Capitalist crisis breeds smoldering depression

BY BRIAN WILLIAMS

Declining industrial production and slowing trade on a world scale are creating depression conditions that wreak havoc on the lives of workers and farmers. The capitalist rulers’ schemes to try to reverse this — the latest is negative interest rates — only exacerbate the crisis, which is rooted in the basic workings of capitalism.

The European Central Bank and several central banks in Europe have held key interest rates below zero for more than a year now. The Bank of Japan joined them Jan. 29. Essentially, this means commercial banks pay a fee to park funds in the central bank, which is supposed to encourage productive investment.

But the reason the bosses don’t invest in expanding productive capacity and hire workers is because it’s not profitable to do so. Average industrial profit rates have been declining for decades. That’s why years of “stimulus measures” and “quantitative easing” haven’t produced a stable economic expansion.

Instead, the big capitalists hoard cash or speculate on stocks, bonds, derivatives and other paper values where the rate of return is much higher — blowing up bubbles like the one in the U.S. housing market, whose collapse helped trigger the 2008 recession.

The Federal Reserve isn’t planning to try negative interest rates, Fed chair Janet Yellen told Congress Feb. 11, but she wouldn’t rule it out in the future. For seven years the Fed has kept interest rates near zero, until it raised them slightly in December.

Industrial production continues to contract worldwide. In January factory output dropped for the fourth consecutive month in the U.S. and for the sixth month in China. Durable goods production in the U.S. fell 3.5 percent over the past year, the largest drop since 2009. In China exports, upon which the economy is based, declined 11.2 percent over the past year.

“One-Third of Oil Companies Could Go Bankrupt this Year,” headlined a Feb. 16 article in Fortune magazine, reporting on prospects facing some 500 oil and natural gas exploration and production companies worldwide. With overproduction and a nearly three-quarters drop in oil prices since mid-2014, oil and mining companies have cut hundreds of thousands of jobs worldwide.

A total of 75,100 layoffs were announced in the U.S. in January, the highest number since January 2009. Layoffs in 2015 rose 41 percent over the previous year.

Daimler, which makes Freightliner trucks, announced Feb. 15 the layoff of 1,200 workers at its North Carolina plants. Procter & Gamble, the world’s largest consumer goods maker, announced plans to eliminate 5,700 jobs over the next four years. Walmart, the world’s largest retailer, which recently closed 269 stores worldwide, announced its first sales decline in 35 years.

With declining agricultural commodity prices, many U.S. farmers are unable to meet their costs of production. Costs for producing corn are around $5 a bushel, but the price farmers get on the market is only about $3.65.

Declining world trade

The economic crisis is also reflected in a growing decline in global trade. Some 690 dry bulk ships that carry iron ore, coal and other bulk commodities are idled worldwide, reported the Wall Street Journal, and there’s an estimated 30 percent overcapacity of container ships that transport manufactured goods. Shipping giant Maersk has already laid off thousands of workers, with more to come.

Asia-to-Europe trade fell nearly 4 percent last year, according to Container Trades Statistics. The Baltic Dry Index, a global measure of shipping prices for commodities, reached its lowest point in its 31-year history Feb. 10.

As manufacturing production and trade has slowed, the use of protectionist measures has risen with the governments of India, Russia and the U.S. implementing the most. The largest number of trade restrictions imposed over the past seven years have been directed against Beijing — the opposite of what you’d think listening to the hype from politicians ranging from Bernie Sanders to Donald Trump, as well as many trade union officials.

In January the Labor Department reported an unemployment rate of 4.9 percent, but this figure masks the real scope of joblessness. The employment-to-population ratio — the percentage of those over 16 years old who have a job — plummeted from 63 percent in June 2007 to below 59 percent at the end of 2009. It has remained below 60 percent for nearly seven years. In 1999, 84.6 percent of workers aged 25 to 54 were working; today it’s down to 81.1 percent.

In Japan, the official unemployment rate is 3.3 percent, but the percentage of the working-age population that is employed is only 57.6 percent, lower than in the U.S. In the countries that make up the European Union, the official unemployment rate is around 9 percent overall, but is much higher in the countries hardest hit by the capitalist crisis, such as Greece and Spain. About half of youth under 25 in Greece don’t have a job.

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