Socialist Action /April 2002
Is the US Recession Really Over?
By JEFF MACKLER
There is little agreement among the ruling rich as to the state of the
U.S. economy. While some government officials tentatively assert that the
recession is virtually over, a poll of Fortune 500 CEOs indicated that 75
percent disagree.
The fact that Congress failed to pass President Bush's proposed $100
billion stimulus package was hailed as evidence that government intervention
was indeed unnecessary to avert a deepening of the slowdown. After the congressional
sound and fury over Bush's bill receded, a paltry $8 billion was allocated,
mostly for extending unemployment benefits plus unnamed sums in tax cuts
for business to supposedly stimulate new investment.
But a new survey by leading capitalist economist and former presidential
adviser Louis Uchitelle indicates that behind-the-scenes billions were spent
by federal and state governments to prime the economy at a startling pace.
Uchitelle reports in a March 23 New York Times article entitled,
"Sharp Rise in Federal Spending May Have Helped Ease Recession,"
that some $106 billion was recently pumped into the economy, mostly in the
form of increased military expenditures but in several other categories
as well.
Medicaid and Medicare payments, mostly for increased drug costs imposed
by a rapacious drug industry, accounted for $16 billion while "unspecified
programs," a term usually reserved for corporate welfare, received
$40 billion.
Pumped up military
Some $14 billion went to "military/defense." This is in addition
to the $50 billion already added to the military budget in the formal budget
proceedings, plus another $50 billion to Homeland Security. The total U.S.
yearly military expenditure now exceeds $450 billion, the highest in history.
This massive infusion of capital into a stagnant economy is expected
to reverse the negative or virtually flat growth rate statistics of the
past year and boost economic growth a full percentage point. In addition
to federal spending boosts, Uchitelle reports that state governments have
also found ways to circumvent spending limits to bolster the economy.
This year's government pump-priming is admittedly undertaken in the context
of a decline in government revenues. Unlike last year when Bush's $1.3 trillion
in tax cuts and other corporate welfare for the rich was justified in the
name of redistributing a massive government surplus, today's gifts will
be paid for by deficit spending-that is, by increasing the already bloated
national debt through a series of loans from America's leading bankers and
other financial institutions.
In truth, the $1.3 trillion gift to corporate America was based on a
fictitious surplus as well as the looting of social services, and Social
Security funds.
Once again, a declining capitalism is rejecting "free enterprise"
in favor of Keynsian deficit spending to keep faltering corporations afloat.
Today, however, there is no assurance of success since the heightened state
of worldwide capitalist competition has reduced profit rates to the point
where new investment in supermodern industrial plants, as compared to those
already operating with state-of-the-art technology, offers bleak prospects
of success.
Simply put, today's major corporations, facing saturated world markets
and ruthless competition, see no way out by borrowing money or even taking
it free, as the government offers, as a way of modernizing to beat the competition.
Free money, of course, is never rejected by any self-respecting capitalist.
It's to be expected from their cohorts in Congress who function to protect
the interests of their corporate employers. But it is not invested in arenas
of the economy where returns are uncertain. This is precisely why Enron
officials turned to stock market speculation and other such ventures rather
than entering into real competition with the world's superpower corporations
in the energy business.
In this regard, Ford Motor Company's fortunes are instructive. Ford announced
the closing of four U.S. plants in late March plus an additional Ford plant
operating in Canada. Overall profits are down 3.4 percent, with no prospect
of a reversal in sight. Incentives to buyers like zero percent interest
rates on new car purchases, plus rebates, have proved incapable of reversing
Ford's fortunes in the face of Japanese competitors whose cars are produced
with levels of technological sophistication that far exceed the U.S. car
industry.
Military spending in capitalist America does have an advantage that other
areas of investment lack. Largely operating as a monopoly with a guaranteed
market, the U.S. armed forces, the military-industrial complex can achieve
profit rates that exceed the norm. They can sell submarines, aircraft carriers,
jet fighters, and nuclear weapons, or example, at virtually any price that
corrupt officials in the government "negotiate."
U.S. imposes tariff on steel
The supposedly free-enterprise Bush administration revealed the system's
weakness when it imposed a 30 percent tariff on foreign steel imports in
early March. Free trade gave way to instant protectionism when U.S. steel,
a vital component of the nation's industrial infrastructure, was threatened
by foreign steel produced with superior technology and qualitatively lower
costs. A modern European plant produces high quality steel at a hundredth
the cost of a number of antiquated U.S. plants.
The wounded steel magnates demand that their government guarantee their
profits even if it means buying steel and steel products at prices far above
those available on the world market. Bush complied, proving once again that
capitalist free enterprise is a myth, operative only when it benefits the
corporate elite. When a laggard but essential U.S. industry proves incapable
of meeting today's competition, it is pampered.
Bush's action guaranteed a response. The March 23 New York Times
reported, "The European Union has drawn up a list of imports from the
United States, worth about $2.1 billion annually, to penalize in retaliation
for the Bush administration's recent imposition of tariffs of up to 30 percent
on some imported steel."
Europe's penalty list includes U.S. textiles, citrus fruits, and steel.
Under World Trade Organization (WTO) rules, an "unjustified tariff"
can be met with a retaliatory tariff of up to 100 percent, imposed immediately.
The U.S. is counting on the myriad of WTO and other trade-organization rules
and regulations as well as the delays attendant to litigation on these issues
to justify its protectionist measures and to limit the penalties.
But the line of march is undeniable. Once there is a major breach in
the "free trade" barrier, the rules of the game will change, as
each nation is compelled to protect its own industries from more powerful
competitors.
World capitalism's worst nightmare, the cascading imposition of one protective
tariff after another, has witnessed its first major incarnation. The mad
drive for profits, inseparable from the production of commodities in numbers
far beyond what the market can absorb, inevitably results in the major players
imposing restrictions on the entry of each other's products into their own
markets. The result can only be a deepening protectionist restriction of
trade and a threatened collapse of the entire system.
Similar developments led to the Great Depression of 1929 and to other
periods of world economic stagnation. In the end trade wars gave way to
regional and world wars as the leading contenders resorted to force to protect
their home markets and their international "spheres of influence."
Today's WTO-type organizations are designed to mitigate these contradictions,
but when the vital interests of the leading imperialists are at stake, there
are no limits to the measures to be considered and undertaken. Europe has
already embarked on its own arms-production program, proclaiming at the
same time that its "unity" will result in its world superiority
in the next half decade. But superiority in the economic sphere cannot be
separated from the military capacity to enforce it.
The underdeveloped world, on the other hand, is virtually helpless as
the imperialist nations impose at will the opening of their markets and
the associated destruction of their state industries. Argentina is a prime
example of a nation whose industrial infrastructure was severely compromised
as it proved incapable of meeting foreign competition.
Today the world economy stands on a precarious precipice, with imperialist
rivalry on the upswing and the focus on increasing profitability at the
expense of working people everywhere. The corporate rich seek to promote
divisions among the exploited and oppressed, in this country employing various
"Buy America" campaigns designed to counterpose the interests
of workers here to our sisters and brothers in other nations.
Each ruling class cuts wages and erodes working conditions in the name
of staying in business and beating the competition abroad. The U.S. economy
is far from reaching a safe haven with the injection of Bush's hundreds
of billions into a severely weakened system. The gains of the super-rich
come at the expense of an increasingly exploited working class.
In France the number of strikes has increased 41 percent over the past
year. Three million marched against the government's anti-labor policies
in Rome last month. U.S. workers will not be far behind.
Socialist Action /April 2002 |