Abayomi Azikiwe, editor of the Pan-African News Wire, on right, with the MECAWI solidarity team which supported the UAW strike against American Axle. This photo was taken on Sunday, March 16, 2008. (Photo: Alan Pollock).
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How changes in capitalist cycle have impacted workers
Published Aug 17, 2009 7:58 PM
Courtesy of Workers World
Following is the second part of an excerpt from the introduction by Fred Goldstein to an upcoming reprint of the ground-breaking work “High Tech, Low Pay” written by Sam Marcy in 1986 during the early stages of capitalist restructuring. Goldstein is the author of “Low-Wage Capitalism: Colossus With Feet of Clay.” Read part one in the Aug. 13 WW issue.
Even before the 1990s the capitalist business cycle, described a century earlier by Engels, had changed in favor of capital. Marcy, in Chapter 3, focuses on the fact that capitalist recession lengthened in the post-World War II period and that “this is very important in relation to strike strategy, which had a lot to do with the duration of the capitalist economic crisis.” It raises the question of what workers can do if a recession turns out to be protracted and the bosses can hold out for a long time.
Workers, ‘boom-and-bust’ and low-wage capitalism
The new era of low-wage capitalism, worldwide wage competition and slowing capitalist economic growth has put workers under pressure even during times of capitalist upturn. The booms have weakened, benefiting only the bosses, with not even relative gain for the workers.
The era of rapid accumulation, that is, rapid and tempestuous growth of capital investment, has been undercut by the growing productivity of labor and the speed with which markets become saturated. The relative labor shortage during the upturn is a thing of the past. Instead, there are jobless recoveries and the consequent eradication of the opportunity for the workers to make up lost wages by forcing increases on the bosses.
The “golden chains” Marx referred to are not so golden anymore. Marx spoke of workers getting higher wages during a boom while the capitalist got even higher profits. This meant that workers’ real wages went up, although their wages declined relative to the larger profit gains of the bosses. In the present era, these conditions no longer obtain.
For the last several decades, with a slight exception in the mid 1990s, workers’ real wages have gone down or stagnated even during the periods of expanded capitalist accumulation—during upturns. Because of off-shoring, outsourcing and wage competition with workers in low-wage areas, workers in the United States went into massive personal debt and worked extra jobs; whole families worked just to compensate for the wage decline. Not only did the relative wages of the workers decline, but their absolute standard of living plummeted—and this was before the crisis.
This makes Marcy’s work, his admonitions to the labor movement to develop new strategies to deal with protracted crisis, to engage in class-wide struggle, to break out of the traditional capital-labor relationship, more pressing than ever before.
Engels spoke of the continuous cycle of boom and bust. Certainly the cycle continues, but under conditions of structural changes to capitalism. Booms have become weaker and weaker over time. The classic booms that reemploy most of the workers laid off during the bust are a thing of the past. That is the meaning of the increasingly protracted jobless recoveries.
Solving a crisis by creating a bigger one
In fact, the immediate roots of the latest global capitalist crisis, which began in December 2007, can be traced back to the attempt by the financial authorities to overcome the jobless recovery of 2001-2004 and the weakness of the capitalist upturn.
The Federal Reserve System pumped hundreds of billions of dollars into the economy by lowering interest rates from 5.5 percent to 1 percent. Alan Green-span directed much of this credit toward creating an artificial housing boom. He publicly urged home buyers to take out adjustable-rate mortgages. The housing market regulators gave a pass to the most egregious, often racist, subprime mortgage-lending practices. The Securities and Exchange Commission synchronized its efforts with the Fed by deliberately closing its eyes to the burgeoning market in mortgage-backed securities, derivatives and other shady practices. The rating agencies Moody’s and Standard & Poor’s played their part by giving potentially toxic assets triple-A ratings.
Much of the credit made available went straight to stock market speculation and banking operations. Huge sums of fictitious capital, paper wealth with no underlying value, found their way through an unregulated conduit known as the shadow banking system—hedge funds, private equity funds and insurance companies—backed by the big Wall Street banks. This shadow system was used to evade even the minimal constraints on finance capital.
In the end, a crisis emerged in the overproduction of housing. The bubble burst, housing prices plummeted and masses of people lost their homes. Throughout the economy, production had outstripped consumption. Auto sales and construction collapsed. Record credit-card debt could not bridge the gap. Debts based on housing sales, credit cards, student loans and auto loans became bad debts. Banks were insolvent.
As Engels had predicted, hard cash disappeared, credit vanished, goods piled up, means of production were destroyed. And in the end the attempt to stem the original crisis by artificially creating a housing boom led to an even greater crisis that enveloped the globe at the speed of light.
If this is a recovery ... Where are the jobs?
By Fred Goldstein
Published Aug 19, 2009 3:22 PM
Capitalist economists, experts and stock market gamblers cannot make up their minds as to whether or not there is a “recovery.”
For workers who are losing their jobs, their homes, their health care, their wages and are deeply in debt, there is no ambiguity. There is no recovery.
However, at the slightest hint of less-bad news—news that is not as bad as the news from the period before—the well-paid experts are quick to declare that a recovery is in sight.
For example, on July 31 the government announced that the economy had declined by “only” 1 percent in the second quarter, compared to 6.4 percent in the first quarter of 2009. On Aug. 6, a week later, it announced that “only” 247,000 workers lost their jobs in July and that unemployment declined—from 9.5 percent to 9.4 percent.
It turned out that, in addition, 422,000 workers had dropped out of the workforce and were not being counted. So the unemployment rate would actually have gone UP to 9.7 percent if the discouraged workers had been counted as part of the workforce.
It certainly does not take much to encourage capitalist experts who are desperately in search of optimism. After all, optimism makes stocks go up. So they paid scant attention to this little “discrepancy.”
On Aug. 10, more good news. French and German capitalism had slight growth after long periods of economic downturn. This was followed two days later by the announcement that Japan had slight growth, too, after a long and drastic economic contraction.
Ben Bernanke, head of the Federal Reserve System, pronounced light at the end of the tunnel: the recovery was on the horizon in the second half of the year.
Business was supposed to be picking up. The economists could almost taste the recovery.
False promise of ‘good news’
But then, on Aug. 13, came news that retail sales had fallen—even at Wal-Mart, Kohl’s and other giant stores that sell to the workers. On Aug. 14, the highly regarded University of Michigan report on consumer confidence showed a sharp drop; a rise had been expected. U.S. stock markets fell, followed by a sharp drop in Asia and then a further decline back in the U.S.
Credit card defaults, foreclosures and layoffs are all on the rise. Close to 30 million workers are either unemployed or underemployed and the number keeps rising. Personal bankruptcies are on the rise.
How can sales do anything else but drop? The masses have little to no money. Whatever they have is being hoarded to pay off debts, get their children through school, pay for medical care, or just hold on to basic survival.
This is why more than 100 banks have failed since the crisis began. This year 77 U.S. banks have gone under. Another 300 are on the watch list of the Federal Deposit Insurance Corporation (FDIC). Five banks failed just in the week of Aug. 10-14 alone.
Capitalism’s new and dangerous stage
This back-and-forth about recovery, no recovery, weak recovery, etc., goes on in the face of an unabated increase in suffering, hardship and poverty among the workers and oppressed.
Here is the contradiction.
Capitalism is traditionally not supposed to work this way. The way it is supposed to work is this: When there is an economic crisis, there is a crisis for the workers. When there is an economic recovery, there is a recovery for the workers. A downturn brings bad times. A recovery brings better times.
But what happens if there is a business recovery and it is still a crisis for the workers? Clearly capitalism is in a new and dangerous stage as far as the workers are concerned.
Not one of these experts knows if there is going to be any sort of capitalist recovery of business or if, instead, the whole economy is going to collapse once the stimulus money runs out here and in Europe and Japan—or perhaps before that.
But if they manage to engineer a recovery for the bosses and bankers by handing them trillions of dollars in bailout funds taken from the workers, the real long-term structural crisis of the system will become apparent—a growing era of jobless recovery.
Mark Zandi, the chief economist at Moody’s Economy.com, put it this way: “We’re going from recession to recovery, but at least early on, it’s not going to feel like one.” (New York Times, Aug. 1) The threat of double-digit unemployment looms and wages are declining despite the pickup in the stock market and an uptick in corporate profits.
Jobless recovery a global problem
Workers need to pay close attention to the talk of “recovery.” It clearly does not include them.
For example, reading the paragraphs buried in the announcements of revival in Europe and Japan is enlightening. After trumpeting the “strong rebound” of Europe in its headline, the New York Times of Aug. 13 reminds its readers of the possibility that the recovery could stall.
“[U]nemployment is expected to rise sharply this year as government programs that kept people on private payrolls throughout Europe begin to expire. Already, the euro area’s unemployment rate stands at 9.4 percent, its highest level in 10 years, and the anemic growth of the coming quarters will not be enough to arrest the slide.”
The same type of optimistic headline followed by the real grim news appeared in the Times of Aug. 16: “Still the outlook for Japan remains unclear, and some analysts question whether the economy can sustain this recovery after the stimulus measures at home and elsewhere run their course. Falling employment and wages are also expected to weigh on consumer spending for some time. Japan’s jobless rate hit a six-year high of 5.4 percent and wages showed a record drop in June.”
“A self-sustaining recovery is still not in sight,” declared a Japanese economist.
In other words, even if there is a recovery for the capitalists worldwide, for the workers there will still be a crisis of unemployment and declining wages. And that crisis will keep the capitalist system from reviving as it used to.
Increase in rate of exploitation deepens crisis
A very important figure that was published but not well publicized on Aug. 11 showed a surge in the productivity of labor in the midst of the crisis. Reuters put things quite bluntly in announcing a jump of 6.4 percent in the hourly output per worker (annual rate).
“U.S. output per worker rose at its fastest pace in six years during the second quarter as businesses wrung more from shrinking staff in a sign that recovery from recession will be slow and unlikely to create a surge in hiring.”
Thus, the bosses have used the crisis to shed workers on a permanent basis through the use of technology, reorganization, speedup or other means. What this really means is that the capitalists have increased the rate of exploitation of the workers.
Workers’ hours plunged 7.6 percent, but production fell only 1.7 percent. Thus the workers produced more in less time. This is what has caused a rise in corporate profits, despite a declining economy.
The struggle of each capitalist to squeeze more and more out of the workers means the bosses will not have to rehire many of the tens of millions of workers out of a job or underemployed, even during a recovery.
It also means that if there is a recovery—and that is not guaranteed at all—it will be weak, short-lived and will come at the expense of the workers, who will be left to compete for fewer and fewer jobs.
Capitalism has no automatic revival for the workers. The only way to revive the fortunes of the workers and the communities is to open up a massive struggle for jobs, for income, for social services, health care, housing, food and all the needs of life.
The bosses and bankers have made us pay for this crisis with trillions of dollars in bailouts while we are thrown out of our jobs and homes.
It is time that workers organize to push back. It is time to declare that a job is a right; housing is a right; health care is a right; education is a right. And it is time to mobilize unions, the communities and all mass organizations in a united struggle to turn things around.
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