Almost overnight, the media, corporate CEOs and government officials have gone from proclaiming that the U.S. would somehow avoid an economic slump, to all but recognizing that the country has probably already entered a recession. They are simply acknowledging what millions of workers have known for months and even years: the economy is in trouble, and working people and the poor are being hit hard.
Incredibly, we are told by some pundits that there is nothing to worry about, that it is all part of the “natural cycle” of the system, that less spending on dining and entertainment will lead to a healthier population that eats less and exercises more, that expensive gasoline leads to fewer cars on the road and therefore to less pollution, and so on. Yes, it is indeed part of the “natural cycle” of capitalism, and yes, belts will need to be tightened.
But for some, the “natural cycle” will mean a lot more pain than for others. While some CEOs may need to purchase one less corporate jet this year, millions of workers and poor people will have to choose between buying food, gasoline, heating, medicine, education and keeping a roof over their heads. Merrill Lynch has reported that by the end of 2007, 36 percent of Americans’ “disposable income” went to cover food, energy, medicine and health care, the highest proportion since records began in 1960.
The stock market has taken a beating, as investors realize that the trillions of dollars in fictitious money they have been trading back and forth has little of substance behind it. The dollar has sunk to new lows, oil and gold have risen to new highs, with both food and gasoline prices rising fast. Bear Stearns, once a top-five U.S. investment bank, collapsed in a single day, surviving only due to an emergency buyout by rival JP Morgan Chase for just $2 per share. Less than a year ago it was worth over $158 per share.
The Philadephia Fed index on manufacturing fell to -24.0 in February, from -20.9 in January, a further contraction of the sector. The reading for New York was similarly grim, registering its steepest drop on record. There is a very real danger of stagflation: rising inflation combined with rising unemployment and slow growth or contraction.
crisis in the housing market has now definitely spread to other sectors
of the economy. Home prices have collapsed in many markets, and many
borrowers now owe more than their houses are worth. Hundreds of
thousands of households are defaulting on their mortgage loans even
before the rates reset to a higher level, with twice as many defaults
in 2007 than in 2006. The media has even reported cases of people
resorting to arson to avoid foreclosure and bankruptcy.
To make ends meet, many workers have had to resort to “pay day” loans at exorbitant rates as high as 800 percent. The Center for Responsible Lending (CRL) recently reported that the average borrower has to pay a total of $793 for a $325 loan. Far from helping people, these predatory lenders succeed only in digging a deeper hole for workers already on the brink of financial disaster.
The loss of millions of quality unionized jobs over the last 30 years means that those with less education are more vulnerable to the effects of a recession than ever. In the past, even many people who didn’t finish high school could make a decent enough life for themselves and their families by learning a trade or working at a factory. These days, even college graduates with specialized training are more and more likely to find themselves working at a low wage, dead-end service job.
A “good job” is defined by the Center for Economic and Policy Research (CEPR) as one that provides health insurance, a retirement plan and earnings of at least $17 per hour, or about $34,000 per year. In 1979 there were 19.6 million such jobs in the manufacturing sector, the peak of U.S. manufacturing. Since then, nearly 6 million such jobs have been lost, with another 52,000 down the drain in February alone. 30 years ago, one in five high school graduates had a “good job”, by 2005 it was one in seven. According to the CEPR, in 1979, 41 percent of those who didn’t finish high school had “bad jobs”, that is, jobs without health or retirement plans paying less than $16.50 an hour. By 2005, that figure had reached 61 percent.
As the economic crisis worsens, those who lose their jobs will find it even harder to find new employment, and without savings, unable to keep up with mortgage payments, and a gutted social safety net, millions of people will be “out of luck”. Those that do find work will likely have to take major pay and benefits cuts. Many young people and even some not so young have been compelled to move back to their parents’ homes to try and regroup financially and avoid homelessness.
One sector of the economy that remains highly profitable is the so-called “defense” industry. The CEO of Lockheed Martin made nearly $25 million last year. Compare that with the average wage earned by a private in the Army: $25,000. Unable to find work or educational opportunities in the private sector, thousands of working class youth are sucked into the military in an “economic draft”.
Over 4,000 U.S. soldiers and countless Iraqis have died, and the billions of dollars spent on this tragic adventure of imperialism have meant a steady decline in U.S. workers’ standard of living. Bush’s approval rating has sunk to a new low of just 31 percent, forty points lower than it was five years ago when he launched the invasion. This is a decline similar to Lyndon Johnson’s in the late 1960s during the Vietnam War. And still the occupation of Iraq continues, a full 16 months after the Democrats were swept into congressional power with a mandate to end the war. Not one of the Republican or Democratic presidential candidates has a plan to immediately pull all the troops out.
It is in this situation that workers are being asked to vote for either Barack Obama or Hillary Clinton to bring about “change”. There is even talk of a “Dream Ticket” with both candidates on the ballot. This is more than enough proof that there are no fundamental differences between them. At root, they both defend the status quo, albeit with this or that cosmetic change. This is why working people need a party of our own. And not only for those born in the U.S., but for all workers.
On May 1st, workers across the country will march for immigrants’ rights. The magnificent mass movement that erupted two years ago has largely been driven underground by a wave of state terror, with tens of thousands being rounded up in raids and deportations. But nothing fundamental has been resolved. Sooner or later, the mass struggle will erupt again, on an even higher level, as the economic crisis forces all workers to come together to defend their common class interests. In the meantime, the scapegoating of immigrant workers for the problems caused by the system itself has increased exponentially. The labor movement must denounce these attacks and stand shoulder to shoulder with our working class brothers and sisters. Contact the WIL to join the struggle for a better world for all workers.
See also (on the Financial Crisis):
- Capitalism beared by Michael Roberts (March 27, 2008)
- US slides into recession - who's next? by Mick Brooks (March 17, 2008)
- Financial meltdown: another day, another finance house bites the dust by Mick Brooks (March 17, 2008)
- 1929: Can it happen again? by Mick Brooks (March 17, 2008)
See also (on the U.S. Elections):
- USA: Obama and the Democrats' Foreign Policy by Shane Jones in the USA (March 31, 2008)
- USA: The War, the Economy & the Elections by US Socialist Appeal Editorial Board (March 6, 2008)
- Who is Barack Obama and what does he stand for? by Luiz Bicalho in Rio de Janeiro (February 22, 2008)
- Super Tuesday and the U.S. Elections by John Peterson in the U.S. (February 7, 2008)
- USA: Why Workers Need a Labor Party by Ed Riley in the U.S. (February 7, 2008)