Vol. 73/No. 13      April 6, 2009

Capitalist politicians from President Barack Obama to those in the halls of Congress insist that the economic and financial crisis can be solved by the government sinking hundreds of billions of dollars into banks, hedge funds, and related financial institutions to get lending and credit going again and that a new collapse can be avoided by stricter regulation. However, the economic crisis is not fundamentally the result of inadequate financial rules and regulations or frozen credit; it is rooted in declining rates of profit and the worldwide contraction of capitalist production and trade, the scope of which has not been seen since the 1930s.

According to the International Monetary Fund, factories around the world are making the sharpest and swiftest cuts to production ever, reported Bloomberg News.

In the United States, industrial production in February declined for the fourth straight month, down 11 percent from a year earlier. This is the biggest drop since 1975. Output has declined in 10 of the last 12 months. Factories were operating at just 67.4 percent of capacity last month, the lowest level since records began being kept in 1948. Once mining and utilities operations are included, this figure inches up slightly to 70.9 percent, matching a record low set in December 1982.

Since the recession began in December 2007, U.S. bosses have eliminated the jobs of 1.3 million factory workers, according to Bloomberg News.

For European countries using the euro the decline in industrial production was even greater than in the United States. In January it was down a record 17 percent compared to a year earlier. Factory production in Japan that month was down by 31 percent from the previous year. In Poland, it declined by 14.3 percent in February and in Brazil, by 15 percent.

ThyssenKrupp, Germany's largest steel company, is planning to cut more than 3,000 "permanent" jobs, reported the Financial Times. This is in addition to reducing working hours and eliminating the jobs of temporary workers.

France's second-largest automobile company, Renault, slashed production in the last quarter of 2008 by 50 percent, closing plants and laying off thousands of workers.

World trade is rapidly declining faster than production. Germany's exports are down 20 percent from a year ago; Japan's have plunged 46 percent. In the United States, exports in January dropped for the sixth straight month. According to Bloomberg News, "U.S. industrial companies suffered what the National Association of Manufacturers calls an unprecedented drop of 20 percent or more in business investment, exports, and durable goods ordered at the end of last year."

In China, where much of production is geared toward sales abroad, exports in February declined more than 25 percent compared to a year ago. This is the country's fourth consecutive monthly drop, with millions of factory workers being laid off. Imports also declined sharply, falling by 24 percent in February.

In Cambodia, companies from abroad had set up almost 300 factories employing 340,000 workers, many of them women from the countryside, since the mid-1990s. Now tens of thousands are being thrown out of work. Garment workers are paid an average of $2.70 a day. According to one of the country's labor unions, Chea Mony, some 70,000 workers have been laid off since last year and another 100,000 jobs may be cut over the next two years, reported the Washington Post.

Garments are Cambodia's biggest export, with some 70 percent of the clothing produced going to the United States. In January, U.S. imports of these garments dropped by nearly 40 percent. The Cambodian government says that 30 percent of the population is living in poverty, which it defines as surviving on less than $1 a day.

In another development, the Treasury Department announced March 23 its latest scheme to bail out the banks—the Public-Private Investment Program. Under this plan the federal government will give as much as $1 trillion to hedge funds and other "investors," which includes those managing pension funds, to buy so-called toxic assets from banks. While the private firms purchase these unwanted securities, the federal government will provide more than 90 percent of the funds needed to "invest."
 
 
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