Workers face ‘recession within a depression’

BY BRIAN WILLIAMS

For years workers in the United States and much of the rest of the world have been living under capitalist economic depression conditions. Evidence now shows a renewed contraction — a recession within the depression. Many bourgeois economists now admit this, although they have no explanation of why or proposals for how to end it.

“Heed the Fears of the Financial Markets” was the title of a column by former Treasury Secretary Lawrence Summers in the Financial Times Jan. 11. “How alarmed should [policymakers] be about the prospect of a global slowdown?” he asked, adding they should “plan for the worst.”

For more than a year Summers has been warning of a decade or more of “secular stagnation,” in which “full employment and production” will be impossible. He now has more company.

Workers in coal, steel, rail, oil and other basic industries could have told these pundits the truth earlier. Mines and mills are shutting down. Those still working face speedup and dangerous conditions.

“Future economists will probably call this decade the ‘longest depression,’” wrote University of California at Berkeley economics professor Brad DeLong in the online Huffington Post. Investment adviser John Hussman titled his Jan. 18 newsletter “An Imminent Likelihood of Recession,” noting, “The current total of 10 (of a possible 12) month-over-month declines in Industrial Production has never been observed except in the context of a U.S. recession.”

A spate of articles in the business sections of the capitalist press blame the recession on the Federal Reserve’s decision to raise interest rates last December. A Jan. 25 article in the Wall Street Journal is titled “Why the Fed Is the Root of Much Market Turmoil.”

But none of the bourgeois economists can explain why the economic decline continues. In fact, the current crisis is baked in the capitalist cake. It’s the cumulative result of more than four decades of falling average industrial profit rates. This leads the capitalists — who are motivated by making profits, not by producing goods people need — to hoard cash; U.S. companies are now sitting on $1.9 trillion. Or they turn to speculation in paper values, such as stocks, bonds and derivatives.

This speculation blows up bubbles that eventually burst. One example was the housing bubble that triggered the 2008 recession. Each time they say it will be different, but it’s not. And the effects for working people are devastating.

Over the first three weeks of this year, nearly $8 trillion in stock value was wiped off the books as markets worldwide plunged. Their prices had gone up and up, with no relation to production.

In December the portion of U.S. industrial capacity being used was 76.5 percent. For utilities it fell to 73.2 percent, the lowest since records began being kept in 1972.

While the Labor Department reports hundreds of thousands of jobs were added last year — especially part-time, temporary and at low pay in service and retail — only 17,000 new manufacturing jobs were created for all of last year through November, compared to 18,000 such job openings every month in 2014, reported the Financial Times.

Declining production has contributed to the plunge in oil prices, and further job cuts. Schlumberger, the biggest oil service company worldwide, plans to cut 10,000 jobs, bringing to 34,000 the number axed since November 2014. With the drop in oil and coal shipments, Union Pacific Corp. laid off 3,900 rail workers last year. Canadian Pacific Railway said it will cut up to 1,000 jobs this year. Mining output fell 11.2 percent in 2015.

Workers in the U.S. face this new downturn after six and a half years of a “recovery” many have never felt. The labor force participation rate has declined the most for workers under 25 years old since December 2007. At 62.6 percent last month, the overall labor force participation rate remains at a nearly 40-year low.

While the paltry number of jobs created did nothing to lower real unemployment, wages of many workers have declined. The official U.S. poverty rate was 14.8 percent in 2014. That’s higher than in 1966, when President Lyndon Johnson launched his so-called War on Poverty.

Bosses hoped growth in China would create a miracle, fueling growth worldwide. But the workings of capitalism has hit with a vengeance there as well, with production contracting.

“Over the past year, about 20 percent of China’s growth as reported in its official statistics has come from its financial services sector,” writes Summers, “and Chinese debt levels are extraordinarily high. This is hardly a case of healthy or sustainable growth.”

Capitalist investors, who over the past seven years ploughed trillions of dollars into so-called emerging markets — China and semicolonial countries in Africa, Asia and Latin America — to profit off high interest rates, are now rushing to withdraw. In 2015 a record $732 billion was pulled out of these countries, according to the Institute of International Finance. On top of this working people are being forced to pay for the debt crisis from Puerto Rico to Ukraine.

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