Job Destruction, Overproduction and Crisis In the High Tech Era – A Marxist View
By Fred Goldstein
“American business is about maximizing shareholder value. You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”
Allen Sinai, chief global economist at the U.S. research firm Decision Economics
The above quote, by a prestigious and often-cited capitalist economic analyst, brutally describes a constant underlying process of capitalism in general – not just in the U.S. but capitalism as an economic system. This is a process which has been in existence since the system began 500 years ago.
The prominent bourgeois economic consultant to Wall Street, also a former Lehman Bank executive, is well known for his sharp characterizations of the economic crisis. He is the originator of the phrase ―the mother of all jobless recoveries,‖ referring to the 2009-2010 so-called “recovery.”
Sinai’s above comment, should he have followed out the thinking that flows from his remark, would have led him to the conclusion that capitalism has no future. Of course, that is an unthinkable thought for a capitalist expert, no matter how discerning he may be.
What Sinai remarked on has been true for all of capitalism since bosses began hiring workers. And at the present moment, the process described above has reached the point where it may bring capitalism to a dead end, which is the subject of this paper.
The point of view of our presentation is that of revolutionary Marxism. Marxism has no crystal ball and no ability to prophecy. It can only rely on the scientific theory of historical materialism, observe events as carefully as possible, and attempt to uncover developments in order to more effectively intervene in those events on behalf of the working class and the oppressed.
That is the spirit in which we attempt to characterize the present crisis.
The economic crisis, which began in August 2007 with the collapse of the housing bubble in the U.S. and quickly spread around the world, marked a turning point in the history of capitalism.
A different crisis
It is a turning point which carries great danger for the workers and the oppressed of the world, but at the same time carries great future potential for those with a revolutionary perspective.
Why? Because this is not just a severe capitalist crisis. It is not a crisis which has within it the seeds of its own recovery, as all previous crises since the Great Depression have had.
There have been 10 economic crises in the United States since World War II prior to this one. Capitalism has been able to climb out of each one and push further upward in production and employment. It has used all sorts of artificial means to overcome these crises – militarism and war, imperialist expansion, state financial intervention, technological restructuring, union busting, lowering of wages and so forth.
This crisis is different. A world historic social system, the system of capitalist wage slavery, shows many signs that it has reached the point at which it cannot revive itself.
Central bankers have poured trillions of dollars into the system. The U.S. Government Accountability Office (GAO) issued an audit of the Federal Reserve Bank in July. It found that secret loans of $16 trillion were given out, mainly to U.S. banks, but also to many European banks.
This is in addition to the publicly known bank bailout by the George Bush administration of $750 billion and the $750 billion stimulus package by President Barack Obama in 2009.
If you include Europe and Japan, the total amount of money poured into the world capitalist financial system is probably at least $20 trillion. (Throughout this paper, 1 trillion means 1 followed by 12 zeros and 1 billion means 1 followed by nine zeros.) The entire world Gross Domestic Product, according to the World Bank, is $58 trillion. So central bankers have put in amounts equal to approximately one third of global GDP.
New stage of the crisis ahead
What has been the result? In the first two years, from August 2007 to June 2009, the bailouts and stimulus packages were able to avoid a complete collapse of the system. For the next two years, from June 2009 up to July 2011, the system remained at a stage of impasse. While a crash was temporarily avoided, the system stabilized, with unemployment remaining at crisis levels while business grew very slowly and anemically.
Since this July, there have been signs that the impasse phase is coming to an end and the system is headed toward a renewed capitalist downturn. The wild stock market swings over the financial fate of Europe get the headlines. But the fundamental issue of decline in growth is widely underreported.
Behind the intensified default crisis in Greece is the fact that the Greek economy contracted by 6 percent in the last quarter. The entire euro zone grew at 0.2 percent last quarter. Germany, the engine of the European economy, grew by 0.1 percent and France had zero growth.
As for U.S. capitalism, it grew at 0.4 percent in the first half of the year, but it had zero job growth in August. There are still at least 30 million workers, one fifth of the work force, either unemployed or underemployed. For every job opening, at least 5 or 6 workers are actively looking for employment.
The U.S. government has just announced that a record number of people now live in poverty. Some 46 million people are officially living in poverty in the richest, most powerful capitalist power in the world. Yet the official numbers are artificially low by all standards and the number is probably double that. Poverty is most concentrated among African Americans, Latina/os and Native people, whose extraordinarily high rates of poverty are increasing at an alarming rate.
Thus it is clear that unprecedented amount of $20 trillion in capitalist state intervention has been unable to revive the system. Furthermore, it has been unable to prevent a renewed contraction – called a “double dip.” (Of course for workers, it is not a double dip. They never recovered. For our class it is just more of the same, only worse.)
The capitalist market mechanisms certainly cannot revive the system. Massive capitalist state intervention cannot revive the system. And no amount of restructuring of the economy can revive things. In fact, continuous global restructuring of capitalism for the past 30 years has profoundly aggravated the crisis.
A regime of low-wage capitalism has been achieved on a global scale. Workers from every continent have been drawn into a world-wide network of exploitation and super-exploitation. Workers have been set in competition with one another all over the world. The bosses have set up a race to the bottom as far as wages go. In addition to causing untold suffering and insecurity, this further undermines the global market for the commodities produced by the workers in this global network.
Global youth unemployment
One of the extreme symptoms of capitalism’s dead end is the desperate state of youth around the world. There were 81 million unemployed youth aged 15 to 24 at the end of 2009, according to a study by the United Nations International Labor Organization. In the U.S. official numbers of youth unemployment, completely understated, are 20 percent.
Youth unemployment is 50 percent in Egypt and Tunisia, 40 percent in Spain and Italy, close to that in Africa, Youth unemployment is the most dramatic sign of the declining ability of capitalism world-wide to absorb labor. The new generation of workers coming into the work force is largely shut out. When they do work it is for low wages. Youth unemployment is a key measure of stagnation of the system in decline.
Slow growth, stagnation and outright contraction of capitalism mean a growing reserve army of unemployed. The largest contingent of that army is the youth, who have least access to the labor market.
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