Permanent unemployment, capitalism's hallmark

The Nov. 6 announcement of a dramatic surge in U.S. unemployment to 10.2%--really 17% counting discouraged workers--brought home that far from this being an ordinary downturn, the economy has sunk into a deep structural morass. A year ago the dreaded worst-case scenario, projected to garner support for President Obama's stimulus plan, was that without the stimulus unemployment would peak by now at an unconscionable 9%. Today's unexpected revelation of the depth of misery in the real economy contrasts sharply with the financial market's renewed exuberance over a reported third quarter growth rate of 3.4% and an officially declared end to the Great Recession.

New "growth" in the economy has come not from investment but from stimulus spending and increased productivity as companies force remaining workers to work harder. The growing economy lost 190,000 jobs in October. Every day there are 6,600 new foreclosure evictions in the U.S. In many places foreclosure rates are not slowing but accelerating. In Orange County, California, September's foreclosures were up 5% over August and 90% from a year ago.

There are now 19 million vacant housing units and 3.5 million homeless people, of whom 1,350,000 are children. Tent cities are sprouting up across the country. Each night 350 people are turned away at St. John's Shelter for Women and Children in Sacramento, California whose growing tent city has attracted national media attention.[1] There are now 36 million Americans on food stamps, 10 million added over the past two years. The Department of Agriculture reports that hunger stalks over a million children, and in 17 million households, encompassing 49 million people, food periodically runs short in this richest country in the world. In Elkhart County, Indiana, suicides went from an annual average of 16 to 22 already this year. In many areas of severe unemployment, suicide rates due to economic distress are comparable to those last seen during the Great Depression.

BIGGER TOO-BIG-TO-FAIL

The lords of finance, who brought the system down and precipitated this crisis, are indeed a minuscule minority. The same club of investment banks--minus one after the collapse of Lehman Brothers--are now even bigger too-big-to-fail. They are on top again, making record profits, dishing out record bonuses, and inflating a new bubble with the same kind of speculative instruments that caused the financial collapse. Since they were rescued, bailed-out banks spent $70 million lobbying Congress, which dutifully forced accountants to weaken standards put in place after the Enron scandal, so that these banks could hide their toxic assets.

What can't be hidden is the naked truth of this totally inverted world, which is causing consternation among the great majority who work in the real economy. The political system will do anything and everything to preserve finance capital as an alien power over workers' real-life human activity that constitutes social production.

THEN AND NOW: THE 1930s AND TODAY

Incredulity and a boiling outrage continue over the no-holds-barred effort to save the system of finance capital--a thieves' den that splits up the spoils extracted from workers in production, where their alienated labor creates all value. The overlords of social production drive the system into periodic crises precisely because their separation from production fosters the illusion that value can be generated from speculation. The $700 billion TARP bailout was only the beginning as the Federal Reserve Bank just kept issuing trillions of dollars to buy and guarantee the value of banks' hidden bad assets. No wonder that, when the stolid American Bankers Association met in Chicago on October 27, thousands marched proclaiming "the bankers got bailed out, we got sold out." By then U.S. workers had suffered through 22 straight months of job losses, a 70-year record, that now totals over 7.3 million U.S. jobs gone.

In another world from the protracted decline in the conditions of life and labor for ordinary workers, an even smaller group of investment bankers, who regularly switch roles and become government policymakers, are now slapping themselves on the back for having avoided a total meltdown and the abyss of another Great Depression one year ago. Then came November's dismal employment report, which engendered a resolute-sounding response from President Obama: "I will not rest until all Americans who want work can." However, this belied his pragmatic approach, which kowtows to those same Wall Street financiers who precipitated this crisis.

In the wake of a deepening disaffection among those who made possible his historic victory a year ago, President Obama scheduled a jobs summit in December to seek out ideas. At the same time the real direction of his thinking came to light when White House budget director Peter Orszag alerted domestic government agencies to plan for budget cuts because the President's January State of the Union address will focus on cutting the deficit in 2010.

This is totally at odds with Orszag's Nov. 3 comment to Charlie Rose that what is "crucially important to avoid…is…to repeat the mistake of 1937." Orszag was referring to then President Roosevelt's attempt to reduce the deficit in 1937, which brought back the Depression with a fury. While government officials take a 1930s time-line as their perspective on current history and now celebrate having dodged a 1930s style financial meltdown, the depression is being played out in the real economy. The real crisis now, as then, is not its appearance in the financial sector but in production, where capitalists are wary of any new real investment because the financial crisis and the immense vanishing of paper profits revealed a much diminished rate of profit.

Many economists, drawing on the experience of the 1930s, did warn Obama that the current crisis demanded a lot more deficit spending than his woefully inadequate $787 billion stimulus package. What 1937 taught today's Keynesian economists is that massive deficit spending cannot stop anytime soon. What they forget to add is that it cannot stop at all without a massive destruction of capital, which then was accomplished through total war and unspeakable barbarism.

BREWING INTER-CAPITALIST TENSION

In spite of the name of the Asia Pacific Economic Cooperation (APEC) forum, it was not "cooperation" but inter-capitalist tension over economic policy that prevailed there and throughout President Obama's East Asia trip beginning on Nov. 13. No sooner did the trade spat over U.S.-imposed tariffs on Chinese tires blow over than a new one erupted when the U.S. imposed anti-dumping duties on Chinese steel pipe a week before President Obama's first visit to Beijing.

In spite of the now universally recognized imminent danger to the life-sustaining capacity of the planet, APEC squabbling produced a pre-emptive announcement that there will be no new accord on global warming at the December Copenhagen climate summit. Deep trade disagreements disrupting APEC emerged because of diminished opportunities for capital accumulation in the post-crisis global economy. APEC nations, especially China, are frantically working out their own separate trade agreements, like a new one between Japan, South Korea and China.

Trade imbalances are driving a search for an alternative to the way social production in the global economy is managed primarily through U.S.-China inter-state finance. Chinese state-disciplined cheap labor provides manufactured goods to U.S. and other western consumers. When, due to the imbalance, a lot of extra dollars end up in Chinese banks, the Chinese state uses those dollars to buy U.S. debt. Chinese state-capitalist financiers now hold over $2 trillion in U.S. debt.

Chinese state financiers are now in the role of being the U.S.'s banker and they not only didn't bend to U.S. pressure over trade but criticized the U.S. Federal Reserve Bank for continuing to fuel speculative investments and lectured Obama about U.S. deficits endangering the value of the dollar. They could stop buying U.S. debt but then the whole finance system would collapse, including the value of their growing hoard of U.S.-denominated debt. They are searching for new relations with other centers of capital, dealing in other currencies than the dollar as a way out of this "mutually assured financial destruction." When centers of capital are confronting global capital's internal barrier to accumulation, lurking in the background of warring over trade and relative economic power is military power and real war.

THE SEARCH FOR NEW BEGINNINGS

New beginnings are emerging not only in opposition to finance capital in the political sphere but among workers--alienated from control of their own social production--fighting back in production. Auto workers at SsangYong in South Korea, partly inspired by the sit-down strike at Republic Windows and Doors in Chicago, occupied their factory and constantly battled police for several months when threatened with a shutdown by banks and a Shanghai auto company.[2]

Even some Wall Street commentators, seeing how capital has totally usurped political power in the U.S., now simply accept that we are living through capitalism's death agony.[3] The real question for the future is: what will replace it? Will capital's inherent despotism in everyday life result in a new form of totalitarianism? After all, Keynes said that his remedy of regulating the economic activity through state spending works better in a controlled, totalitarian economy. The other alternative is a new freedom emerging out of freely associated human activity in production that fully recognizes the social character of production.

As we put it in our editorial in the last issue: "The barriers to productive investment, and therefore to accumulation in the real economy, portend an even more total day of reckoning. For capital that can only mean a deeper collapse, wherein finance capitalists, whom Marx called the mere 'trustees' for capital's social ownership of production, will continue to transparently loot the public treasury to preserve the irrational capital relation at all cost. But this is also transparent for ordinary working people who are outraged and looking for a way to free themselves of being socialized according to the needs for capital accumulation. Never before has there been a greater need to return to Marx, not only for his prediction of total crises, multitudes of unemployed and a falling rate of profit, but his concept of liberation and human solidarity beyond capitalism."

NOTES:

1. For an excellent overview of the depth of the crisis in California, which has the top three U.S. cities with the most foreclosures--Merced, Modesto, and Stockton--see Crisis in California: Everything Touched by Capital Turns Toxic (Insane Dialectical Editions, 2009) as well as their account of a visit to Sacramento's tent city at: http://flyingpicket.org/node/46.

2. For an inspiring video of these workers who persisted through attacks by riot police, helicopters dropping tear gas, company-hired thugs, and shutoff of electricity and water, see: http://www.youtube.com/watch?v=PLXCRzxIDqc and http://www.youtube.com/watch?v=xzIOmK2WvHI

3. “Death of 'Soul of Capitalism': Bogle, Faber, Moore: 20 reasons America has lost its soul and collapse is inevitable,” By Paul B. Farrell, MarketWatch (http://www.marketwatch.com/story/americas-soul-is-lost-and-collapse-is-inevitable-2009-10-20).

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