Socialist Action /July 2001
The Economy Reels!
By JEFF MACKLER
When on June 27, Federal Reserve Chair Alan Greenspan
announced the sixth reduction in federal interest rates since Jan. 1, no
government official felt confident to predict that the staggering U.S. economy
would respond favorably.
Greenspan was compelled to record a continuing
decline in capital spending and productivity losses as U.S. corporations,
despite the most rapid decline in interest rates in U.S. history, saw no
reason to invest in modernizing profitless plants that were already close
to state of the art.
In the face of ferocious global capitalist competition
impelled by corporations that have already invested billions in productivity-increasing
technology, saturated world markets and declining profit rates are the norm
for capitalists worldwide.
The Japanese government, like the U.S. Federal
Reserve, has also lowered interest rates for the sixth consecutive time
until the point where they are virtually zero. The new Bank of Japan lending
rate for overnight loans to banks is 3.75 percent, down from 6.5 percent
in January. Yet the Japanese economy continues to stagnate and falter.
Economists at Morgan Stanley brokers report that
the decline in growth of world trade, from a 12.8 percent increase in 2000
to a projected 4.7 percent increase in 2001 is the sharpest in history.
The June 28 New York Times observed in an article
entitled, "No Fed Magic This Time for Corporate Earnings," that
"the problem is that global trade accounts for a growing portion of
world gross domestic product. The volume of world trade amounts to about
one-quarter of world output, double the share that prevailed in the 1970s.
As a result, declines in world trade will reinforce the downtrends in the
United States, Japan, and Europe."
Morgan Stanley's chief economist, Stephen Roach,
summarized the problem accurately: "The Fed can do little to restart
the global demand for goods. The Fed's fund rate at this point is not going
to temper global contagion. There's a new dimension to this downturn. Stage
1 was the United States; Stage 2 is the world; and Stage 3 is what's happening
in the world com[ing] back to hit the United States."
And the worldwide capitalist crisis has indeed
come back to hit the United States. U.S. businesses cut 271,000 jobs in
the second quarter of this year, the biggest three-month decline in employment
since the 1991 recession. The Bureau of Labor Statistics reports that about
1.1 million jobs were lost in the past six months.
According to the Labor Department, the U.S. jobless
rate rose to 4.5 percent in June. Of course, government unemployment rates
are far from accurate since they exclude those whose unemployment insurance
has ceased after the 26-week period, or who are "discouraged"
from looking for work. In past years, this has accounted for as much as
an additional 7.5 percent unemployment rate.
To be added to these figures are the additional
millions of part-time workers who are counted as officially employed because
they have paid into the social security system at least once in the past
year.
The recession in the U.S. economy has hit the most
vital sectors. U.S. industrial output declined for the eighth consecutive
month and plants operated at the slowest rate since 1983, according to the
Federal Reserve.
"It's a disaster," said David Orr, of
First Union Bank. "The sustained decline exceeded the six-month drop
in the last recession in 1990-91."
Government efforts to prettify economic prospects
focussed on a May rise in the Consumer Price Index of "only" 0.4
percent and of a slight increase in consumer spending. But the significant
increases in food and energy costs are not included in this index and thus
mask the real inflation that the government's statistical experts seek to
hide.
And consumer spending is a contradictory phenomenon,
with the average U.S. adult's savings at an all-time low-actually a negative
savings rate-while the average credit card debt of $8100 stands at a record
high.
The recent $1.34 trillion bipartisan tax cut engineered
by Congress serves as history's largest example of corporate welfare, an
outright effort to boost corporate profit rates at the expense of working
people. Yet the overall economic decline has now raised fears that this
10-year congressional giveaway program is no longer viable since new government
predictions of continued surpluses have been shattered.
The free-trading corporate elite, backed to the
hilt by "their" government, have pulled out all the stops to place
U.S. industry in the most competitive positions worldwide. But U.S. capitalism's
major competitive opponents in Europe and Asia have sought to meet the challenge
at every turn. The result has been the spectacle of global capitalism gone
mad, reducing much of the underdeveloped world to near ruin and now threatening
to do the same in the major industrial centers.
The World Trade Organization and related international
financial institutions were designed to mitigate the conflicts between the
major competitors that have today come to the fore. But the unceasing drive
for profits at the expense of human life itself has brought the great economic
powers to an impasse.
Capitalism's very capacity to increase productivity
beyond human imagination is at the same time its Achilles heel. We are witness
to a world amuck in new factories that stand idle while workers are without
jobs, a world with warehouses filled with goods that cannot be sold at a
profit, and a world where gigantic agribusiness receives subsidies to refrain
from producing crops while billions starve.
The great free-trading George Bush is compelled
to seek fast-track legislation to engineer trade agreements with minimal
congressional interference while at the same time being forced to agree
to amendments to protect inefficient U.S. steel products from foreign competition.
In the end, when WTO-type treaties regulating capitalist
competition stand in the way of capitalist profits, they will be discarded
by the leading contenders when their vital interests are at stake. In a
similar manner, the Bush administration announced its rejection of the already
ineffective Kyoto global-warming accords and the U.S.-Soviet treaties restricting
nuclear weapons.
More recently, the June 27 decision of the U.S.
Court of Appeals to remand to a lower court and a different judge a decision
that threatened Microsoft's monopoly practices is instructive. U.S. law
to the contrary, in the era of frenzied global competition and megamergers,
monopoly is the rule, not the exception. Capitalist law is subordinate to
capitalist profit.
Microsoft, the corporation that produces the operating
systems on most of the world's computers, showed a stock price increase
of 66 percent in the very period when a lower court threatened to break
it up into lesser components in order to increase competition.
The deciding judges in the case are well aware
that U.S. law is subordinate to profit, especially when the stakes are high
and the United States is struggling to retain its superior position in world
computer manufacturing.
The conclusion is obvious. The United States can
retain its position as the world's chief imperialist power only at the expense
of its international rivals. To achieve this, U.S. capitalism is prepared
to overheat and destroy the world's environment and attempt to fill the
far reaches of space with devastating nuclear weapons capable of ending
all life on earth.
Nuclear war and world conflagration are the ultimate
expressions of the mounting economic conflicts that have no means of resolution
other than vanquishing one's competitors. This has been capitalism's history,
including two world wars and innumerable interventions the world over.
The only rational alternative is socialism, a truly
democratic world society in which human ingenuity, technological progress,
and the world's abundance serve to meet the needs and aspirations of the
vast majority.
Socialist Action /July 2001 |