Casino capitalism drives economy
Jobs disappear in election year
By Milt Neidenberg
Once again, wishful thinking won't make it so.
Economists at top Wall Street corporations and Federal Reserve
head Alan Greenspan had predicted a growth of at least 125,000
jobs in February. Instead, corporate bosses hired a miserly
21,000. Most were part-time, temporary, low-wage, non-union
workers who can be used and discarded.
Some 3,000 factory jobs and 24,000 jobs in construction were
lost. That is on top of what are now 43 consecutive months of
job loss.
Meanwhile, nearly 400,000 workers exhausted their benefits
in February. Many more gave up looking for work.
African-American workers between the ages of 16 and 64 and
recent college graduates are bearing the brunt of the "jobless
recovery."
More than 9 million are unemployed in this country. The
average time spent looking for work is over 20 weeks, the
highest in over 20 years.
Corporate strategy is to squeeze more productivity out of a
lean work force and to move jobs abroad.
"What we are looking at now is a more extreme version of the
early 1990s, when we also experienced a jobless recovery but
not as severe as this one," said Edward McKelvey, a senior
economist at Goldman Sachs. "We have no way of knowing when
hiring will pick up; we don't have models for what is happening
now." (New York Times, March 6)
Confusion and uncertainty have become the norm on Wall
Street. They are reflected in the daily ups and downs of the
stock, commodity and currency markets. Once again the dollar
has begun to slide downward against the euro and the yen,
raising fears that foreign investors will withdraw their funds,
which have been propping up U.S. debt.
The danger of too many cheap printing-press dollars chasing
too few commodities will sooner or later create an inflationary
trend, bringing the "recovery" to a screeching halt. Prices at
the gas pumps are already skyrocketing. So are prices of other
raw materials that corporate America needs to feed its
factories, mills and high-tech machinery.
"Creditors abroad financed about a third of the year's
borrowing. ... There's a time-bomb issue," said Allen Sinai of
Decisions Economics, a consulting firm. "There are potential
adverse consequences, but we don't know when." (New York Times,
March 5)
Economy driven by debt and
hyper-speculation
In 2002 and 2003, according to the Federal Reserve, total
debt in the United States grew by some $1.7 trillion to $22.4
trillion. The federal government accounted for about 18 percent
of the total; local governments, roughly 7 percent; households,
42 percent; and businesses, 33 percent. The Fed report added
that this debt excludes the obligations of banks and other
financial institutions.
Wall Street has become a major player in risk-type loans to
speculators who bet on whether the capitalist economic
fundamentals go up or down on any given day. Hundreds of
trillions of dollars are gambled casino-style in these
derivatives, in which fortunes are tied up in
hyper-speculation.
According to calculations from the Standard & Poor's
500, "one-half of General Electric's income comes from finance
earnings from the GE Capital Unit. Ford Motor gets 15 percent
of earnings from financing and General Motors, a third. Many
industrial corporations have their own financial arms and few
investors know what portions of profits are at risk." (Wall
Street Journal, Feb. 9)
These giant monopoly corporations have shifted their
priorities into making money through financing, rather than
through investing in the expansion of commodity
production--which would create jobs. Karl Marx, who made an
exhaustive analysis of capital a century and a half ago,
defined wealth invested in this way as "fictitious capital."
This is because in a crisis it can evaporate.
The corporations are focused on using their profits to raise
stock prices so they can recover the ground they lost in the
2000 stock market plunge--and also to feed their obscene
jet-set, scandal-filled way of life with huge salaries, bonuses
and stock options, all at the expense of the work force.
Sharp drop in consumer confidence
On Feb. 18, the ABC News weekly consumer confidence index
reported the biggest decline in 18 years. The report stated
that "the sharp declines appear to be tied to negative
perceptions about the job market." Deepening the pessimism is
the huge consumer/worker debt load driven by a credit card
craze.
The debt crisis driven by the frenzied speculation has
spread among many sectors of capitalist industries. On Feb. 24,
Greenspan warned that Fannie Mae and Freddie Mac, nicknames for
the biggest government-sponsored mortgage institutions, posed a
"systematic risk" that could cost taxpayers dearly. Testifying
at a Senate Banking Committee hearing, he said that "both
companies, which hold about $2 trillion worth of obligations
tied to home mortgages ... have accumulated so much debt that
they cannot adequately hedge against the risks of financial
crises."
Much of this bad debt comes from underpaid and unemployed
workers defaulting on mortgage payments and losing their
homes.
This could be a rerun of the savings and loan debacle during
the boom years of the 1980s. Speculation in real estate and
mortgage loans, fueled by banks large and small, was out of
control. When the real estate bubble burst, savings and loan
banks collapsed like falling dominoes.
The government stepped in to bail them out while the
taxpayers/workers lost their savings. Personal and corporate
bankruptcies piled up.
For the workers, the 1987 stock market crash was an Enron on
an unprecedented scale.
The world economy is now infected with this disease. It has
become saturated with dollar-based speculation and huge debt.
Some financial pundits fear that the only way out of this
dilemma would be a U.S. financial market-driven crash. The
process would begin with the dollar taking a sharp and
unpredictable plunge. The stock and bond markets would follow
as borrowers default and creditors, both here and abroad, pull
out of the U.S. credit markets in a panic.
Currently, foreign lenders already own $2.3 trillion in U.S.
assets, according to Lester Thurow in his book "Fortune Favors
the Bold." He concludes that "the day of reckoning is
inevitable, even though the timing is unknown."
Meanwhile, the deficits are rising, exacerbated by endless
war and the occupation of Iraq, Afghanistan and now Haiti. The
"war on terrorism" and tax cuts for the rich are costing big
bucks. There is a growing feeling among the analysts that the
economy is out of control.
Is a capitalist crisis a possibility in an election year?
George W. Bush may yet become the first president since Herbert
Hoover (1929-1933) to preside over not only a net loss of jobs
during a four-year term but a capitalist catastrophe.
The crisis is not just, as Democratic presidential candidate
John Kerry claims, Republican-made. The liberals and
progressives who with the AFL-CIO leaders have joined the
growing chorus for "anybody but Bush" overlook the possibility
that a crash endemic to the capitalist system may be in the
making.
Will it come during this presidential campaign? Or will
Bush, the Fed and Wall Street move mountains to postpone it in
order to get him re-elected?
On the other hand, suppose Kerry is elected. Won't he be
forced to take harsh measures, too, as any capitalist
politician must, to remedy the ongoing crisis and keep the
system of capitalist exploitation going?
In either scenario, it will be at the expense of the
workers, the poor and the oppressed nationalities. The issue is
not Republican versus Democrat but labor versus capital.
The class struggle will determine the direction of the
events now unfolding. For all workers and especially people of
color, job creation and a social network that protects health
care, education and housing, plus stopping U.S. occupations and
endless imperialist wars, will be won on the streets, not in
the ballot box.
Reprinted from the March 18, 2004, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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