Vol. 79/No. 1      January 19, 2015

“It may be impossible for an economy to achieve full employment, satisfactory growth and financial stability simultaneously,” he says.

His only answer is for the bosses to continue their grinding offensive against workers’ jobs, wages, social benefits and rights.

In the more than five years since bourgeois economists announced that a recovery has taken hold, there has been little in the way of economic recovery for working people. Government statistics posit a gradual decline in official unemployment levels to 5.8 percent in November. But workers continue to face a grinding crisis of joblessness and lower wages and hours for those who get work.

Millions without jobs are simply dropped from government statistics, discounted as no longer part of the workforce, and nearly 7 million have been forced into part-time work. Average wages rose only 2 percent last year, less than rising food and health care costs.

This situation results from a long-term crisis of the propertied rulers’ industrial profit rates, which has fueled a continued slowdown of capitalist production and trade on a world scale. Instead of investing in plant and production the propertied rulers look to speculation in financial paper for higher returns. And they’ve targeted workers’ wages, benefits and safety on the job to raise profit margins.

Summers notes that “unsustainable finances” have wracked the capitalist system for more than two decades, referring to rising government debt, budget deficits and falling investment in plant and production replaced with financial speculation upticks ending as the Internet and stock market bubbles of the 1990s and the mortgage bubble of the early 2000s burst.

Following the 2008 crash, the Federal Reserve slashed interest rates to nearly zero in December 2008, hoping to spur economic growth. It then began a “quantitative easing” money-printing scheme in which the government bought $3 trillion in government bonds and largely worthless mortgage-backed securities to pump money into the financial system over the next six years.

The rulers’ aim was to make borrowing cheaper for companies and encourage them to invest in expanding production and hiring workers. But for the great majority of bosses, it remains unprofitable to do so. Instead they’ve accumulated hoards of cash or invested in stocks or other forms of speculative bets, hoping to turn a profit on the rise or fall of paper values. And for workers, unemployment, underemployment, shrinking wages and more danger to life and limb on the job are the “new normal.”

So Summers has a new theory, “secular stagnation,” which says it is impossible for capitalism to maintain a “posture of full employment and production” for the foreseeable future.

“Secular stagnation” was posed in the depression of the 1930s, Summers says, but reversed after the U.S. rulers entered World War II, cranking up factories for war production and emerging as the top imperialist power. Resolving today’s crisis through a massive imperialist war is not on the table for the capitalist class.

Summers has no answers. He is fearful of the future, saying the situation is “troubling.” “Indeed there is the possibility of destabilizing deflation with falling prices leading to higher interest rates leading to greater output shortfalls leading to more rapidly falling prices and onwards in a vicious cycle,” he says.

At best, the current crisis is “likely to continue for at least the next decade,” Summers writes.

In response to the question “What is to be done?” the noted economist calls upon the propertied rulers to continue their grinding squeeze on the working class, hoping to raise profit rates and gain time for the capitalist system to recover. However, he cautions the bosses need to keep some “social protections” to blunt working-class resistance.

The whole house of cards is built on one key assumption — that the working class will quietly take the shellacking he prescribes for the next 10 years or so that he believes is the minimum needed for U.S. capital to “recover.” But the evidence is to the contrary.

Walmart workers striking and protesting for $15 an hour and full-time work, fast-food workers doing the same, rail workers at Burlington Northern overwhelmingly voting down boss demands for a one-person crew on freight trains, skirmishes by workers in other industries, as well as social protests against cop brutality and other actions that reinforce working-class resistance point to a different future.  
 
 
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