Socialist Action /May 2002
Economy on the Rebound? Ask the Folks
without Jobs
By JEFF MACKLER
When the U.S. Commerce Department reported on April 26 that the nation's
Gross Domestic Product (GDP) rose at an annually adjusted rate of 5.8 percent
during the first quarter of 2002, the stock market gleefully registered
a momentary advance. Analysts initially, and without foundation, concluded
that the data signaled a sharp rise in the nation's fortunes and an end
to the recession.
Within an hour, however, the stock market reversed course and registered
lows not seen since October. The Dow Jones industrial averages tumbled below
the 10,000 mark, and the Nasdaq dropped to below 1700. Within a week the
market dropped a half trillion dollars in value, an amount not seen since
the reopening disaster following the Sept. 11 bombings.
"Economy's growth belies weakness," was the front-page headline
in the next day's April 27 San Francisco Chronicle. The Los Angeles
Times noted that the economy "shows resilience but the outlook
is clouded by a drop in consumer confidence and weakness in business investment."
As it turned out, some 3 percent of the gain came from inventory adjustments,
as merchants restocked their shelves to replace commodities previously sold
at less than profitable prices. The consensus was that this portion of the
"gain" in GDP was meaningless as a growth indicator. "The
remaining 2.8 percent," according to the Chronicle, "may
not be enough to sustain a vibrant recovery and create large numbers of
jobs."
A closer examination of the Commerce Department's figures showed that
military and related government spending accounted for the lion's share
of the GDP gain. The $400 billion bipartisan war budget, plus additional
hidden billions in government outlays for a variety of police agencies and
security measures, were designed to prime capitalism's flagging economic
pump. With profit rates declining and plants closing in virtually every
major sector of the economy, the ruling rich are in no mood to invest in
new technologies when current state-of-the-art factories remain shut down.
Business investment in fact declined 5.7 percent during the first quarter,
while a full 25 percent of the nation's industrial capacity stood idle,
a figure virtually unmatched in the past 20 years. Meanwhile, jobless claims
hit a 19-year high, with continuing unemployment claims reaching 3.84 million.
Michael Evans, chief market economist for the Standard and Poor's research
firm, predicted that "the unemployment rate will rise for the rest
of the year." To give substance to his words, several days later it
was revealed that the unemployment rate in April had bounded to an official
rate of 6 percent-the highest level in almost eight years.
Massive layoffs today are the rule as unprecedented worldwide competition
has compelled all major corporate players to retool and modernize to attempt
to remain in the ballpark.
But as highly automated machines are introduced, more and more commodities
are produced by ever fewer workers. As the resulting saturated world markets
prove incapable of absorbing the increasing mass of new products, the world
stands witness to a deepening crisis of overproduction and an associated
decline in average profit rates. Despite massive government subsidies, the
prospect of lower and often negative profit rates makes capitalists reluctant
to invest in yet another generation of technological innovation.
As the system stagnates, of course, the bosses seek to make the workers
pay. The Boeing Corporation predicts additional thousands of layoffs. Delphi
is eliminating 6100 more jobs in the U.S. and abroad, bringing its yearly
total to 17,540. Hewlett-Packard's merger with Compaq is expected to result
in 15,000 layoffs.
General Electric plans to cut 7000 jobs, and Arthur Anderson, whose corrupt
accounting practices are likely matched by most others in the trade, will
fire 7000. The trend is repeated in almost every industry-with no end in
sight.
Unprecedented losses are also becoming the rule in corporate America.
When several months ago JDSU Uniphase, a major player in the fiber-optic
cable world, reported an historic quarterly loss of $40 billion, few thought
that similar figures would or could be registered again. Just months later,
however, AOL Time Warner recorded yet another catastrophe when it was compelled
to announce a record first quarter loss of $54.25 billion. AOL originally
hid the loss through an accounting trick wherein it overpriced its acquisition
of Time Warner.
Government pumps money into corporations
Lies, hype, and prayer aside, there is little evidence to demonstrate
a turnaround in the U.S. economy. The government was compelled to admit
that its projected $70 billion deficit for the coming fiscal year was off
by 100 percent. The actual deficit was $140 billion, putting a crimp in
the Bush administration's view that surpluses, not deficits, were in the
offing.
But continued gifts to corporate America in the form of new business
tax cuts remains a constant priority for Bush and his Democratic Party associates.
From their vantage point there is no alternative other than to pump additional
billions and even trillions of dollars into the corporate tills that have
proved incapable of prospering on their own steam.
After granting the ruling rich a $1.3 trillion tax cut over the next
10 years, Congress is now reviewing legislation to make the gift permanent-that
is, irreversible. Even if the previously expected surpluses, on the basis
of which the tax cut was justified, do not materialize, workers' tax money
will continue to flow to the rich. In truth, the administration's announced
surplus proved to be nonexistent. It was based on looting the Social Security
system and on spurious projections of a continuing economic boom.
A surprised George Bush was pressed to explain why his projected surpluses
or modest deficits didn't materialize. Bush claimed that as a candidate
he had warned of deficits if the country faced war, recession, or national
emergency. "In this case, we got all three, " said Bush. "And
we're recovering from all three," he added.
Bush's claimed recovery is difficult to prove on paper and in the lives
of American workers. The U.S. economy was in recession before he became
president and before the Sept. 11 bombings. The bombings were merely used
by Bush as a pretext for his "war on terrorism," a euphemism for
the extension of U.S. imperialism's military and economic might across the
globe.
War is profitable for the rich in capitalist society. It's only the workers
who do the dying. Government investment in the war industry guarantees excessive
profits since in the production of war commodities-jet planes, tanks, aircraft
carriers, and the like-there are few, if any, competitors anywhere. Additionally,
war, especially when waged by the leading capitalist nations, serves to
expand markets in areas previously blocked as well as insuring access to
essential resources such as oil.
Oil is the chief resource that drives most all capitalist industry. According
to Merrill Lynch, every dollar increase in crude oil prices takes $5 billion
a year out of the economy. In the past five months the jump in crude oil
prices from $16.36 per barrel to $25.72 sucked $46.8 billion out of corporate
America's bottom line.
The expanded U.S. military presence in the Middle East as well as in
the former Soviet republics in Central Asia serves, among other purposes,
to strengthen future access to oil
Similarly, U.S. support to the coup attempt in Venezuela was in part
due to the fact that the Hugo Chavez government's appointee to OPEC (Organization
of Petroleum Exporting Countries) became head of this organization and led
in engineering OPEC's successful move to limit oil production while raising
oil prices.
War and intervention are intimately associated with U.S. political and
economic policy. They were central to bringing the U.S. out of the 1929
Depression, which lasted more than a decade. Their employment today are
proof positive that capitalism's options have become more limited.
Brokers lied to investors
When profits are at stake, nothing is sacred. The Securities and Exchange
Commission (S.E.C.) investigation of the Merrill Lynch and Citicorp brokerage
houses is a case in point. Merrill's CEO has publicly apologized for advising
customers to buy stock in corporations they knew to be in trouble. Pressed
by these corporations to sell their stock or lose their business, Merrill
chose to service its corporate benefactors even though they knew that their
customers would be the losers.
In fact more than 90 percent of all brokerage houses told their clients
to buy stock over the past two years while the stock market registered some
of the most massive loses in history.
Fear among the rich about corporate lying is today widespread. Enron's
offshore operations, designed to hide massive loses, are indeed the norm.
Even the Commerce Department's figures regarding a supposed 5.8 percent
growth rate have been called into question. Analysts report, according to
the Los Angeles Times, that "Intel Corporation, the world's
largest maker of semiconductors, has stopped telling the government about
its orders, inventories and shipments, making it harder to estimate economic
trends." The Times concluded that the government's data was
therefore "corrupt." Diane C. Swonk, chief economist of Bank One
Corporation in Chicago, said, "It's hard to know what to make of corrupt
data."
Intel stated that it refused to present data on its operations because
"the statistics the government generates from them are meaningless."
While Intel might have a point, its failure to report the information that
has previously been routine appears to be a telltale sign that like all
corporations whose fortunes and stock prices are under siege, it too has
something to hide.
While it is true that the wealthy and relatively few ruling-class families
have prospered at the expense of the vast majority of the population, it
is not true that corporate America always follows suit. Plagued by its inherent
contradictions, like a wounded beast, it is struggling to survive.
And survival today means forced and voluntary mergers and acquisitions,
absorbing or driving competitors to ruin, corrupt book-keeping, looting
social services, massive layoffs, union busting, environmental pollution,
racist scapegoating, and war.
Capitalism's victims are receiving a hands-on education about how the
system really works and for whom. In time, working people and their allies
among the oppressed will take to the class-struggle road and begin the process
of building a new society where the satisfaction of human needs as opposed
to corporate profits is the operative principle.
The youthful fighters emerging in the renewed struggles against capitalist
globalization and war will certainly be in the vanguard of the big battles
to come.
Socialist Action /May 2002 |