Workers beware of good tidings
Capitalism can't solve the unemployment crisis
By Milt Neidenberg
Once again the grandmaster of spin, Federal
Reserve Chair Alan Greenspan, has woven a tale of robust
recovery and good times for all. Testifying before two
Congressional committees in mid-February, he assured them--and
the broader spectrum of financiers and corporate CEOs--that the
Fed was bullish on the economy, but warned in economic double
talk of growing budget deficits. It was a blissful
presentation, a combination of strong growth, falling
unemployment and low inflation.
His remarks soothed the nerves of volatile stock markets.
The Dow Jones Industrial Average jumped more than 123 points on
the first day of Greenspan's report to Congress, to close at
its highest level in more than two and a half years.
For the Bush administration, whose ratings have sharply
dropped, it was a joyous moment. The loss of nearly 3 million
jobs on George Bush's watch, along with a whopping budget
deficit, wars in Iraq and Afghanistan that are going badly, and
a giveaway tax policy for the rich have all contributed to his
shrinking support.
Greenspan's comments gave the Bush administration an
additional boost when it was reported that the Fed "would
continue to fuel the economy with cheap money up through the
elections in November." (New York Times, Feb. 12)
It confirmed the fact that the Fed--the bankers' bank, a
mouthpiece for the giant banks and big business--is more than a
manipulator of monetary policies. It is political to the core
and about as independent as any of the politicians who serve
the interests of monopoly capitalism.
In this case, the Fed is in lockstep with the Bush
administration. Greenspan refused to attack the Bush plan to
make permanent the tax cut for the rich and agreed with him
that the export of jobs--service oriented and
multi-skilled--helps the economy's overall performance. Most
significant, the Fed chairperson went along with the outlandish
pre-election claim by the Bush economic team that they will
create around 2.7 million jobs in the coming fiscal year.
"Greenspan Predicts Job Growth Will Soon Begin to
Accelerate," heralded the Wall Street Journal of Feb. 12. The
article stated that "it is possible that the unemployment rate
could drop close to 4 percent from 5.7 percent."
It's all smoke and mirrors
However, after a report that there was a net gain of only
112,000 new jobs in January, after a minuscule 1,000 in
December (later revised to 16,000), Morgan Stanley market
economist William Sullivan commented, "The level of job
creation is well under expectations and certainly disappointing
for the 26th month of an alleged economic recovery."
Dominic Konstam, head of interest-rate strategy of Credit
Suisse First Boston, which recently merged with the Bank of
America, expressed a similar sentiment. "The number was very
disappointing ... . We're not getting the jobs to replace the
stimulus [in the economy], which will fade once the first
quarter passes."
Ken Mayland, president of Clear View Economics, pointed to
"Employers who are working their workers longer hours instead
of hiring more bodies ... . This economy under normal
circumstances should be generating 200,000 to 300,000 a month
in new jobs." (Wall Street Journal, Feb. 6)
According to a column by Bob Herbert in New York Times of
Feb. 16, while the administration predicted that 5.5 million
jobs would be created in the 18 months from July 2003 to the
end of this year, only 296,000 have been created in the seven
months that have passed so far.
So why is there no job growth of any significance? What
happened to the idea that an expansion of the economy, a
falling dollar, and other economic fundamentals automatically
motivate employers to hire workers? They're making more
profits, but does this translate into job creation?
The manufacturing sector has cut jobs for 42 months in a
row, despite the fact that the Fed has kept interest rates at 1
percent, the lowest in 45 years.
The crisis lies embedded in the capitalist system. Boom
cycles are getting shorter in duration. The one lasting from
2002 to 2004 has been jobless.
Capitalism can't exist without an army of the unemployed. It
has always been a powerful weapon against the working class,
exerting pressure on the employed sectors to keep wages down in
order to raise profits. Corporate America has reaped the spoils
of a technological revolution, enabling it to raise the
productivity level and cut labor costs without significant
hiring.
Around 25 percent of U.S. productive capacity is idle. A
similar phenomenon has displaced millions of production workers
around the globe. Greenspan is well aware of this but covers it
up with ill-founded optimism on job creation, based on a recent
slowdown in the rate of increase in productivity. He believes
employers will begin to hire big-time based on growing demand
for goods and services here and abroad, thanks to the falling
dollar and 1 percent interest rate on borrowing.
Forewarned is forearmed
The U.S. trade deficit has reached nearly $500 billion, the
largest in history. Consumer confidence plunged in early
February.
The prognosis of leading capitalist analysts and economists
is not whether, but when, a crash is coming. Many are already
drawing parallels to the stock market crashes of 1929 and 1987,
which came after the stock markets reached record levels. Just
as Greenspan is now painting his pastel picture of an upsurge,
so optimism reigned supreme then.
For example, the prevailing mood on Wall Street just one
month before the greatest and longest crash in modern history
was expressed in a Wall Street Journal article on Sept. 4,
1929: "Many are looking for technical corrective reactions from
time to time, but do not expect these to disturb the upward
trend for any prolonged period." The market was already
starting to turn down then. The Dow Jones did not return to the
level of Sept. 3, 1929, until November 1954.
Similarly, in 1987, the stock markets had been in a bull
market for years. New highs were taken for granted. When the
stock market began to drop, most analysts called it a
correction. It took David Rockefeller--Mr. Capitalist--on Oct.
29 and 30, 12 days after the crash, to go on CNN and call it "a
stock market crash of the dimensions of 1929."
In the March 2000 stock market crash, declines of 49 percent
in the Standard and Poor's 500 stock index, and 78 percent in
the Nasdaq high-tech market, wiped out small investors to the
tune of $8 trillion. Millions of jobs were lost, plants closed
and household income shrank dramatically. Before the crash,
Greenspan had identified the developing crisis as merely
"irrational exuberance." Stock prices did not stop falling
until October 2002.
There are now striking similarities to the boom of the
roaring 1920s. The deep decline that followed in the early
1930s was only overcome by massive military spending begun in
preparation for World War II. Today, hyper-speculation, a
revolution in technology, a currency crisis and a surge in
productivity have reduced the incentive to invest and rehire
workers from the vast army of unemployed.
The 1930s led to the greatest working-class upsurge in
modern times in the U.S. Militant sit-down strikes spread
across the country. Unemployed councils organized mass
mobilizations of the jobless throughout most cities. They
raised the popular slogan, job is a property right." They won
progressive legislation.
It's time for the workers and the oppressed to review this
page in history.
Reprinted from the Feb. 26, 2004, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
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