The Federal Reserve Bank’s announcement Sept. 18 surprised investors and many others and led to a quick rise in stock markets. The underlying message, however, is that the capitalist world economy and the U.S. portion of it have not really recovered from the 2007 downturn and may be facing another collapse.
For the past six months, Fed Chair Ben Bernanke had more than hinted that the Fed would gradually wind down its bond-buying program that committed it to buying $85 billion in bonds each month. He based this step on expectations that employment rates would continue to improve and it would no longer be necessary to keep interest rates low on loans.
The Fed’s reversal, which was backed by 12 of the 13 members of the Fed board, is a sign that its earlier optimistic picture of the economy had been deceptive. The Fed also lowered its estimates for economic growth for the rest of 2013 and all of 2014.
In a statement after its announcement, the Fed said, “The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.” (Reuters, Sept. 18) This is about as optimistic as the Fed could make the news sound.
Since the very rich have been growing even richer during the so-called recovery — and this group in the population has the loudest voice — many bourgeois economists have gotten away with unfounded optimistic projections. Regarding the rest of us, they point to the improving unemployment rate, which in August had dropped to 7.3 percent.
However, as Bernanke noted in the statement, “The unemployment rate is not necessarily a great measure in all circumstances of the state of the labor market overall.” (Wall Street Journal, Sept. 19)
What Bernanke was referring to is that this particular rate is deceptive as it measures only those unemployed who actively look for work. A better measure of a robust economy would come from the portion of the population in the active workforce. That number dropped from just over 51 percent in January 2007 to a little below 49 percent in August. It has been continuing to drop even as the official unemployment rate improves.
Basically, there has been no real improvement in the job market, with the possibility of another downturn facing the working class. Somewhere between 6 million and 15 million workers have “disappeared” from the U.S. workforce.
Not all bourgeois economists wear a happy face. William White, former chief economist of the Swiss-based Bank for International Settlements, or the “bank of central banks,” said, “This looks to me like 2007 all over again, but even worse.” White had flagged risky investments before the 2008 crack. (British Telegraph, Sept. 15)
As Fred Goldstein has shown using a Marxist approach in his essential work, “Capitalism at a Dead End,” because of rapid technological improvements in production, the capitalist system worldwide has found it impossible since 2007 to consistently start up profitable businesses. This has created an economic crisis that is not simply a cyclical downturn, but a permanent stall. The lessons are that workers can count only on their own struggle — not on a capitalist upturn — and that a revolutionary perspective is necessary to overcome both the crisis and capitalism itself.