California participant in the Statewide Organizers' Conference held by the Moratorium Now! Coalition in downtown Detroit on December 6, 2008. The conference demanded the transferal of banking bailout funds to people that need relief. (Photo: Alan Pollock)
Originally uploaded by Pan-African News Wire File Photos
By Fred Goldstein
Published Mar 12, 2009 8:46 PM
The loss of 651,000 more jobs in February and the jump in the official unemployment rate to 8.1 percent have produced important admissions in the capitalist press that every worker should pay close attention to.
The New York Times, one of the most important voices of U.S. big business in the United States and around the world, ran a lead story on March 7 showing that at least 650,000 jobs have been lost in each of the last three months—for a total of 4.4 million jobs in all since the downturn started in December 2007. In the last four months, 2.6 million jobs have disappeared.
But the important point of the story was the prominently placed quote from John E. Silvia, chief economist at Wachovia bank: “These jobs aren’t coming back,” said Silvia. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations.”
“The acceleration,” concluded the Times, “has convinced some economists that, far from an ordinary downturn after which jobs will return, the contraction under way reflects a fundamental restructuring of the American economy.” [Editor’s note: This sentence was pulled from the story in the late edition of the Times. However, the headline still contained this phrase: “Experts See Rapid Drop as Sign of Permanent Restructuring.”]
The auto industry is cited as an example. Car sales have dropped from 17 million annually a few years ago to 9 million today. “Even if sales increase to 10 or 12 million, that still leaves a lot of unneeded factories,” said the Times. And Silvia put it bluntly: “That’s a lot of workers that are not coming back. That’s a lot of steel, a lot of rubber, a lot of suppliers that are not coming back.”
What overproduction means
The market for autos is not shrinking because people need fewer autos. On the contrary, tens of millions of workers without cars or with cars that are broken down, who live in rural areas or in areas with poor or no mass transportation, desperately need autos.
U.S. capitalism has built its transit system based upon highways and roads. The public transportation system has been starved at the behest of the auto bosses and the oil and tire industries. Consequently, in most areas of the U.S. an automobile is essential to get and keep a job, to shop, to visit, etc. But tens of millions of people earning low wages or who are jobless cannot afford to buy cars at a price that will give the auto barons a profit.
Capitalism is now suffering from a crisis of overproduction—not overproduction of what people need but of what can be sold at a profit. This is not only in the auto industry but in housing, commercial real estate, electronics, appliances and so on.
While there has been little talk about the growth in the permanent army of unemployed planned by the capitalist class, it is implied by their own predictions. In fact, as noted in Workers World of March 12, the Obama administration’s most optimistic scenario for a recovery of the economy—growth of 3.4 percent by 2010—still calculates that there would be 7.9 percent unemployment. In other words, the recovery would be a recovery for the capitalists but the workers will still be facing mass unemployment, approximately at the level it is today.
And this is the optimistic viewpoint!
This is a virtual admission, without saying so, that capitalism from now on cannot function without growing mass unemployment of a permanent character. Add to this the projection that 8 million people will be facing foreclosure in the next few years.
This makes it clear that the bosses, the bankers, the mortgage brokers and Wall Street in general are planning to deepen the war on the working class and the oppressed. And it is equally clear that the workers must gear up, get organized and plan a counteroffensive against this brutal campaign of layoffs, foreclosures, evictions and cutbacks.
Perfect storm engulfs the globe
The present crisis is a global crisis. U.S. capitalism is the center of world capitalism. It is financially, industrially and militarily dominant and every thread in the world capitalist economy is tied in some way to Wall Street—from Berlin to Bangkok, from Mumbai to Manila, from Rome to Rio. All the symptoms now exhibited in the U.S. are being reproduced worldwide, often on an even more drastic scale.
The present crisis represents a perfect economic storm in which the factors of long-term growth that have propelled U.S. capitalism forward over the last 70 years have gone into reverse. But unlike a perfect storm in nature, which is random, this perfect storm is driven by the fundamental contradictions of the predatory capitalist profit system of exploitation.
Private property has come into extreme contradiction with the vast socialized apparatus of global production created by capital itself in pursuit of profit. The system can no longer be propped up by violent militarism and other artificial means, as it has in the past.
The growth of militarism, the scientific-technological revolution, the globalization of capitalist exploitation and superexploitation, the creation of fictitious capital and credit, the relentless pauperization of the working class—all these factors artificially kept capitalist accumulation and profits going for generations after the Great Depression. But now they have run their course.
Wars used to stimulate economy
How did U.S. capitalism emerge from the collapse of the Depression and sustain itself for 70 years? The fundamental turning point was World War II. After the 1929 to 1933 crisis subsided, there was an upturn in 1934 which lasted until October of 1937. But then came a profound second crash that frightened the Roosevelt administration and the ruling class.
World War II was the historic turning point that opened up a new phase of U.S. capitalist development. It choked off a prerevolutionary development among the working class in a period of furious class struggle and restarted a moribund system.
There was a turn toward war preparation, the beginning of the militarization of the economy. Then came the war itself. The massive war production—tanks, jeeps, planes, ships, uniforms, food, etc.—restarted capitalism. When the smoke cleared, more than 50 million people were dead. Europe and much of Asia were in ruins. Massive means of production had been destroyed as well as residential buildings, bridges, railroads, roads, dams, canals, ports and so forth.
In the period since World War II, U.S. capitalism has relied on various artificial methods to keep the system from collapsing. War and war preparation were a basic stimulant for decades during the post-war period. The Korean War, the Vietnam War, the military buildup during the Cold War—all served to generate capitalist production and profits, as the system could not rely on the civilian economy to automatically keep it going. But by the end of the 1980s, even the $2 trillion Reagan military buildup in a “full court press” to undermine the Soviet Union and the socialist camp was insufficient to sustain capitalist prosperity.
The continuous development of the scientific-technological revolution, the restructuring of capitalist industry, the relentless anti-labor campaign of union-busting, extracting concessions, destroying benefits, driving down manufacturing wages and steadily expanding the low-wage service economy—all this enormously increased inequality in the national income in favor of capital at the expense of the workers. All this served to bolster profitability for the bosses and bankers.
The collapse of the USSR and Eastern Europe in the 1990s and the opening up of China to capitalist investment gave imperialism a brief period of unprecedented global expansion. The monopolies seized this opportunity to create global networks of exploitation and vast superprofits as they engineered a worldwide wage competition among the international working class and promoted a vicious race to the bottom.
The structure of globalized production has now turned into an epidemic of globalized layoffs and mass unemployment, from Eastern Europe to the Baltic states, from east and south Asia to Latin America.
To keep the system going, militarism, technological development and anti-labor attacks were supplemented by borrowing, financial injections to save banks and corporations, speculation, credit bubbles, mortgage schemes, exotic financial instruments and all manner of fraudulent schemes to make profits based on trading in fictitious capital.
Crisis deepens despite militarism
In the present crisis, none of these measures are available to restart the system in any significant way. The two wars underway are draining the coffers of U.S. imperialism. Overall militarization has largely been accomplished.
New rounds of military development are technology intensive, such as laser-guided bombs, satellite-guided missiles, predator drones, high-tech missile ships and fighter planes. Current imperialist wars are limited and heavily dependent on air power.
Although the trillion dollars (open and hidden) spent annually on the military is essential to the system, the size of the capitalist economy has grown and any significant stimulus through military expansion would have to be on a much greater scale than is possible at the moment.
Only a massive war mobilization on a vast scale for a catastrophic military adventure could hold the prospect of diverting the crisis. This long-run danger to all humanity is inherent in this crisis.
The long period of creating low-wage capitalism, with a working class in debt and living closer and closer to the poverty level, has intensified. As this trend deepens it only further aggravates the crisis of overproduction by further reducing the buying power of the masses.
And, of course, the credit option has completely run its course as a mechanism for reviving capitalist accumulation on a vast scale.
The recent period of technological development has raised the cost of capital and made it so productive that the last recovery of 2002 to 2004, following the dot-com technology bust, was a “jobless recovery” during which almost 600,000 jobs were lost! This is what led the banks and the Federal Reserve, with the complicity of the Securities and Exchange Commission and the Treasury Department, to foster the housing bubble.
Capitalism has reached a point where, even if the trillions of dollars that the ruling class is spending in an attempt to mitigate the crisis were to result in a revival, it would be weak and short lived, leaving many millions unemployed. Capitalism is entering a period of permanent and deepening crisis for the masses.
In the present crisis the historic methods of reviving the profitability of capitalism, of restoring capitalist accumulation and prosperity, appear to have run their course, as they did leading up to the Great Depression. This is what has the ruling class running scared.
Working class leaders, labor leaders, community organizers and activists in all spheres must come to grips with the prospect that there is no way out of the crisis except for mass intervention and mass struggle.
The multinational working class must interfere with the automatic processes of capitalist crisis. The layoffs must be stopped. The foreclosures and evictions must be stopped. The wage cuts and short hours must be stopped. Food must be available for all, no matter what. Medical care must be made available to the masses. And this can only be achieved by unified mass mobilization and struggle. There is no other way, all the stimulus packages and bailouts notwithstanding.
Ultimately the movement must regroup ideologically and recognize that it is the capitalist system that has brought the multinational working class and much of the middle class to the brink of ruin.
The only way out of the crisis is to liquidate capitalism itself, which can only be done by the workers and the oppressed taking into their own hands the economic powerhouse they have built and putting it on a socialist basis—that is, creating a system that functions to satisfy human need rather than to produce profits for a privileged few.
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This article is Part 2 of “Data on economic crisis show only one solution,” published in the WW of March 5.
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