Big business economists breathed a public sigh of relief at the announcement that the U.S. economy grew by an annual rate of 2.0 percent in the quarter ending Sept. 30. They were thanking their lucky stars that it was an increase over the 1.3 percent growth in the second quarter.
But workers should be alert to the less-publicized reservations behind this public show of optimism.
First, the 2.0 percent growth was completely inflated by Pentagon spending. “What saved this figure from being much, much worse, was a somewhat freakish surge in government spending, driven by a 13 percent gain in national defense spending,” revealed Rob Carnell, the chief international economist at ING Bank. (Financial Times, Oct. 26)
Thus the Obama administration and Leon Panetta at the Pentagon made sure a surge in military spending came in time to rescue the economic growth figures in the pre-election period. Without this military spending, the official growth number would have been 1.4 percent, essentially the same as in the second quarter. That would have been a statistical alarm bell warning that the economy was on the way to tanking.
Other danger signs for workers
In the wake of the global capitalist slowdown, U.S. exports last quarter declined for the first time in three and a half years. Capital investment by the bosses went from a 3.6 percent increase in the second quarter to a 1.3 percent decrease last quarter. When the bosses cut back investment, workers are bound to lose their jobs.
Also, any rise in spending among the workers and the middle class is being fueled by the beginning of a new credit bubble. An article in the Oct. 27 New York Times entitled “Rise in Household Debt Might Be a Sign of a Strengthening Recovery” cheerily announced that U.S. households “are taking on more debt than they are shedding.” Debt from mortgages, credit cards and auto loans had been falling for 14 consecutive quarters as the masses tried to get out from under the mountain of debt accumulated during the bubble. The bubble burst, leading to the great financial crisis.
Now the bankers are celebrating that people are going back into debt, bringing more income from interest and fees to the bankers and keeping the economy from collapsing. In other words, the bankers are looking forward to profiting from the next credit bubble. The bosses, economists and politicians are hoping it will keep capitalism going.
The real news: mass layoffs planned
What really should have made the headlines were the decline in worldwide sales by the giant monopolies, the announcements of mass layoffs and the expectation of future layoffs.
As the crisis of overproduction begins to choke the capitalist markets in China, India, Brazil, Russia and especially Europe, the sales and profits of the giant transnational monopolies have begun to contract. As one bourgeois analyst put it, lower sales “are a sure prescription for layoffs to start heating up as companies take immediate action to show their shareholders how responsive they are.” (Business Insider, Oct. 25)
Another said that “North American companies since Sept. 1 have announced plans to eliminate more than 62,600 positions at home and abroad, the biggest two-month drop since the start of 2010, according to data compiled by Bloomberg News. Firings total 158,100 so far this year, more than the 129,000 job cuts in the same period in 2011.” (Bloomberg News, Oct. 25)
There is fear that “the economic recovery is not picking up” as sales come in below estimates.
Hewlett-Packard announced in September that it plans 29,000 job cuts as PC sales slow around the world. Banks in the U.S. are planning 19,000 job cuts, while the giant Swiss bank UBS is planning 10,000 layoffs.
Ford is closing two European factories, one in Belgium and one in Britain, and will cut 6,200 jobs or 13 percent of its European workforce. Dow Chemical will close about 20 plants, eliminating 2,400 jobs. DuPont plans 1,500 layoffs right away and more in the future if profits continue to decline.
AMD, the second-largest chip maker for personal computers, will lay off 15 percent of its workforce; Colgate-Palmolive, the engine maker Cummins and Kimberly-Clark are among the giants that have announced layoffs due to a decline in profits and/or sales.
The giant corporations are a bellwether for the global economy and for what the workers will confront in the coming period as capitalism is unable to lift itself out of the crisis begun in 2007.
capitalism can’t stop global slowdown
Some signs of the bigger picture seep through the media. The Financial Times points out that, despite the rise in profit margins on the index of the S&P 500 corporations over the last several years, “sales growth on the index has been down for a year and a half.” In other words, the markets have been unable to absorb the output of the corporations. Nevertheless, these firms have been able to squeeze out rising profits, mostly by speeding up workers or cutting them out altogether. That’s how they boost profits despite declining sales.
The Wall Street Journal of Oct. 26 notes how dismal the 2 percent growth rate is for the economy: “After the much milder recession of 1990-1991 the economy reeled off four straight quarters of better than 4% growth.” The article failed to point out that even with 4 percent growth, that was the first “jobless recovery” in post-World War II history — meaning that despite economic growth, workers were not rehired.
The hard fact regarding the development of technology under capitalism is that the more productive labor becomes, the greater must be the rate of growth of the capitalist economy in order to create jobs for all those made redundant. But the rate of economic growth is not increasing. It is declining as technology grows.
Officially, the economy has generated 146,000 new jobs a month on average — which is just about enough to match population growth. Thus, the 23 million officially unemployed, underemployed or forced part-time workers cannot look forward to a capitalist recovery lifting them out of their misery.
On the contrary, the winds of economic crisis and downturn are blowing stronger and stronger, from Asia to Europe to Latin America. The workers in Greece, Portugal, Spain and Italy are already in a state of resistance to the crisis. Strikes and demonstrations are growing more frequent, more numerous and more widespread throughout the European continent.
The ruling class here is fearful that these winds will stream into the U.S. and provoke a European-style wave of working-class resistance and/or explosions in the oppressed communities. The next administration will be imposing more painful cutbacks.
Real issue: capitalism is at a dead end
The debate between Obama and Romney about who can turn the economy around was utterly false. The crisis of unemployment is generated by the capitalist system, which has reached a stage that cannot be reversed in any fundamental way.
The growth of job-destroying technology and the creation of a globalized economy in which workers everywhere are in a wage competition and a race to the bottom are developments beyond the control of politicians, or the capitalists themselves, for that matter. This process is driven by the struggle to get the most profit. This has always been the law driving capitalist development. It means making fewer and fewer workers turn out more and more goods in less and less time at lower and lower wages.
The dangers of this process are beginning to seep into the consciousness of sections of the capitalist economic establishment.
David Leonhardt, one of the chief economic writers for the New York Times, wrote a major piece on Oct. 24 based on polling a number of economists about the real issues behind the economic crisis.
Leonhardt noted that real family income is now 8 percent below what it was 11 years ago, while in the decades following World War II it had increased by 30 percent.
“The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate,” wrote Leonhardt.
“At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.”
The core of this analysis was begun not by bourgeois economists but by a Marxist, Sam Marcy, in his groundbreaking work, “High Tech, Low Pay,” written in 1985. Marcy, who was the founder of Workers World Party, said of the scientific-technological revolution that “its whole tendency is to diminish the labor force while attempting to increase production. The technological revolution is therefore a quantum jump whose devastating effects require a revolutionary strategy to overcome.”
This was written in the wake of the capitalist restructuring of industry going on during the Reagan administration. Since that time, the scientific-technological attack on the workers has deepened and widened onto a global arena. This writer followed the process in 2008 with the book “Low-Wage Capitalism,” which analyzed the globalization process and its effect on the worldwide working class along the lines begun by Marcy.
While the consciousness of the bourgeoisie can only extend to the symptoms of their crisis, the working class can and must understand the cause of the crisis: the capitalist system. And it must learn that the only way to combat the crisis is through mass mobilization and struggle.
The only way to end the crisis once and for all is with the destruction of capitalism and the creation of a socialist system based on human need, not profit.