Thursday, February 4, 2010

New Phase of Capitalist Crisis, FIGHT FOR JOBS, Greedy bosses profit, unemployment expands, wages sink

By Fred Goldstein
Published Feb 3, 2010 5:34 PM

The news that while the economy grew at an annual rate of 5.7 percent in the last quarter, there was simultaneously a net loss of 208,000 jobs, indicates that U.S. capitalism has entered a new phase — the phase of the “jobless recovery” with increasingly intractable and growing long-term mass unemployment.

Features of this new phase of capitalism include the intensified exploitation of those who still have jobs, characterized by the lowering of wages and reduction in hours worked, a massive shift to temporary and part-time workers who can be hired and freely fired while being treated as “disposable” labor, and withholding the wages of low-wage workers. This is accompanied by a crisis in youth unemployment, continued layoffs and the shrinking of the economy by corporations as they seek to restore profits and end secure employment.

According to government reports, the last two quarters have seen economic expansion, but in those six months there has been a net loss of 735,000 jobs. At the same time that the Bureau of Labor Statistics loudly announced a 5.7 percent annual economic growth rate, it quietly reported that 470,000 workers filed new claims for unemployment insurance in the week ending Jan. 23.

In fact, the actual growth of the economy was much lower than the numbers indicate. During a downturn, businesses stop manufacturing new items and fill new orders from the inventory of products that have already been manufactured. This is called a drawdown of inventory.

The way the government deals with inventory in calculating economic growth is to call it “growth” when businesses don’t draw as much on inventory as they did in the previous period. In other words, the government adds numbers to the growth figures that do not represent an increase in production but only a slowing down of the dipping into inventory to fill new orders. If the inventory factor is removed from the 5.7 percent growth number, it is really 2.3 percent.

A thimble to bail out an ocean

President Barack Obama in his State of the Union speech changed his message from health care to jobs. Before and after the speech he stumped the country talking about creating jobs. His program consists primarily of throwing $5,000 tax breaks to small businesses for hiring new workers and additional tax breaks on Social Security if the bosses raise wages.

The idea that bribing businesses with tax breaks can revive the capitalist economy enough to absorb the 15 million unemployed, draw the millions of “discouraged workers” back into the workforce, and raise the hours of the millions of part-time workers is ludicrous. It would take the creation of 550,000 jobs each month for two years just to regain the 8 million jobs lost plus absorb the 2 million new workers coming into the workforce.

That would be like opening up dozens of auto plants, steel mills, computer factories, hospitals and department stores every month. But the present stage of capitalism is a stage of shrinking the economy, not growing it. Every significant industry is downsizing, whether auto, airlines, housing, department stores, etc.

Throwing tax breaks to small business as a solution to the jobs crisis is a very thin smokescreen to conceal the lack of any real government jobs program. It is like trying to bail out the ocean with a thimble.

As bad as things are now, capitalist economists are waiting with trepidation for the day when the original government stimulus package of $787 billion runs out and the credit for first-time home buyers ends in the spring. Much of the stimulus money was in the form of tax breaks to business — and that has hardly put a dent in unemployment.

Growing dependence on capitalist state

As limited as it is, whatever upturn in the capitalist economy that has occurred is a result of government spending. This has revealed another fundamental feature of the new phase of U.S. capitalism: The economy has reached a new level of almost complete dependence on the intervention of the capitalist state. This is a sign that capitalism as an economic system is approaching a dead end.

According to a study by the Economic Policy Institute: “[P]rivate sector sources of spending have not produced positive growth in gross domestic product on their own since 2007.

“The recession that began in 2008 saw the longest consecutive stretch of negative quarterly growth rates (four) since such data began being kept in 1947. The figure shows that without the public spending made under the Recovery Act last year and the Economic Stimulus Act of 2008, the U.S economy would have actually seen six straight quarters of contraction followed by another quarter of zero growth.” (“Private sources of spending cannot sustain job growth,” Josh Bivens, EPI)

In other words, the capitalists can no longer keep the system going on their own — even with the hundreds of billions of dollars that are annually pumped into the economy through funding the military machine and all the normal subsidies and supports given to business.

The bosses are becoming more and more superfluous as a force for economic growth and employment. At the present stage their direction is to shrink the economy — and thus destroy more and more jobs permanently — so that they can rake in greater profits.

Rather than make profits through the normal cycles of boom and bust, the bankers and bosses need the capitalist government to supply them with easy money in the form of guaranteeing them cheap credit or outright bailouts. Furthermore, they need the government to give car buyers and home buyers money to help buy cars and homes. The capitalists need the government to give them funds to bankroll construction projects, i.e., to guarantee them profits as a bribe to create jobs. The state has to extend unemployment insurance and food stamps to keep the victims of layoffs and low wages from starving. This is the condition that the capitalists have brought about over time in their lust for profit.

‘We’re all temps now’

It is a law of their system that the capitalists must increase the productivity of labor, i.e., the rate of exploitation of labor. But now they have arrived at a point where they have increased the productivity of labor in “outrageous amounts” which are unsustainable, according to the former chair of the Federal Reserve System, Alan Greenspan. (Marketwatch, Oct. 4) The growth in productivity was 8.1 percent in the third quarter of last year and it is likely to have increased significantly since then.

Workers are forced to work harder, faster and more intensely, turning out more goods and services in less time, in order for there to be economic growth. But this increase in productivity brings growing unemployment at the same time. The capitalists boost their profits by sweating more out of the workers. This is what is behind the jobless recovery.

The bosses use growing job insecurity to sweat more profits out of a diminishing workforce. One key to this phenomenon is the growth of temporary and part-time work.

In 2005 more than a quarter of the workforce were temporary, part-time or freelance workers who could be hired and fired at will and lived in a permanent state of insecurity. Most of these workers received no health care insurance, no vacation, no retirement benefits, etc.

In a Jan. 7 cover story, Business Week magazine called them “disposable workers.” Their numbers have undoubtedly grown during the current crisis. “‘When I hear people talk about temp vs. permanent jobs, I laugh,’ says Barry Asin, chief analyst at the Los Altos (Calif.) labor-analysis firm Staffing Industry Analysts. ‘The idea that any job is permanent has been well proven not to be true.’ As Kelly Services (KELYA) CEO Carl Camden puts it: ‘We’re all temps now.’”

The capitalists have used the crisis and all the insecurity it creates to bring down the living standards of the workers in every way possible. Yet these are the very workers who must buy their products.

“[T]his recession’s unusual ferocity,” wrote Business Week, “has accelerated trends — including offshoring, automation, the decline of labor unions’ influence, new management techniques, and regulatory changes — that already had been eroding workers’ economic standing. The forecast for the next five to 10 years: more of the same, with paltry pay gains, worsening working conditions, and little job security.”

The time to fight back is now

Business Week is a mouthpiece for big business. It behooves the advanced workers to be aware of this grim projection for the future of the working class and the oppressed from the mouths of the bosses themselves.

The underlying assumption of all these grim predictions is that the working class is going to sit back and take it on the chin without end. The workers and their communities, the students and youth, and all those who are exploited and oppressed by this vulture class must begin to organize for the fightback.

It is clear that the capitalists are just parasites on society. They cannot even keep their system going without the tax money of the workers being recycled from our wages into their pockets. The process of capitalist exploitation, with all its crises and all the boom-and-bust cycles that the workers have suffered through, had been able to recover up until now and put workers back to work. But those days have come to an end.

A capitalist recovery is only a recovery for the capitalists and not the workers. That is becoming clearer every day. A working class recovery will depend on the struggle of the working class — employed and unemployed, organized and unorganized, documented and undocumented immigrants, of every race and nationality. There is no other road to turn this crisis around.

It is time for the workers to open up a struggle against the capitalist state. It is time to demand an end to the subsidies to business, the bailout of the banks, the handing over of hundreds of billions of dollars to the military. Instead of funding capital, Washington must fund a massive jobs program.

Everyone who needs a job at livable wages must have one. Those who are unable to work must be guaranteed income. Youth must have jobs and education, not jails. Universal health care must be a right. There must be an end to foreclosures and evictions, to the persecution of immigrant workers, and an end to war and racism.

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1 comment:

Anonymous said...

It is wrong to expect capitalists to provide jobs for all as they are least interested to recruit more people whose job is done by machines. Profit is generated through more machines than more men. Workers develop machines and the same machines throw the same workers from jobs. In recession time too, the capitalists throw the people out from jobs to maintain the bottom lines or to survive in crisis. As such expecting capitalists to provide more jobs and particularly in recession time is futile.
State will always protects capitalist to see the figures of GDP growing. Workers are useless for the state for improving GDP and the country's image in the world. The state is least interested in protecting workers. Improve workers' productivity is the trick of capitalists to improve bottom lines and not to employ more people.
Recession is caused by excess production of goods with the help of higher productivity of machines as compared to the demands for the same products. This is called abundance of products in markets which is not liked by capitalists. This brings pressure on profits and survival. There is no economic theory developed by West's economists till date for abundance. It is never found necessary for maintaining capitalists' planning of scarcity of supplies for more profits. Workers have to find an economic system allowing small and medium size enterprises or self-employment system for eternally producing to sustain a decent living for themselves and their families. Please read the book Hindu-economics by Dr. M G Bokare for this new economic theory. Second edition of the book is now available from