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NEWS & LETTERS, February 2008 - March 2008LeadFears of global recession haunt U.S. electionBy Ron Brokmeyer and Htun Lin While the U.S.'s unending war in Iraq continues, and U.S. soldiers and Iraqis continue to pay with their lives, a new specter looms over capitalism. With fallout from the subprime mortgage crisis, suddenly the economy overshadowed the war as an issue in the 2008 presidential election. By Feb. 5, news came that, along with continued hemorrhaging of manufacturing jobs, service sector employment dropped sharply in January. Then most economists acknowledged a recession had already begun. In spite of deep discontent with the war, expressed in the turnover of the Congress to the Democrats in the 2006 election, Bush continued to get Congress to support funding for the war. Aside from the huge supplemental war budget, the Pentagon budget of $515 billion will bring military spending in real dollar terms to a level not seen since World War II. President Bush's final budget deficit of over $400 billion is actually over $700 billion with $300 billion of the Social Security surplus being used to finance the bloated military budget. The legacy of Bush's militarized "ownership society" is that workers own only a ballooning national debt. As gloom spread about the economic future, the President and Congress rushed together a $168 billion stimulus package of tax rebate checks and business investment tax cuts. For economists and politicians who pushed through this stimulus package, workers are pawns in the crisis, to be thrown a few more dollars to give consumption a temporary boost. LABOR CREATES VALUE; BUBBLES DON’T Workers have a different perspective on capitalism and the cost of the war, especially as they experience continuing fallout from the subprime mortgage bombshell. Years of deregulation of the banking industry unleashed a speculative bubble, the collapse of which now threatens to take down the world economy. This follows the dot-com collapse and industry accounting scandals in which paper profits puffed up stock prices. Each burst bubble brings home the truth that where no value is created by labor in production, none can be conjured up through speculation. Moreover, the end of the housing bubble, which had propped up the economy during these other crises, has much deeper implications. Monumental losses at financial giants like Merrill Lynch and Citigroup grew out of aggressive marketing of money to ordinary workers. They were encouraged to turn their homes into ATMs by borrowing against equity, or to buy new property at low introductory rates. The banks that made the loans took their commissions, then repackaged them as high-yield mortgage-backed securities. Everything came apart when housing prices started to retreat. Many workers have lost their homes and their life savings in this debacle, and many more will do so in the coming year. Over 250,000 families lost their homes to foreclosures in 2007 in California alone. The economists who blame the crisis on "over-zealous and irresponsible" consumers are the same economists who pushed overextended consumerism as a national policy. After September 11 Bush had set the tone, telling workers that it was patriotic to go shopping. Bush pumped up the U.S. economy with huge tax cuts, adding to the national debt. The fruits of economic gains were steered to wealthy investors, not toward expanding consumption by workers. To get out of previous crises through expanding consumption, the managers of the national economy at the Federal Reserve Bank laid the ground for this crisis with low interest rates that encouraged the cycle of predatory lending, and repackaging mortgages as securities in the global capital markets. Once rated as safe, these mortgage-backed securities have now lost most of their value and have undermined the global capital markets. Lost was any confidence that financial securities of any kind have any value behind them. The Fed kept cutting interest rates to no avail--then in the early morning before the stock market opened in the U.S. on Jan. 22 it made a dramatic unscheduled move: reducing interest rates by three quarters of a percent. The Fed was responding to falling global stock markets when U.S. markets were closed for a holiday. Gone was the illusion that fast-growing economies like China and India can now be uncoupled from U.S. problems and continue to be engines of global growth. The Fed's only option if it wanted to avoid a depression-style collapse of the world banking system was to flood the system with cheap money. 'END OF AN ERA BASED ON THE DOLLAR' However, this intervention from the Fed is no solution to an even deeper structural crisis in the global economy which, according to George Soros, "marks the end of an era of credit expansion based on the dollar as the international reserve currency" (BLOOMBERG, Jan. 24, 2008). Some of the consequences of the U.S. becoming a debtor nation in the 1980s are only now coming home to roost. Ever since, the long-term trend has been a persistent and growing trade imbalance, financed through borrowed money. Even before the Fed's action the U.S. dollar had plummeted to record lows against the world's other currencies. Super-exploitative Chinese manufacturing had been counted on to keep inflationary pressures in check. Now manufacturers have to pass on large increases in costs for raw materials. Lower interest rates will only push the dollar down further and ignite more global inflation. Thus the dollar's role as the international reserve currency is untenable. This has called into question the symbiotic relation the U.S. has with China. China's state capitalists have been financing U.S. consumption by buying U.S. treasuries with their mountain of dollars gained through the trade imbalance fueled by China's super-exploited workers. With the declining dollar and low interest rates, these U.S. treasuries can actually have a negative yield. Other Asian and Middle Eastern states have invested huge sums in U.S. financial firms now threatened with bankruptcy. U.S capitalists fear the price these state-capitalist entities might extract will not be just financial but political control. These inter-capitalist tensions may spark an even deeper crisis or a brokered restructuring that will come down hard on workers all over the world. REVOLT IN WORLD'S WORKSHOP Chinese capitalists got wealthy with backing from an authoritarian state whose economic policies keep uprooting the country's seemingly inexhaustible rural population, adding them to the world's surplus labor pool. This has also been met with unprecedented and persistent labor disturbances among Chinese workers, especially migratory workers. China became the world's Dickensian authoritarian workhouse, sucking production away not only from the U.S. but from the rest of the world's poor countries. Pervasive new labor disturbances by Chinese workers put flesh on Marx's idea that the reserve army of the unemployed is the gravedigger of capitalism. (For ongoing news on labor actions in China, especially in workers' own words, see CHINA LABOUR BULLETIN at www.clb.org.hk The ongoing reports coming out of China's mines and factories recall Raya Dunayevskaya's view of the world economy of 1986: "What all the bourgeois economists choose to disregard about this stage of robotized production is that unpaid, surplus labor--i.e., profit--comes, and can only come, from the living sweated laborer. The economy's dependence on alienated, sweated, and exploited labor does not stop short of even death and mutilation" (NEWS & LETTERS, Oct. 1986, p. 5). Today's reserve army of the unemployed is also global and fluid, including all those workers now losing their jobs in the U.S. For half the world's population, nearly three billion people who live on less than two dollars a day, being part of that reserve army means near total deprivation. The world's poor are especially hard hit by capital's expansionary requirements. Capital's voracious appetite for energy is consuming the world's food supply because of the high price of oil. Even in the U.S. this may signal the end of relatively inexpensive food. Subsidized U.S. ethanol production uses up a third of the country's corn crop. Vegetable oils that can be used for bio-diesel fuel are being priced out of the reach of the world's poor. The price of palm oil, a staple in the diet of many of the world's poor, rose 70% in a year. The UN Food and Agricultural Organization reports that food riots recently broke out in Guinea, Mauritania, Morocco, Senegal, Uzbekistan and Yemen. In Haiti a 50% rise in price of food staples like rice and beans in the last year has left many resorting to "mud cookies" made of dirt, salt and vegetable shortening as a regular meal. ELECTION OFFERS NO ALTERNATIVE The candidates in this election don't challenge this anti-humanism and militarism. All embrace globalization--the free trade agreements that enshrine the principle of the free movement of things, commodities and capital. These agreements force poor peasants off the land into sweatshops or migrating for work across borders. In all cases they have few or no rights as workers. Capital flows to places where there is the least restraint on its unsustainable devouring of human beings and nature. In the U.S. the social safety net has disappeared, resulting in colossal human disasters of neglect of whole cities like New Orleans after Hurricane Katrina. The 47 million Americans who lack health insurance are one serious illness away from financial ruin. Healthcare proposals coming from Democrats would put a major burden of payment for health insurance on the working poor, while leaving insurance companies and pharmaceutical companies free to deepen the crisis of diminishing quality care. On the housing crisis, Democratic candidate Hillary Clinton is proposing a temporary freeze on interest rates and 1930s-style government programs to aid borrowers. Barack Obama, who has gained tremendous popularity as the "change" candidate, proposes even less. The same is true of McCain, the most pro-war candidate, who came from political death to become the Republicans' presumed nominee, once the focus turned away from Bush's war. Huckabee has been able to milk the economic crisis along with his unapologetic demonizing of gay folk. Once candidates accept the needs of capital for expansion instead of beginning from workers' struggle against the alienation from their own work, it is impossible to propose anything but a band-aid on a serious if not fatal wound. Bailout programs that renegotiate loans are not for the benefit of workers, but to help the financial industry avoid even greater losses from mass defaults and foreclosures. As we put it in our Perspectives, "the expansionary requirements of capitalist value production [have] eliminated the economic basis of progressive liberalism" on issues like universal healthcare. It is time to engage the new revolts against capitalism with the fullness of Marx's concept of freely associated relations between the world's producers. This is the way to finally challenge capital's logic that puts all life on the planet at risk. |
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