Socialist Action /October 2001
Terror Bombing Sharpens Economic Crisis
By JEFF MACKLER
Only fools believed that the U.S. stock market would head in any direction
but sharply downward when trading resumed six days after the horrific Sept.
11 terror bombings in New York and Washington, D.C. But fools there were!
The Sept. 14 "Nightly Business Report" on television cited
a "gentleman's agreement" between Federal Reserve Board Chair
Alan Greenspan and several major U.S. brokerage houses.
Greenspan, to stave off a major collapse when the stock market was set
to reopen on Sept. 16, first huddled with elite corporate traders and then
announced, in advance of the market opening, a half percent cut in the Fed's
benchmark lending rate. This was the eighth rate cut in 2001, none of which
have proved capable of reversing the recessionary trend.
In return, the brokerage houses were to back off, according to the Sept.
18, New York Times, "from issuing negative investment opinions
on individual companies." The same houses supposedly pledged to refrain
from short-selling stocks, a method employed to reap profits as stocks decline.
Major corporations similarly "promised" to buy significant amounts
of their own shares on the open market.
Any finally, "economic specialists" and media personalities
urged the general public to rush into the stock market as a "patriotic
gesture," an act that would supposedly signal confidence in the U.S.
economy and government.
Hype and bluster aside, when the market closed on Sept. 16, it recorded
the largest point decline in history. The Dow Jones industrial average dropped
685 points, or 7.1 percent, to its lowest level since December 1998. The
next three days recorded an additional drop of 500 points
The Standard and Poor's index, the measure of 500 corporations that comprise
the heart of the U.S. economy, fell 5 percent to its lowest level in three
years. And the technology-heavy Nasdaq lost 6.8 percent on the day to register
a 70 percent loss since March of 2000.
Spinning the catastrophe in an effort to avert further losses, The New
York Times reported on Sept. 18, "Never before has a day in which
the stock market tumbled so far seemed like a good day. But yesterday was
a day unlike any other. The losses were smaller than expected, and they
reflected a surge of buying by ordinary Americans who were evidently convinced
that it was patriotic to be bullish."
America's ordinary "patriots" were sadly taken for a ride as
they paid good money for overpriced stocks that, as the day proceeded, were
slashed furiously in value.
New legislation to benefit the rich
Many on Wall Street were not as confident-sounding as commentators for
The New York Times. "There is no question that this terrorist
event will kick us over into a recession," warned David Jones of the
Aubrey G. Lanston brokerage firm.
But the terror bombing was not the real cause of the market's downfall.
The deeply troubled U.S. economy has been in free fall for some time now.
Last month's Congressional approval of a $1.7 trillion tax cut, largely
for the rich, proved insufficient to stimulate a U.S. and world economy
chiefly characterized by massive overproduction and ever declining average
rates of profit.
Finding the $1.7 trillion infusion (to be expended over the next 10 years)
wholly inadequate, Congress set out to prime the Keynesian pump further
with additional hundreds of billions in tax cuts for the corporate elite.
Looting the so-called surplus in the Social Security system was the prime
objective. The cuts were announced the day before the terror bombing.
Now the corporate looters are preparing legislation to further line their
pockets by eliminating the capital gains tax outright, a move they dared
only to dream of in years past.
Having reduced yesterday's "unprecedented" surplus to zero,
and with the country now running in the red, the Bush administration's Congressional
Budget Office admitted that the $9 billion they expected to take from Social
Security in June would today be "much higher."
But the scale of corporate disaster exceeds anything imagined by government
or corporate executives. The immediate Congressional infusion of some $50
billion into the CIA and military industrial complex following the bombings
amounts to a trifle when weighed against the unprecedented sums corporations
have lost.
Last month, for example, a single corporation, the fiber optic cable
and communication equipment manufacturer, JDS Uniphase, announced losses
of $40 billion in a single quarter. Its national and international competitors,
also faced with saturated markets worldwide, announced lower but similarly
stunning reversals in the tens of billions of dollars. Tens of thousands
of jobs in these industries have been eliminated.
The combination of the massive decline in the stock market and the looting
of Social Security portend future reductions in the retirement programs
of millions of American workers.
On Sept. 20, government and airline officials announced huge layoffs
in the airlines industry, with 70,000 workers to be fired by the major airlines
(20,000 each by American and United), and as many as 30,000 to be placed
on the block by the Boeing Corporation, the leading airplane manufacturer
But a significant portion of the layoffs were expected before the New
York and Washington, D.C., terror bombings. Like most of the major highly
competitive industries in the U.S. and worldwide, massive competition and
declining profits have compelled increasing numbers of mergers and consolidations
designed to win the deadly capitalist game of survival of the fittest.
TWA, recently swallowed up by American Airlines, planned major layoffs
long ago, and negotiated major wage, benefit, and retirement cuts with compliant
union bureaucrats, supposedly in return for continued operation.
The Labor Department announced in early September that the nation's official
jobless rate had "unexpectedly" risen by nearly a half percent
to 4.9 percent. Prior to September, the monthly rate of job losses for 2001
was 135,000. The marked rise in September indicates that this rate has now
tripled or more.
The rate of firings is expected to increase in coming months. Davis Wyss,
economist at Standard and Poor's, predicted in the Sept. 20 San Francisco
Examiner, "We're looking at an additional 1 million in job losses between
now and the end of the year." The year's totals may well record that
2.5 million workers were fired by capitalism's "patriots."
Government figures, however, are not accurate measures of real unemployment,
since Labor Dept. statistics are manipulated to exclude workers who are
no longer eligible to collect unemployment insurance, having exceeded the
26-week limit.
In government double-speak jargon, you're only unemployed if you're collecting
unemployment insurance! When the number of part-time and occasional workers
whose income is far below subsistence is added to the real figures, the
U.S. unemployment rate is similar to that of Western Europe-where double-digit
rates have been reported for decades.
Each month, government leaders hype the media by touting this or that
sector of the economy that is supposedly not in decline. Last month it was
consumer spending, the index that supposedly points to overall economic
stability. But with the rapid rise in unemployment associated with growing
numbers of plant closures, production cutbacks, and ever-declining corporate
investments, Americans are spending less and less, as the new figures will
readily demonstrate.
Similarly, Alan Greenspan points to the "wealth factor," a
government invention designed to explain why consumer spending has not sharply
declined. This still unmeasured criteria is supposedly an economic reflection
of the fact that the market value of homes is at a high point in U.S. history,
creating the illusion that homeowners have more money, in the form of home
equity, to spend than they actually earn.
A part of this equity, according to Greenspan, will be liquefied-that
is, converted through bank loans to cash that will be spent on purchases
that boost the general economy.
But government figures now demonstrate a "softening" in the
price of homes, not to mention the fact that many of those who bought at
inflated prices can no longer afford to pay the bloated mortgage payments
that were within their reach when they had jobs. Mortgage foreclosures and
bankruptcies are on the rise to say the least.
Domino effect in unemployment
Despite the sharpest decline in federal interest rates in U.S. history,
few corporations have moved to use cheap money to invest in new technologies
that in past decades were the prime factor in winning a larger share of
the world market and, at least for a time, reaping superprofits. Economic
growth slowed to a near standstill, 0.2 percent last month, as compared
to 5.7 percent the same time a year ago.
Despite the fact that the world's capitalist governments are backing
their own ruling classes with subsidies of every kind imaginable, ferocious
national and international competition, accompanied by unprecedented megamergers
and concentration of capital, have reduced average profit rates to levels
comparable to the period preceding the 1929 Great Depression.
While a 2.4 percent increase in corporate investment was projected for
2001, the figures were revised downward in early September to a 2.0 percent
decline. Manufacturing has declined for the past 14 months. From the capitalist
vantage point, it makes no sense to invest in new plants when state of the
art facilities must be closed.
Profit margins have narrowed and/or disappeared, with major players registering
massive losses while lesser competitors are driven out of the market outright
or absorbed by the few giants remaining in each field.
The domino effect is now noted by every economic commentator. When Qwest
Communications fired 4000 workers on Sept. 19, major corporations that sell
to Qwest, including Lucent, Nortel, and Ciena, were expected to follow suit
and announce a new round of layoffs.
Under the irrational capitalism system, where profit is the absolute
ruler, the introduction of modern labor-saving devices means ruin to the
world's workers. The notion that technological progress should serve the
interests of all humankind is unknown in the capitalist world. To remain
competitive human labor must be expendable, and environmental standards
must be rendered irrelevant.
Unimpeded access to natural resources and world markets are a matter
of necessity for capitalism, to be conquered by any means necessary or perish.
Those who block access, including U.S. capitalism's major competitors in
Europe and Japan, have been or will be subjected to trade wars, or other
economic reprisals.
The existence of international institutions like the WTO, FTAA, IMF and
the World Bank is far from a guarantee that capitalist justice will be done
in the world market. At best these institutions are designed to attempt
to mitigate the fundamental contradictions in the system itself.
As these contradictions-including ever shrinking markets, growing crises
of overproduction, and declining profits-reach the breaking point, the gentlemanly
rules of negotiations and compromise give way to wars of every form. The
increasing economic and military interventions of the chief imperialist
player, the United States, on every continent is a measure of the growing
tensions in world capitalism.
In response, all major U.S. competitors have launched their own arms
productions programs. Europe, in particular, like the United States, sees
its future depending in part on military might to defend its economic interests
against all comers.
The inevitable result will be war-unless, of course, the world's working
people, in alliance with the oppressed everywhere, use their vast majority
power to challenge the warmakers and exploiters and struggle for a viable
socialist alternative, where social production satisfies human needs instead
of corporate profit.
The mounting crises have brought ruin and horror to vast portions of
the underdeveloped world. While partially delayed for some time in the imperialist
centers, the same horror is today coming home as increasing millions are
faced with bleak prospects.
Need for a fighting labor leadership
The labor misleaders dominating U.S. trade unions today see no prospect
for a fightback other than deepening their "partnership" with
labor's class enemy.
A Sept. 20 syndicated Washington Post article, titled, "Strange
alliances forged after attacks," indicates the stance of labor's top
bureaucrats, AFL-CIO President Thomas Donohue and Secretary Treasurer John
Sweeney. Both joined with corporate America's leading public promoter, the
U.S. Chamber of Commerce, to, in Sweeney's words, "work together to
enact a program of national investment to rebuild shattered lives and shattered
infrastructure."
Sweeney and his fellow trade-union fakers see labor's future tied to
capitalist prosperity, while capital sees its future tied to extracting
additional billions from working people and throwing those they no longer
require into the ranks of the jobless.
A break with class collaboration on the labor front and a renewed struggle
against the inherent evils of capitalism-war, racism, poverty, and environmental
destruction-require a fight for labor's independence from the Democratic
and Republican parties as well as class-struggle polices to challenge the
bosses at the point of production.
In order to rebuild and reinvigorate a labor movement that has experienced
decades of bureaucratic ossification, the emerging generation of youthful
fighters will make the struggle for union democracy a top priority.
Having wrested the unions-labor's basic fighting institutions-from their
misleaders, working people will build their own parties to challenge the
twin parties of the ruling rich while organizing an historic drive to unionize
the vast majority, whose solidarity and power have so far been untapped.
Socialist Action /October 2001 |