wants us to believe that its present troubles are nothing but a normal phase in capitalism's economic cycle, after which a new period of prosperity will follow, and everything will continue as before. Nothing could be farther from reality. What present bourgeois economists call recessions are not the classical economic crises suffered by capitalism during the 19th century. Then, each cyclical decline of the economy was followed, through the expansion of the world market, by a new expansion of production reaching higher levels than the previous period. Today this way out is not possible. The world market been saturated since the beginning of the 20th century, opening up the historical crisis of capitalism. The youthful periodical crises of the bourgeois system of production have been transformed into a chronic economic crisis of a historically decadent system, which has nothing to offered humanity by cycles of crisis, wars, and reconstruction.
Since the end of the 1960's, following the "economic boom" of the period of reconstruction after the devastation brought about by the barbarism of WW II, capitalism as a whole has been confronted by an ever deepening worldwide open economic crisis, to which the bourgeoisie can only offer artificial solutions. Particularly the lack of solvent markets, in which it would be possible to realize the surplus value produced, has led the bourgeoisie to the creation of fictitious markets through the permanent abuse of credit. Thus for the last three decades, each "recovery," following a so called "recession' has been made possible only by an increasing growth in public and private debt. The result is that each one of the phases of convulsions has meant a more violent fall into the abyss, while each moment of recovery softens the fall. Nevertheless, both are situated in a dynamic of progressive collapse.
In this context the present troubles of the US economy are nothing but a moment in the general economic crisis that the whole system of capitalism has been confronted with for the last three decades. The years of "unprecedented" recovery after the world recession of the early 90's, which we often heard about, was mainly reduced to the US, bearing witness to the depth of the world crisis of capitalism. The second largest economy of the world, Japan, has not been able to come out of recession, while the countries of Western Europe - the other centers of capitalism - at best have shown only very anemic rates of growth over the past decade.
At the end of the 90's the US bourgeoisie was able to avoid the cataclysm of the system threatened by the collapse of the economies of South East Asia in 1997-98 thanks only to a historically unprecedented speculative bubble. Investments in the stock market were turned into the only profitable investment. Families and businesses in the US were pulled into the aberrant mechanism of taking out debt in order to speculate on the stock market and using the stocks acquired as pledges in order to frantically buy goods and services. The "wealth effect," or, more accurately, the dilution of wealth produced by this speculative bubble, has been in fact the real motor behind the famous "unprecedented" longest recovery of the US economy.
As we said above, the bourgeoisie itself had already recognized even before the present troubles of the economy became apparent, that it could not go on forever sustaining growth through the speculative mechanism and was trying to prick the speculative bubble and "cool" down the economy. This attempt to engineer a soft landing of the economy, judging by the sudden change in monetary polices by the Federal Reserve at the beginning of this year, has not been totally successful.
Paralysis of growth, massive layoffs, credit crunch, rising inflation are all indicators of the beginning of a new convulsion of the US economy which will without doubt have a tremendous effect on a world capitalism already very much weakened by thirty years of open economic crisis.
During the 90's, while the bourgeoisie was celebrating the wonders of the "booming economy," workers experienced salary freezes, worsening working conditions, the dismantling of the welfare state - in short, an all out austerity attack, sugar-coated with the promise that they eventually would get their piece of the pie. Yet the only thing that workers saw rising was their debts and the hours that they have to work to keep up with the deterioration of the purchasing power of their salary being eaten up by chronic inflation. Now they are told that the good times are off for a while. Now they will be asked to continue tightening their belts and bear the austerity made necessary by the bad phase of "business cycle." More than ever the working class needs to give its own solution to the crisis of capitalism: fight on its own terrain against the attacks of the system, overthrow capitalism and all its bourgeoisie institutions.