“The coronavirus pandemic’s toll on the nation’s economy became emphatically clearer Thursday,” the New York Times wrote July 30, “as the government detailed the most devastating three-month collapse on record, which wiped away nearly five years of growth.”
Specifically, the gross domestic product, “the broadest measure of goods and services produced,” fell 9.5% in the second quarter of 2020, according to the U.S. Department of Commerce’s Bureau of Economic Analysis. This translates to an annual rate of decline of 32.9% — the biggest since the bureau began tracking the GDP. In the first quarter of this year the GDP dropped 5%, breaking a five-year growth spurt.
Other capitalist economies, including France and Germany, experienced a similar collapse.
The Times would have us believe the downturn was entirely due to the coronavirus — wholly independent of the organic workings of the capitalist system. However, socialist China, where the virus was first discovered, is experiencing a strong economic recovery, after a smaller drop — 6.8% — in the GDP during the country’s lockdown in the first quarter.
This raises questions the Times is clearly avoiding. For one, why are capitalist economies so much more vulnerable to the pressure of the pandemic? And is the economic crisis caused entirely by the pandemic? Or is capitalist overproduction at play here?
There were signs of a recession in early 2020 even before the coronavirus had an impact on the U.S. economy. These included an oil glut, a decline in manufacturing activity and a slump in retail sales. General Motors had closed plants in Michigan and Ohio as well as in Ontario, Canada.
What the Times won’t say
When workers receive wages, they are only partially compensated for the value they produce. What Karl Marx called “surplus value” is pocketed by the boss in the form of profit. Crises of overproduction — recessions, which often become depressions — are an inevitable, cyclical feature of capitalism. They occur when the working class produces more goods and services than the capitalist class is able to sell for profit.
Crises of overproduction have caused tremendous suffering for the working class — the only class that creates value — and especially for the most oppressed. Now capitalism is at a dead end; the normal cycles of “boom and bust” are operating in the context of a permanent systemic crisis. We have seen the phenomenon of the “jobless recovery” as technology is used to generate more value with fewer and fewer workers.
Under capitalism, profits come before human needs. Even health care, a basic right, is dominated by for-profit pharmaceuticals, insurance companies and private care providers. No wonder COVID-19 has been so devastating in the capitalist U.S. — from the nearly 160,000 who have died as of Aug. 4 to the tens of millions of unemployed and their families. Many are still waiting for jobless benefits, which have now been cut as provisions of the CARES Act expire.
The loss of benefits will further drive down purchasing power and with it the GDP. Millions of jobs are not likely to come back, regardless of when a vaccine is developed or the pandemic is under control. The recession, in the making since before COVID-19 hit, has morphed into an economic catastrophe on top of a public health nightmare.
But not everyone is suffering. The filthy rich are getting richer, including the owners of Apple, Facebook, Alphabet (owner of Google) and Microsoft. Amazon’s earnings doubled while the company took away workers’ “hazard pay.”
Capitalist mouthpieces like the Times don’t want workers to see beyond the coronavirus’s impact. Their job is to suppress class truth. But more and more workers and oppressed people are realizing that mass unemployment, the genocidal impact of the coronavirus, racist police violence and capitalist exploitation are all connected.
This rotten system must be overthrown!