Economic crisis continues to deepen
One of the main ideological themes used by the dominant class during the 1990s, in order to maintain its ideological domination over society, was the supposed economic health and prosperity of its system. According to this fable, following the recession of 1990-91, the American economy enjoyed the longest period of recovery in history. For some years capitalist acolytes even declared that, thanks to the new communication technologies, their system had arrived at an era of permanent prosperity, and that the so-called "business cycle" had been definitively surpassed.
Then, in 1997-98, the explosion of the once exemplary economies of the East Asian "tigers" and "dragons" sent shock waves across the globe. Tales of capitalism's imminent collapse and an open world recession filled the media. Nevertheless, the main capitalist countries-with the exception of Japan-managed to stay out of recession for a couple more years giving some continued credence to the tale of a booming capitalism.
Today there is no more chatter about the wonders of the "new economy" energized by the "internet revolution." It seems so long ago that Bill Clinton bragged: "America's economy is the healthiest in a generation and the strongest in the world." By all accounts, world capitalism is experiencing once again a new fall into the abyss of its chronic economic crisis. All the major economies of the world are officially in open recession or just limping by.
At the center of this new downfall of world capitalism is the American economy-by far the biggest in the world. In the summer of 2001, after months of warnings about a possible economic slowdown, the bourgeoisie suddenly recognized that its economy had been in recession since March of that year. Skyrocketing unemployment and the wave of corporate bankruptcies made it impossible for the bourgeoisie to continue preaching the fiction of a healthy economy, even though by its own account, the economy had still not qualified for an official recession, which the economists define as two consecutive quarters of negative growth. Then in the winter of 2001-02, the bourgeoisie suddenly had a change of heart, and magically the recession was officially over as a new myth was born: the US economy has just gone through its shortest and mildest recession in history!
However, no amount of optimism and economic manipulation can hide the severity of the recession that the US is currently experiencing. Even the normally deceiving economic indices that the bourgeoisie uses to evaluate the state of its system don't leave much room to brag about the health of the economy. There are so many black spots that some economists are talking of the dangers of a "double dip recession". For instance:
- Unemployment: The economists can talk all they want about the ongoing recovery, but for people that have lost their jobs and can't find a new one it feels like a recession. According to the Labor Department, there are almost 3 million people nationwide that have been out of work for at least 15 weeks, up more than 50 percent from a year ago. From this 3 million, half have not worked in at least 6 months. The difficulty in finding a new capitalist willing to exploit you once the previous one has decided to "let you go" is not a new phenomenon, but has been a general trend of the last 30 years of chronic economic crisis. When the jobless rate was around 6 percent in 1970 and during the 1980's, as it is supposed to be today, the average length of unemployment was 10 to 12 weeks. In August, according to the Labor Department the average length of unemployment was 16.2 weeks. The impact of this growth in long-term unemployment is causing financial havoc for the laid-off workers. Many who have not worked for months have begun spending retirement savings that were already diminished by the stock market's fall. Others are considering taking low-wage jobs at a fraction of their old pay. Moreover, as usual, the bourgeoisie severely underestimates the number of workers out of a job. Officially, the unemployment rate is floating around 6 percent of the labor force. But, by the "official" bourgeois definition, a worker is only consider unemployed if he/she is receiving unemployment benefits, or is actively looking for a job. Thus, by their own account, 2 million appear to have dropped out of the labor force in the last two years, no longer looking for work and thus not counted as unemployed.
- Fall In Industrial Production: Industry-the real heart of the capitalist economy-has been, according to the economists' statistics, the sector of the economy hardest hit by the recession. Much of the talk about "recovery" has been based on industry's sluggish, but steady rise since last January. Thus, when the Federal Reserve reported that industrial growth stumbled in August, some economists could not avoid talking about the dangers of falling back into recession.
- Fall In Consumer Spending: Just a month ago, a New York Times economic reporter claimed: "One big reason economists remain optimistic that neither the national economy nor manufacturing will backslide into recession is because consumers, whose spending accounts for two-thirds of economic activity, have been holding up amid the economic turbulence." However, although consumer spending is not at all a reliable measure of the state of the economy-individual spending can often be buttressed by consumer debt that will never be repaid- it is symbolic that even this economic indicator is headed downward. Officially, there is a slump in retail sales. In August, retailers announced one of the worse "back-to-school" sale seasons ever, raising worries about the upcoming holiday season. Meanwhile, the real estate market-after a growing wave of speculation that has seen housing prices skyrocket-is starting to cool off amid rising fears of an unavoidable bust of the real estate bubble.
- Stock Market Instability: Ever since the stock market speculation bubble burst over two years ago, things have not been going well for this sacred symbol of capitalism. Last July, the overall market hit a five-year low; and to this day, it has not recovered its previous value, prompting some economists to compare the present stock market slump to the days of the Great Depression.
- Corporate Bankruptcies: The list of bankruptcies is quite long: first were the once celebrated start-up "dot-coms"-many of which never had more than a "virtual" existence. Then came a number of filings in the technological and communications sector. Moreover, in the months following the Enron collapse, many of the titans of American capitalism have been toppled, while others are struggling to avoid bankruptcy. Over 1000 American companies have now restated their earnings since 1997, admitting in effect that they had previously published wrong or misleading profit statements. The existence of these phony accounts means that much of the profit growth of the late 1990s, the ostensible justification for Wall Street's celebrated heights, was equally phony. It would be a mistake to think that this malaise is due only to the greed and "corporate irresponsibility" of a few bad CEOs. In fact, what these so-called "corporate scandals" reveal is a widespread attempt to cheat capitalism's law of value, the very fundamentals of the bourgeoisie's own economic system.
- The Return of the Federal Budget Deficit: Driven largely by the recession and the so-called sluggish recovery, the Federal Budget deficit is projected to reach 1.5% of GDP this year. And as the price-tag of the permanent war in which the American bourgeoisie is currently embarking escalates, the myth of balanced budgets and fiscal responsibility-which the whole bourgeoisie was so fond of just over a year ago-will continue to go up in smoke.
However most of these "economic indices" say little of the impact of the crisis in the working class and other non-exploiters strata, which are really as always bearing the brunt of the economic difficulties of the bourgeoisie. By the bourgeoisie own account "the recession that began in March 2001 has reduced the earnings of millions of Americans -Census Bureau annual report on income and poverty NY Times 9/250-." Of course not every body is suffering the same because while the working class has seen its salaries decline "the gap between rich and poor (has) continued to grow -ibd-."
This document also says that the number of so-called poor Americans rose last year to 32.9 million, an increase of 1.3 millions, reaching 11.7 percent of the total population of the country.
Marxist revolutionaries have repeatedly insisted that so-called recessions are not just a bump in the road of an otherwise healthy economic system, the downturn of the so-called "business cycle." For us, recessions today are nothing more than a particular moment-one more step into the abyss-of the chronic economic crisis of overproduction that a decadent capitalist system, unable to create sufficiently solvent markets for its products, is condemned to suffer. Moreover, coming in the wake of all the propaganda of the 1990s about the "exuberant American economy", this recession is quite important. In particular, it lays bare the feeble basis upon which the prosperity of that decade was built: the stock market speculation; the explosion of personal debt in order to stimulate a consumer binge that allowed overproduction to be hidden to some extent; and the corporate debt that financed a spree of investments in communication technology that have proven to be, to a good degree, useless; being but the most obvious examples of the palliative measures that the bourgeoisie has been forced to adopt.
The stock market bubble: a symbol of the veritable "casino-economy" that characterizes, not the health of capitalism, but its total bankruptcy.
Despite all the talk of "recovery" the fact is that all of the bourgeoisie's attempts to invent various "medicines" with which to revive its economy have been largely ineffectual. Despite the Federal Reserve having lowered its prime interest rate to historic lows, there has not been a revival of the credit market. The effects of the "shot in the arm" given to the economy by the Bush administration's engineered tax cuts, have been, in the long-term, inconsequential. Further, the effects of the rise of military spending necessary to prosecute its "war without end," have yet to hit the economy with their full force.
ES, February 2003.