The events of July and August all came in such rapid succession that the ruling class seemed dizzied by their speed and depth: the debt-ceiling crisis, the downgrading of the U.S. creditworthiness from AAA to AA+ by Standard & Poor, the plunges and volatility on the stock markets, the news of the insolvencies of countries like Spain and Italy and the impasse at the IMF over what to do, the flight of capital away from U.S. Treasury bonds to gold. The ruling class is running out of arguments with which to reassure an ever more uncertain working class with hopes for a better future. To add insult to injury, its options about how to address an ever-aggravating economic crisis are also wearing thin. What is going on?
The credit crunch that followed the housing bubble burst of 2008 threatened the freezing of economic activity so seriously that the bourgeoisie was obliged to bring in recovery plans in the form of the ‘economic stimulus package’ and shore up the financial industry by absorbing the banks’ toxic assets and bailing them out. The little respite these measures offered are at the root of the so-called ‘recovery’ flaunted for the last two years. From the point of view of the working class, as it continues to suffer the brunt of the crisis, it is obvious there has been no ending or solution to its worsening living and working conditions. As capitalism is reaching the end of its tether, and the measures used by the ruling class to slow down the worst effects of the crisis wear out, the working class can only expect more brutal attacks against it.
How is the working class faring?
On Friday, September 2 the government reported on hiring as the Bureau of Labor Statistics released its figures for the month of August. The New York Times wrote the following headline on the front page of its Saturday, September 3 edition: “Zero Job Growth Latest Bleak Sign for U.S. Economy”. The dismal realization at reading the figures is that new people entering the labor market will not be absorbed and that the unemployed will continue to stay unemployed for the foreseeable future: the first time this has happened since the 1940s. It is important to recall that the official unemployment rate, steady at 9.1%, is based on the number of people who have been actively looking for a job in the previous four weeks. It does not include discouraged workers who have given up looking for a job, and those who are employed part time but would be working full time. Adding these, the unemployment rate immediately jumps to 16.1%, and even this is a very conservative figure, because it counts as employed the non-civilian population absorbed in the military.
What is also very worrisome is the long term characteristic of unemployment in the present recession. Job losses have not only been worse since the beginning of the last recession than in previous ones. It is taking much longer to find a job. The ‘zero growth’ figure just released confirms the chronic state of malaise the economy is in. Taking a look at the composition of the working class in America, the brunt of unemployment is carried by the Black population, who experienced an increase in unemployment from 16.2% to 16.7%, once again confirming the chronic illness of capitalism, utterly incapable of lifting the sectors of the population that historically have been disadvantaged out of their bleakness. Hispanics follow suit, with 11.3% unemployment rate. The other very telling demographic figure is that regarding youth unemployment, standing at 25.4%. In the context of an economy that has stalled and is not hiring, this creates the unprecedented condition in which employed parents who still rely on a pension or social security check will have to worry about the financial stability of their children as their parents move into retirement.
The economy continued to shed jobs in the government sector, and manufacturing and retail, which benefited from a little respite last year, also started to shed jobs. This trend will continue, as the only sector that added jobs is agriculture and the harvesting season is drawing to an end. These figures are disheartening enough, but as to the ‘lucky’ ones who still hold a job, going to work is becoming more and more an activity bearing resemblance to torture, with intolerable conditions of oppression, control, and intensification of exploitation. Teachers have especially been victimized and blamed for their ‘privileged’ wages and benefit packages, but their conditions of work have particularly deteriorated since the start of the crisis. It is no surprise that we find in the statistics released by the Bureau of Labor this figure: the number of quits almost equals the number of layoffs, with quits highest in education! This suggests that the conditions of work can be so extenuating that a worker may rather choose the prospect of financial instability over unbearable oppression at work! Faced with the reality of the crisis, bourgeois economists are now projecting downward their growth figures.
How is capitalism faring, and what will the ruling class do?
These convulsions of the economy are neither the result of corporate greed or stock market speculation, as we were told in 2008, when they first emerged to the surface. Their roots are not to be found in ‘consumers’ recklessness in contracting debts they could not repay. Neither are they the cause of the incessant squabbles in Washington between factions of the U.S. ruling class divided by the dilemma of what to do in face of the most serious recession in U.S. history. These factors certainly aggravate the situation, but rather than being the cause, they are a symptom of a malaise for which the ruling class has no cure. As we wrote in International Review 133: “For the last four decades …the overall economy has only kept a semblance of functionality thanks to systematic state capitalist monetary and fiscal policies…During these decades of crisis the economy has accumulated so many contradictions that today there is a real threat of an economic catastrophe.” (‘The United States - locomotive of the world economy... toward the abyss’, 2nd Quarter 2008.)
The monstrous public debt of states, the federal budget deficit, the private national debt, the huge trade deficit are all the result of the capitalist state intervention over the course of the last four decades to shore up its ailing economy. They have now brought capitalism to the point where it has exceeded its ability to sustain its indebtedness. The multiplicity of the contradictions accumulated over the last four decades have come to a head all at once and the ruling class is incapable of coming up with a coherent plan. Austerity plans risk to aggravate an already weakened economy, causing consumption to further become restricted, and exacerbating the risk of bankruptcies. Pumping money into the financial markets –the central bank’s policy called Quantitative Easing of flooding the financial system with cash through direct purchases of Treasury debt, to the tune of $600 billion as of the latest such action—will cause a depreciation of the value of money in circulation, and inflation. Yet, the ruling class will have to continue to rely on the state apparatus to massively intervene in the economy and apply more of the same medicine, already a veritable poison. But more financial and monetary manipulation will only postpone the day of reckoning for a little longer. The central bank, for instance, may start selling off United States Treasury securities set to mature soon and buy the ones that mature later in an attempt to increase demand for longer- term issues. In this way, their price would rise and the interest rates on those securities fall, making it cheaper for the U.S. to finance its debt. But this can only encourage speculation in riskier assets as investors seek higher returns in the stock markets as long-term Treasuries wouldn’t offer a great return.
The growing incoherence the American ruling class finds itself in is also exemplified by the speech made by the central bank’s chairman, Ben Bernanke on August 26, in Jackson Hole, Wyoming when he said that the present state of the economy had not deteriorated to the point where a third round of Quantitative Easing was granted. A few days later, the statistics released by the Bureau of Labor once again are increasing pressure on American capitalism to go to the press and print more of the green back. But this will not cure this terminally ill patient, moribund capitalism in its death throes. Why not?
As we wrote in the International Review 144: “…capitalism suffers genetically from a lack of outlets because the exploitation of labor power leads to a creation of a value greater than the outlay in wages, because the working class consumes much less than what it produces.” (‘Capitalism has no way out of its crisis’, 1st Quarter 2011.) Workers and capitalists cannot constitute enough of a market for capitalism to restart its process of production. And a market is necessary in order to valorize the part of surplus value extracted through the exploitation of the working class and destined to reproduction. Exchanging value among capitalists loses sight of the fact that capital must expand, not consume, its value. As to the workers constituting a solvent market, the most powerful –and mortal-- contradiction of capitalism is the fact that as capital struggles against the tendency of the rate of profit to fall as a result of competition, it improves technology, thus displacing workers and increasing productivity without a corresponding rise in wages. This results in a contraction of demand, as the workers’ ability to consume becomes more and more restricted. The current talks about anaemic spending, lack of investments, decrease in productivity express this fundamental contradiction of capitalism. Under these conditions, capitalism does not, and cannot have a solution to its crisis. As it imposes its oppression and its brutal austerity plans against the working class, the bourgeoisie risks to accelerate the time when the workers of the world take capitalism head on and consign it to the dustbin of history.