The US Economy

There is no place to hide now. According to the December announcement by The National Bureau of Economic Research - the agency responsible for dating the beginning of a recession in the US - the American economy has been in recession since December 2007.In other words, for most of last year Mr. Bernanke, Mr. Paulson, the White House and Congress were busy denying the existence of, and trying to avoid, a recession that hadalready started!

This is 2009 and with the new year comes a brand new president predicting that the economy will get worse before it gets better, a new congress ready to act where the past one fumbled, and a great new economic team educated at the most prestigious American institutions, with fresh ideas on how to save capitalism from catastrophe. Yet given the fact that so far the bourgeoisie has failed to contain the crisis, the odds for Obama's success are definitely not good.

The ruling class likes to call the period of time that goes from one recession to another a "recovery." What was unique about this alleged period of capitalist "prosperity" was that the living conditions of the working class actually continued to deteriorate at an alarming rate.

For over a year now American capitalism has gone through a protracted economic malaise of proportions unseen since the Great Depression of 1929-35.  There isn't a month that passes without a dramatic new event in the life of the system, from head-spinning gyrations in the stock markets, to the widespread failure of the most reputable financial institutions, yesterday's symbols of capitalism's alleged vitality.  And things have just gotten worse since the summer!

Since the collapse of the housing bubble at the beginning of 2007 economists and government representatives have been betting on the odds of a recession in the US economy. Currently we are mid-way through 2008 and still the ‘experts' have not made up their minds about its likelihood. Meanwhile the signs of crisis are everywhere...

On February 28th, even though he acknowledged the risk of an economic slowdown, President George W. Bush declared, "I don't think we're headed for a recession...I believe that our economy has got the fundamentals in place for us...to grow and continue growing, more robustly than we're growing now. So we're still for a strong dollar."

The summer has not been a good season for American capitalism. The instability of the financial markets, the credit crunch,  the roller-coaster of the stock market, the housing bust, the record fall of the dollar's value,  all show that the American economy continues sinking deeper into trouble.

There's plenty of evidence that capitalism kills...in the imperialist wars that are the hallmark of capitalist decadence for over 90 years, in the grinding poverty that shortens the life span of millions of people, in the diseases and inadequate medical care that afflict society,  and in the inhuman living conditions that people are forced to exist in. The month of August included several stark reminders that capitalism also kills at the workplace...

The recent stock exchanges convulsions (see article on front page) pose the following question: whether the approaching open recession, which everyone agrees is likely, is part of the inevitable up and down pattern of the capitalist economy which is fundamentally sound, or whether it is a sign of a process of inner disintegration and breakdown, integral to capitalism, that will be punctuated by more and more violent convulsions.

Until very recently the dominant message conveyed by the bourgeois media has been one of general optimism for the continued health of the American economy. The main economic indicators pointed to a continuation of the expansion phase of the so-called economic cycle. For all of 2006, the growth of the Gross Domestic Product (GDP) stood at 3.3 percent, the third straight of year 3+ percent increase. At the same time, other leading economic indicators, such as unemployment stood officially at 4.6%, inflation at 2.5%, both of which are considered to be signs of economic health by bourgeois economists, particularly in comparison to European economies.

The pensions of American workers face an unrelenting attack as part of the ruling class’ austerity program aimed at lowering the standard of living in order to make the working class bear the brunt of the deepening global economic crisis and to finance US imperialism’s military interventions throughout the world...

The current media blitz in the US about social security “reform” is the latest installment in a quarter century of austerity attacks against the American working class. American capitalism has been implementing austerity measures since President Carter first began talking about the “economic malaise” during the period of double digit inflation in the late 1970s.

As the American bourgeoisie began its lavish preparations to inaugurate President Bush’s second term in the White House there didn’t seem to be much open worry in the administration about the state of the American economy. 

Despite the lowering of the dollar and the increases in oil prices, the specialist economic forecasters are reassuring themselves with the positive rates of growth for 2004: 4.7% for the USA; 3% for Japan; 1.6% for the Eurozone; 9.1% for the first three quarters of 2004 for China. How do we interpret these results? Is the world economy getting better? Can the United States, and above all China, presented by the bourgeoisie as the new Eldarado, be the locomotives of the world in order to re-launch the economy, including that of Europe?

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.

The war in Iraq is being used by the American ruling class as a pretext to ram austerity measures down the throats of the working class. The attacks on the workers’ standard of living were actually initiated by the Bush administration last year, and have escalated sharply this year, constituting the most significant degradation of working class living conditions in more than twenty years. Patriotism and war propaganda are being used to push through these cuts with only minimal opposition. Not only is the working class paying for the war with the lives and physical well being of its young men and women in uniform on the battlefield, but it is being forced to endure a permanent decline in its standard of living to finance US imperialism’s war mongering policies.

After months of warning of a possible economic slowdown, the American bourgeoisie has suddenly acknowledged that its economy has in fact been in recession since last March, based not on the traditional capitalist economic criteria of two consecutive quarters of negative growth, but for the first time based on an admission that rising unemployment can be utilized as an indicator of economic decline. 

As the bourgeois media gave its gory accounts of the terrorist attacks in the attempt to rally the American working class behind its rulers’ war cry about the ‘necessity to unite behind the nation in its fight against terrorism’, it also subtly started to prepare the working class to accept sacrifices and belt-tightening of all sorts in the name of patriotism and the defense of the nation. For example early media reports following the NYC and Washington, DC carnage, conveyed the news that President Bush would have to put domestic policies on the back burner, and divert billions of dollars from Social Security and other social programs into the military effort. Numbed by the nationalist, patriotic propaganda blitz, this news was received without the least hint of opposition. The bourgeoisie wants to blame the accelerating economic difficulties on the terrorists, and to use patriotism to get the working class to accept the escalating crisis and its attacks on wages and the standard of living without a whimper. But this propaganda line just won’t wash.

For years the media painted a rosy picture of the state of the American economy. Today all the hype about never-ending prosperity seems a distant memory. The myth of the “new economy” and the “end of the business cycle” has unraveled. The media is full of stories bemoaning the deteriorating economic situation. Officially the country isn’t yet in recession, although there are few economists that hold fast to this view. Elsewhere around the world, the situation is not much better with increasing signs that world capitalism is heading towards a new global, open recession. The situation is actually a lot worse than they would want us to believe.

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.

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.

Earlier this year the American ruling class proudly announced the end to the post-September 11 recession it had only recently acknowledged. Very reluctantly, faced with worsening economic statistics, the US bourgeoisie admitted its economy had in fact been in recession since March of 2001. Nevertheless, soon after this sombre admission, the American bourgeoisie precipitously declared the end to the ‘shortest recession in American history’ and announced the beginnings of an economic recovery. Since then, we have seen corporate bankruptcies (including the continuing circus surrounding Enron, which, at the time, was the largest bankruptcy in US history), spiralling redundancies and stock market turbulence which clearly give the lie to health of the US ‘model’.

In the USA, the country always cited as an example of unstoppable growth and of an economy which has almost ‘wiped out unemployment’, 18% of the population, around 36 million people, live below the poverty line. Insecure, part-time and underpaid jobs have become the norm and there has been a continuous fall in workers’ living standards for ten years. In Britain, the industrial heart of the economy is more and more diseased, as can be seen with the crises at Rover, Ford and Harland and Wolff. All the official blather about how the ‘Internet economy’ will create loads of alternative jobs can’t change this.