"This is the sixth month that manufacturing has failed to grow, which technically by our numbers would indicate a recession," said Norbert Ore, chairman of the purchasing managers committee that publishes the report. He said the figures marked an end to "the longest economic run of growth that we've seen in history."

"The slowdown has arrived," declared Jerry Jasinowski, president of the National Association of Manufacturers. "The remaining question is how hard the landing will be."

U.S. finance capital's crisis of capital accumulation has stretched across several business cycles, with far-reaching consequences, including overproduction and excess industrial capacity, declining capital investment, bank and business failures, and intensified inter-imperialist competition. The latest expansion in the U.S. economy appears to be ending as corporate profits are falling in many industries and banks have started tightening their lending policies, the New York Times reported last November. Lockheed Martin Corp. said January 23 that its fourth-quarter earnings dropped 70 percent from the same period of 1999. Other big U.S. companies also reporting sagging profits, include Ford Motor Co., UAL Corp., and Sears, Roebuck & Co.

The slowdown is a result of the normal capitalist business cycle, despite talk until recently from many bourgeois pundits that the expansion and the "new economy" hailed the end of these laws of development. In an upswing, the bosses add on workers and seek through fierce competition to expand their market share, producing more goods to be sold on the market. Eventually this process leads to a crisis of overproduction of commodities--more output than bosses can sell at a profit. Companies lay off workers, depressing the market more and causing reverberations in other sectors of the economy.

These pressures can be seen in the production of computers, where despite cost-cutting for ever more powerful machines, companies are turning out far more than can be sold profitably on the market. Gateway, the nation's second largest direct seller of computers, reported last November that its sales dropped 30 percent from the previous year's figures. Inventories at Compaq Computer were also building up.

The dotcom companies also took a deep nose dive. Yahoo Inc. said its profit would plummet 10 to 30 percent this year. "Dotcom mania was the froth on an exponential surge of [information technology] appliances driven largely by unprofitable businesses," asserted Stephen Roach, chief economist at the investment firm Morgan Stanley Dean Witter.

Michael Teumbreull, vice chairman of Paccar, one of the world's largest truck makers, said the heavy truck industry was burdened with a 20,000-unit inventory surplus. Both Ford and General Motors acknowledged that their inventories are expanding--Ford to about 90 days production and GM to 100 days. "Manufacturers fear being left with thousands of unsold models and plants churning out vehicles with no buyers," said an article in the Financial Times last December.

DaimlerChrysler announced January 29 plans to cut its manufacturing capacity by 15 percent. The bosses said they will close six plants and fire 26,000 workers by 2002.

In the steel industry, US Steel, the largest U.S. steelmaker, posted a loss of $57 million in the fourth quarter last year. Five U.S. steel companies went bankrupt in 1998 and LTV, the third largest in the country, filed for bankruptcy in December. In January LTV laid off 500 workers at its blast furnace in Cleveland.  
 
'Last hired, first fired'
With the latest job cuts, the U.S. unemployment rate crept slightly upward last month from 4.1 percent to 4.2 percent, according to a report from the U.S. Labor Department. The report indicated jobless rates increased significantly for Blacks and Latinos--the "last hired in an expansion and first sacked in a recession," the Financial Times noted. For Blacks, the unemployment rate is 8.5 percent and for Latinos it is 6.4 percent.

Working people are entering this slowdown in an already precarious position. Over the past two decades, the poverty rate among working-class families has soared by almost 50 percent. Health care has disintegrated as nearly half of all adults in working-class families living under the poverty level lack health insurance. Some 43 million U.S. citizens have no health coverage.

An increasing number of working people are seeking help from soup kitchens, food pantries, and homeless shelters. There is at least one working adult in 39 percent of U.S. households receiving emergency food. Nearly half of these adults are working at least 40 hours a week.

"People are working full time and have to make choices they shouldn't have to make--a doctor or a meal, a prescription or a meal, housing or a meal," said Deborah Leff, head of the country's largest domestic hunger relief organization.

An element that helped fuel the economic expansion in the 1990s was massive lending and underwriting of many corporations. The capitalists are alarmed about the rising number of defaults on loans. "Amid the good times, many U.S. companies are drowning in debt," read a headline in the International Herald Tribune last August. The article noted that "such household names as Pathmark Stores Inc. and United Artists Theatre Co. defaulted on bonds," adding to the $15 billion total in defaulted debt across the country. Figures from the U.S. Census Bureau show a 15 percent increase in business failures from 1990 to 1998.  
 
Growing personal debt
During the same period the total number of bankruptcies filed rose nearly 50 percent, from 725,484 to 1,429,451. These figures include individuals as well as businesses. Some articles in the big business media have pointed with concern to the fact that over the past decade personal savings in the United States have hit a historic low as individual debt has shot up.

"The borrowing has been so extensive, in fact, that home owners, after building up equity through much of the 1960s and 1970s have let their ownership shares deteriorate over the last two decades to the lowest level on record," wrote Louis Uchitelle for the New York Times. "The average homeowning household owed lenders [banks and mortgage companies] 46 percent of the market value of its residence."

Other weaknesses rising to the surface of the U.S. economy include the speculative balloon in stock prices that has begun to deflate. U.S. stocks have lost $5 trillion in value from their peak last March. The Nasdaq index, which is dominated by trade in technology stocks, fell 39 percent last year and 44 percent from its high point in March.

A slowdown in the U.S. economy, which absorbs 30 percent of the world's total economic output, will have serious repercussions around the globe. Some 5,000 auto jobs in Mexico that depend on car sales in the United States have been axed by the U.S. auto parts company Delphi. The German-U.S. carmaker DaimlerChrysler said 1,000 workers will be thrown out on the streets when it closes two plants in Toluca, an industrial hub west of Mexico City. Mexico has become the second largest auto parts supplier to the United States in recent months and now produces 98 percent of all television sets sold in North America.

Japan, with 40 percent of its exports going to the United States, will also be severely affected by a U.S. recession. The country has been mired in economic stagnation since the early 1990s.

In Europe, the wealthy ruling classes are hoping to be somewhat shielded from a downturn in the U.S. economy. According to estimates from the European Commission, the 12 countries within the euro zone earn slightly more than 2 percent of their national incomes from exports to the United States. Some 80 percent of trade in Europe is with the 12 countries that make up the imperialist trade bloc. While U.S. companies have had slumping car sales, the German auto companies--Volkswagen, Porsche, and BMW--have been raking in record profits.

But Britain has been hit by the slowdown in car sales, with GM being the latest to announce plant closings there. The British-Dutch steel company Corus Group PLC, which mainly sells flat steel to the auto industry, posted an operating loss of $440.7 million. The company said it would cut 6,050 jobs and reduce its production by 20 percent.  
 
U.S. growth 'is close to zero'
"As far as we can judge we have had a very dramatic slowing down," Federal Reserve chairman Alan Greenspan told the Senate Budget Committee. He said that U.S. economic growth was "very close to zero" and that the manufacturing industry had built up too much inventory. In the face of contracting production, new orders, job losses, and declining exports, the Federal Reserve cut interest rates twice in January. Greenspan also backed George Bush's $1.6 trillion, 10-year tax cut plan, which the president said was needed to boost the economy.

"We've got a recession in smokestack America," said Richard Berner, a chief economist at Morgan Stanley Dean Witter. He said many U.S. corporations "are not going to be investing in capital equipment" as a result.

Since late 1998 capital investment in the U.S. economy, excluding computers, has in fact declined. Despite talk in the big-business press about an "investment boom," the total stock of industrial plant and equipment in the United States has grown at an annual rate of 2 percent since 1980, compared to an annual rate of 3.9 percent over the previous three decades.

The money that was invested in new equipment went mainly into ways to make fewer workers produce more. During the 1990s the U.S. capitalists boosted their profit margins by increasing productivity, cutting costs, and taking a bigger slice of market share from their rivals. Workers paid for this with declining wages, longer workweeks, damage to their bodies, and with their lives.

But the capitalists have not been able to expand productive capacity to the level they need to generate another gigantic boom, set industrial profits on a long-term upward course, and accelerate capital accumulation. As Karl Marx explained, it is the long-term tendency for the profit rate to decline that intensifies competitive struggle between the capitalists and drives the bosses in their assaults on the working class. This has once again been confirmed by the economic developments in the past decade.
 
 
Related article:
The capitalist business cycle and politics of economics  
 
 
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