Most of us have never known an economic crisis of the scope and depth of the current capitalist contraction. Writing in April of 2007 regarding my prediction of an impending depression-like downturn, I jokingly noted that ÂLeft sects sport this prediction more frequently than Elvis sightings or the announcement of impending ArmageddonÂ. I sought to dissociate what I believed to be a careful Marxist assessment from the childish Marxism that sees capitalist doom in every hiccup or imbalance in economic life. Such predictions have embarrassed the Marxist tradition since its beginnings. With that in mind, my projection, though guarded, was not given lightly.
Had I been supremely confident Â which I wasnÂt Â that capitalism would experience a crisis of the dimensions we are now suffering, I might also have warned readers not to take this crisis, or any crisis, as the death throes of capitalism. While one can argue persuasively that private accumulation in a market economy will inevitably lead to crisis, it does not follow that crisis leads inevitably to the collapse of a capitalist system. Indeed, collapse is extremely unlikely. Many academic Marxists of a mechanical stripe have fostered this apocalyptic view, but capitalism is not a mechanical system. It is, rather, a complex system of social relations that requires human agency to secure fundamental, revolutionary change. The notion of a ÂbreakdownÂ Â in the fashion of a worn out watch Â is both wrong-headed and misleading.
With that in mind, we need to understand the direction of economic life at this moment. Some see ÂsproutsÂ of growth, others are skeptical, expecting a turn-around later, while still others see stabilization coming without a sustained recovery. Despite all the Nobel prizes awarded for economic theory, it is amazingly hard to find any professional economist willing to offer a projection based on much more than a metaphor or an intuition: so much for mathematical economics, rational choice theory, and computer modeling. Like weather forecasters, economists are uncanny when conditions are stable, but pretty useless in times of turbulence.
So mid-year, what do I see?
First, any discussion of ÂrecoveryÂ must turn on what measure signals a healthy socio-economic rebound. Does a stock market turn-around constitute a recovery?Â Do we count a positive GDP as the mark of recovery? Does recovery come with an improvement in the employment picture? An increase in industrial production?
Clearly, everything turns on how one looks at the economy. Those heavily invested in the stock market will undoubtedly declare a recovery when the market advances smartly Â regardless of the fate of any other indicator. Similarly, those dependent on the sale of consumer goods are anxious for an increase Â a recovery Â of consumer spending. We could go on and on discussing the varied interests that celebrate a recovery when their economic status thrives. But such an exercise can be cut short with the pregnant question: Recovery for whom?
For the Marxist viewing economic life through a class prism, the answer is quite simple: Economic recovery comes when the living standards Â employment, wages, benefits, security, and general well-being Â of the vast majority, of the working class improve. For the Marxist, the only meaningful recovery can be measured by the advancement of their material conditions Â the conditions most conducive to a better life. Insofar as Marxists are partisans for the interests of the majority, they are profoundly democratic. Pledges of Âbi-partisanshipÂ and ÂconsensusÂ melt away as clever evasions when confronted with this measure of success. Is there anything profoundly democratic in a recovery program that rescues the rich and powerful while imposing even greater pain and sacrifice on those who work for a living?
But talk, evasion, and promises are all that those government officials charged with fixing a broken economy have delivered to most of us. Where ÂsproutsÂ are detected, they have little or nothing to do with restoring or advancing the lives of the vast majority of our citizens. The key business indices that bring hope to the pundits from time to time are based almost entirely upon squeezing more effort and imposing greater hardships on the working class. Â
LetÂs be clear on this point:
Capitalist recovery is the recovery of profitability. As IÂve argued elsewhere, Marxist crisis analysis is fundamentally based upon a fall in the rate of profit. Economic contraction, in the end, unfolds from the capitalist class experiencing declining profitability. Conversely, recovery, for the capitalists, springs from an improvement or restoration of profits. From the perspective of the ownership class, the renewed march of accumulation is the sole goal and measure of rekindling a sluggish, stagnant, or shrinking economy.
With the recognition of economic distress, policy-makers and corporate leaders have directed every effort, engaged every resource towards this objective. The recent report by the special inspector general, Neil Borofsky, vividly demonstrates this point; he testified before a House committee that potential public exposure from the measures taken to revive the financial sector could reach $23.7 trillion. Compare that to the governmentÂs commitment to the peopleÂs welfare! He objected strenuously to the Âlack of transparencyÂ in the bail-outs Â a polite way of pointing to its disregard for democracy. Â
Capitalism does not only pillage the public to rescue its criminally irresponsible financial sector; it intensifies the exploitation of workers to bring profits back to life. In the face of excess productive capacity and with few labor-saving technologies emerging, the obvious antidote to profit shrinkage is to squeeze more and more production from fewer and fewer workers at a lower wage and benefit rate Â a forced increase in labor productivity. The massive lay-offs, the bankruptcy filings, the restructuring, the violation of labor contracts, and the speedups of the last year are all elements of the furious efforts to restore profitability. Unemployment and impoverishment are not unintended consequences of this economic decline, but the prescription for healing the ÂpainÂ of capitalist profit shrinkage.
In the past and in some countries facing the current economic decline, labor militancy, political initiative, and legal restraints have retarded the capitalist class from swiftly and mercilessly imposing this brutal remedy on working people. In France and Germany, for example, government financial support for struggling corporations was conditioned upon maintaining employment. But the class struggle in the US is decidedly more one-sided. Years of erosion of regulation, declining labor unity and militancy, and political servility have opened the door wide to naked aggression against working people.
Many economists expressed surprise at the Labor DepartmentÂs data on first quarter nonfarm business productivity which registered a 1.6% annualized increase, a report doubling initial estimates. Despite defying historical trends, this increase would be readily expected given the shock therapy inflicted on the working class by corporate leaders and urged by policy-makers. Many seem to overlook the fact that lay-offs, speedups, and the avoidance of contractual obligations are the conscious actions of the powerful to advance their interests.
One can see this clearly from the Labor Department figures that show a deep decline in output in the first quarter, but an even steeper decline in hours of employment Â an indisputable increase in the rate of exploitation. Fewer workers are producing more for less in spite of the slowdown in production. Clearly, the burden of recovery is squarely and fully on the backs of working people.
While the goal of restoring profitability is largely unspoken, many on both the right and left have raised the alarm about the huge resources Â in the form of government debt Â devoted to propping up the corporate world, especially the financial sector. Barely imaginable quantities of funds Â essentially deferred, yet to be realized dollars Â have been poured into failed capitalist enterprises that have been designated as Âtoo big to failÂ. This designation constitutes a conscious restructuring of the State-Monopoly structure that will leave the smaller, less dominating enterprises competitively weaker. In the coming period, they will either disappear or be absorbed by the giant firms ordained by the state-corporate dictatorship. It takes little imagination to recognize this restructuring Â the encouragement of further monopolization Â as a further step towards the restoration of profitability.
The alarm over rising government debt is real, though confused and misdirected in the popular press. Certainly debt Â a promissory note against future created value Â raises the question of where that value will be produced and how it will be transferred to the government. The right wing offensive Â the tax revolts Â sells the notion that ÂweÂ will be on the hook for enormous taxes in the future to pay back the enormous government debt. They conveniently and demagogically obscure the fact that much of the debt springs from ÂdefenseÂ spending, the imperialist wars and wealth-favored tax policies which they enthusiastically supported. They simply ignore the fact that current policies that have increased the money supply by 16% over the last two years is exactly the policy prescription advocated by their revered economic guru, Milton Friedman, to address a sharp contraction. Insofar as they want to reduce the debt by destroying social programs and blocking progressive initiatives like national health care, enhanced social security, public employment, and fair taxes, they objectively carry the water for the profit-centered ruling class.
Liberals, on the other hand, are largely constrained by the corrupted and discredited logic of Âa rising tide lifts all boatsÂ and the fallacy that wealth Âtrickles downÂ from the top. Dogma, lack of historic perspective, and self-interest confine the official opposition confronting the right-wing offensive to an unseemly defense of the corporate bail-outs and profit-friendly stimulus. Â
In truth, the bail-outs and stimuli do present a serious problem. In the past, much of government debt has been readily passed on to others in the form of the issuance of Treasury notes. For the past decade, trading partners have purchased US debt as part of an unspoken deal to sustain the US as the principal global consumer. China, Japan, Hong Kong, and Taiwan hold over $1.65 trillion in US Treasury notes; their determination to save fueled the US propensity to spend. But matters have changed drastically with the collapse of world trade. At its peak in 2006, foreign investors purchased a net monthly $96 billion in US securities. Since then, these purchases slipped, turning negative on two occasions in 2007 and at the end of 2008. In May of 2009, foreign purchases of US securities were only $7.9 billion, 1/12th of their 2006 average. This is a startling, though little noticed, collapse.
Pollyanna policy-makers are betting (and praying!) that this appetite for US debt will return with the capitalist recovery. But there is every reason to believe that global trading partners may not cooperate. The PeopleÂs Republic of China has enjoyed unique success in resisting the global downturn, with the economy well on target to achieve the 8% growth rate projected for 2009. While exports are down, the USÂs Wal-Mart economy remains a strong cornerstone of PRC-US trade. But more importantly, the PRC has enacted a huge and effective stimulus program that has quickly channeled capital into public employment and social programs, expanding the domestic economy and shielding citizens from the worse effects of economic dislocations. The success of this balanced approach to growth suggests that the PRC may well rely less on the export-engine for future development. Consequently, it is a good bet that policy-makers will encourage spending at the expense of the purchase of US securities. Suffice it to say, the road taken by the PRC was available to the US Â public ownership of banks, massive direct public employment on infrastructure, public health, social security Â but weakly advocated and vetoed by the state-monopoly rulers.
The question of inflation arises frequently, especially with the denizens of talk radio, the right-wing megaphones of ignorance. Without grounding the massive funds committed to bailing out capitalism in real assets (tax collections, government securities, etc.), the circulation of bail-out funds threatens to drive prices skyward, cheapening the value of money generated by the productive economy. The simple and obvious solution Â extracting greater revenue from the beneficiaries of the bailout Â is precluded by the dominance of monopoly capital and its compliant political servants. Moreover, monopoly capital would likely welcome a period of substantial inflation to cheapen the debt obligations incurred in the federal bail-out, obligations that were already offered with shamefully favorable terms. Thus, the right-wing fears are justified, though calculatedly misdirected at Âbig governmentÂ, as if government actions were independent of the interests and wishes of the corporate elite. They re-channel these fears into a general attack upon social spending that might advance the interests of working people. They find an only too receptive audience with many in the Democratic Party leadership. Â
In the era of State-Monopoly Capitalism it should come as no surprise that:
●Policy efforts have been directed towards a recovery for capitalism, fundamentally, capitalist profitability.
●Little attention has been given to a peopleÂs recovery. All the vital signs of the condition of the working class continue to deteriorate: rising unemployment, sinking incomes, benefit cuts, rising numbers of uninsured, growing mortgage delinquencies and foreclosures Â up 73% in the first quarter, increasing credit card defaults, expanding welfare applications, etc.
●Monopoly enterprises are strengthening with support and encouragement of the government, absorbing the weaker firms. As The Wall Street Journal headline recently attested: Goldman Grows on Rivals Pain, an anointed corporation, like Goldman Sachs, parlays its most-favored status and insider connections into record profits and dominance. Likewise, the merging of Bank of America with Merrill Lynch, Morgan Stanley with Smith Barney, and others Â a new wave of even longer-named financial corporations ÂÂ signals a greater concentration in the financial sector.
●The costs of restoring profitability are expected to be borne by the working class. One looks in vain for the IOU from corporate interests or the wealthy for the unemployment and immiseration visited on the vast majority for the cause of accumulation.
All of these truths confirm the continuing, advancing fusion of monopoly capital and the state. Behind the faÃ§ade of democracy are actors and institutions devoted first and foremost to preserving and expanding the dominance of monopoly capitalism over every aspect of our life. Those political actors who do not already identify with the goals of monopoly capital are corrupted or, frequently, politically marginalized.
Clarity on the nature and path of State-Monopoly Capitalism is a necessary first step to combating the forces arrayed against the interests of the majority. It is important to remember that they are relatively few and we are many. The jobless recovery from the last downturn at the beginning of the decade saw virtually no improvement in household income, more people without health care, and increasing poverty. An ingenious study by researchers at The Wall Street Journal reveals just how poorly the bottom 94% of US employees fared over the period preceding the current downturn. Using Social Security Administration data, the study revealed that the highest paid 6% – Âexecutives and other highly compensated employeesÂ Â received more than one-third of the $6.4 trillion in overall US wages, up from 28% five years earlier. The researchers warn that this vastly understates the real incomes of this group since SSA data does not include additional compensation such as stock options. The WSJÂ article (Top EarnersÂ Pay Is Seen Eroding Social Security) also points out that removing the earnings cap on Social Security would easily make the system viable for at least 75 years.
This ÂrecoveryÂ promises an even more devastating fate for working people. Through March of this year, pay raises were down about a third from the prior 12 months according to the Labor Department. Analysts cited by The Wall Street Journal note that these increases are Âthe smallest in decadesÂ.
People are beginning to and will increasingly question both a people-grinding economic system and an ÂundemocraticÂ democracy. While questions are not challenges, there is a sobriety in the air that will not accept mere promises, ÂfaithÂ, or ÂhopeÂ as answers to the rising misery. Witness the organized militancy for Employee Free Choice and Single Payer health care. While both movements frequently meet deception, falsification, and betrayal, they count as great teaching moments for thousands of activists who now have some clarity on the nature of the two-party system, the economics of profit, and the necessity of organization and militancy.
Unmistakably, the forces arrayed against a truly peopleÂs agenda are powerful and single-minded. They are hell bent on returning to the rapacious Cowboy Capitalism of the last two decades Â an approach that can only generate new crises – and they can count on the state to continue to abet this goal. But there are ÂsproutsÂ of conscious struggle that must and will be nurtured in the coming years. Â