Reports at the beginning of November show that the U.S. economy declined in the July-September period, the first negative growth in eight years, and many bourgeois economists say a recession has begun. Business spending on new plants and equipment fell by 11.9 percent in the third quarter, a figure that was actually better than the second quarter of the year.

Official unemployment figures for the United States--widely acknowledged as underreporting the numbers of those out of work--climbed steadily in 2001, up to 4.9 percent in September and 5.4 percent in October. Japan, already in an official recession, shows no signs of recovery, and an economic slowdown is affecting the European capitalist economies as well. Joblessness in France, for example, rose for the fifth consecutive month, hitting 9.1 percent in September.

The economic downturn is marked by deflationary pressures, and headlines such as "Hints of Dreaded Deflation in U.S. Data" are cropping up in the capitalist media. The government's quarterly report on U.S. growth noted that there was a 0.4 percent decline at an annual rate in prices for personal consumption expenditures. It was the first quarterly fall in nearly half a century. A report issued by the National Association of Purchasing Management showed the pricing power of manufacturing companies is at the lowest level since 1949.

"Is the U.S. Economy at Risk of Emulating Japan's Long Swoon?" asked a feature article in the Wall Street Journal November 7. The piece noted the Federal Reserves decision to cut the benchmark interest rate to 2 percent, its 10th cut this year. The article notes high consumer debt, a continued bubble in the U.S. stock market just "waiting to deflate further," and excess industrial capacity as signs of more trouble ahead. Industrial capacity in use in September was 75.5 percent, the lowest level since 1983.

"As companies are saddled with excess capacity, they have little incentive to borrow to expand," the Journal points out, "no matter how low interest rates fall," and no matter how big a tax break they get from Uncle Sam.

The New York Times noted the problem for the employers in a deflationary period. "Cutting wages is very hard to do, so corporate profits get squeezed, leading to more layoffs and more falls in consumer purchases, which lead to more layoffs and on and on." Both papers worried that if inflation falls below zero, the Federal Reserve will loose its ability to influence the economy by lowing interest rates, something known as a liquidity trap.  
 
No shift in ruling-class policy
But given these trends there has yet to be a move by any wing of the U.S. ruling class or its two parties, the Democrats and Republicans, to either change their "strong dollar" policy or press for a shift toward a massive public works program along with extended and supplemental unemployment benefits.

U.S. president George Bush is pushing a plan to spend a miserly $3 billion to extend unemployment compensation from 26 to 39 weeks. The only catch is that it will cover only workers who were thrown out of work after September 11 and who live in states where the unemployment rate shot up 30 percent since that date. Workers in New York, New Jersey, and Virginia are automatically covered by the proposed extension.

Due to the attacks on the social wage over the past 15 years under successive Republican and Democratic administrations on the federal and state level, only 39 percent of unemployed workers currently receive any benefits, down from 50 percent in the mid-1970s.

The impact of the world's largest economy going into reverse is especially felt in semicolonial countries. The effective default by the government of Argentina is just one sign of the devastating impact of the downturn in the world capitalist economy (see article page 16).  
 
An imperialist protectorate
As the dominant imperialist power coming out of World War II, Washington took the course for the most part of finding rising capitalist or privileged layers in oppressed countries around the world that they could work with. This was a shift from the imposition of colonial regimes that marked the European imperialist powers in earlier decades.

Washington expected them to police workers and peasants and maintain conditions that maximize the ability to draw wealth into the coffers of the imperialist banks, corporations, and bond holders, as well as to take the side of Washington against the Soviet Union in international politics.

Over the past two decades, though, the growing crisis of world capitalism, combined with the historic inability of the oppressed semicolonial countries to develop into modern industrial or imperialist powers, has led to an extreme economic and political polarization in country after country, and the resulting social explosions. For the ruling classes in a number of countries such as Indonesia, the Philippines, and many in the Middle East where there are relatively weak governments, the threat of uprisings by workers and peasants has made them unstable and unreliable for imperialism.

A growing chorus of bourgeois voices and opinion columnists have been urging the "Western democracies"--their code words for the imperialist powers--to step in and establish stable governmental structures in what they termed "failed states," especially across Africa and Asia.

Washington's policy has more and more been to seek to impose military protectorates, such as it was driving to achieve in the 1990-91 war against Iraq, in order to advance imperialist interests, even if disguised with a United Nations fig leaf and flag. In both Bosnia and Kosova, for example, imperialist military forces are the muscle for United Nations administrations empowered to have say over governmental decisions, up to removing officials if they so choose.

In Afghanistan, Washington quickly dropped its pretension of patching together a coalition government that would replace the Taliban regime. The lack of a cohesive alternative has eliminated any chance of a stable, postwar government. Instead, U.S. imperialism's goal is a protectorate, and United Nations general secretary Koffi Annan has already offered the services of that body to give it an "impartial" cover.  
 
Central Asia
In a move to strengthen its strategic military weight in the Central Asian region, Washington struck a deal October 7 with the president of Uzbekistan, Islam Karimov, to station U.S. troops and use a military base in Uzbekistan for at least the next year. Already, some 1,000 U.S. light-infantry troops are stationed at Khanabad, an Uzbek military base about 90 miles from the Afghan border.

They are the first U.S. ground troops to be deployed on any territory of the former Soviet Union. The agreement builds on military cooperation and training of the Uzbek military by Green Berets, Navy SEALs, and other U.S. special forces on Uzbekistan's soil since 1996.

Washington made more progress in gaining a military foothold in the region in early November, when the government in Tajikistan agreed to allow U.S. forces use of its three air bases to prosecute the imperialist onslaught against Afghanistan. Similar steps are being pursued in Kyrgyzstan and Kazakhstan (see article, page 1).

These steps place Washington in a stronger position to exploit billions of dollars in oil, natural gas, copper, coal, gold, and other natural resources in the area. The Uzbek government recently signed an investment deal of some $360 million for mining.

Since 1995, the U.S. rulers have tried to cobble together a multi-country agreement to build a 1,100-mile oil pipeline from the Caspian Sea to Turkey's Mediterranean coast, cutting out both Russia and Iran from the lucrative deal.

In early October, an Italian company drilling off Kazakhstan's Caspian coast found "the most convincing evidence yet of the largest oil field in the world since the 1967 discovery of oil on Alaska's North Slope," according to the Wall Street Journal.

In an Op-ed piece November 7 in the Journal, Harvard University's Brenda Shaffer wrote that "one way to diminish dependence on Saudi Arabia is to focus on oil from the Caspian Sea." She added: "Flows of large volumes of Caspian oil through non-OPEC countries would erode the power of OPEC, as well as its ability to maintain high oil prices and to use oil as a mode of political blackmail."

The Times noted October 19: "Russia is stepping forward as a new friend in need. Alongside its support for the United States' military campaign in Afghanistan, Russia is offering its oil fields as a secure alternative to dependence on the turbulent Persian Gulf."  
 
Missile defense and NATO
During the recent Asia-Pacific Economic Cooperation meeting in Shanghai, China, Russian president Vladimir Putin said the Russian government may strike an agreement with the Bush administration to gut the 1972 Anti-Ballistic Missile Treaty. Bush has accelerated the effort started under former president Clinton to build and test an antiballistic missile system that Washington hopes can one day be used to shoot down missiles soon after lift off. Putin and Bush both said they want to hammer out an agreement during Putin's visit to the U.S. president's private ranch later this month.

U.S. and Russian officials announced in early November tentative agreement to drastically reduce the number of long-range nuclear weapons each country has. Bush said the administration has made a decision on how far to reduce the stockpile. While not disclosing the figure, Pentagon sources told the press that they recommended keeping around 2,000 weapons, down from the current 7,000. A mutual reduction would be an economic boon to Russia, as it would drastically reduce expenses entailed in maintaining and updating its nuclear arsenal.

These steps follow a speech by Bush in Warsaw earlier this year in which he said Washington favored a Europe that included all countries "from the Baltic to the Black Sea"--including Ukraine. He said "Europe's great institutions--NATO and the European Union--can and should build partnerships with Russia and all countries that have emerged from the wreckage of the former Soviet Union."

The Russian government under president Vladimir Putin has taken consistent steps to converge with Washington along these lines, and to cede Moscow's earlier pretensions of dominating the republics that made up the former Soviet Union. Instead, stable borders and economic integration into the world capitalist market have become the goals of the ruling layers in ascendency in Russia today.

In late October, press reports disclosed that Moscow "has discretely asked NATO for assistance in restructuring its defense ministry and armed forces after recent talks in Brussels" between Putin and NATO secretary-general Lord Robertson.

Given the distance Washington has traveled since early September, its rival imperialist powers in Europe and Japan are trying to keep from being left in the dust.

From the start London backed the U.S. war effort, committing warships, planes, and troops to the imperialist Afghan war. Until this past week the British government was the only European power to commit troops to back Washington. But now Italy and Germany have announced they too will send forces, including in the case of Berlin nearly 4,000 elite combat troops, along with ships and armor.

Tokyo announced in early November that it was preparing to send a fleet of military vessels, including an advanced Aegis destroyer, to the Indian Ocean to take part in limited operations backing the U.S.-led assault. The move follows passage of legislation allowing the country's armed forces to join overseas operations, but not actual combat. One ship in the fleet is a helicopter-capable destroyer.  
 
 
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