10) A PAINFUL
ANNIVERSARY
By Zoltan Zigedy,
mltoday.com, April 27, 2017
Exactly ten years ago this past April 7, I posted an article on
Marxism-Leninism Today entitled Tabloid Political
Economy: The Coming Depression. It was my first and only attempt at economic
prognostication, always a challenging and risky venture.
The "Tabloid" in the article's title was a tongue-in-cheek reference
to the headline in the April, 2007 issue of a now defunct supermarket tabloid, Weekly World News. Featured between
Virgin Mary Slaps Boy and Jews Invented Pizzoh was
the shrill admonition: Surviving the Next Great Depression! It's Coming This
Summer!
It didn't come in the summer of 2007.
In fact, the Dow Jones Industrial Average continued to climb seemingly with no
limit, reaching a new peak in the fall of 2007. The pundits continued to extol
the virtues of unbridled capitalism.
While the folks at WWN built their case on scant evidence ("Skyrocketing
gas prices, escalating war, crashing housing prices, calamitous weather and
freefalling stock prices..."), there were many other good reasons to take
their prediction seriously, reasons which I offered in my article.
Unfortunately, the print edition did not survive to see the collapse that
rocked the foundations of the global capitalist economy the following year.
Nonetheless, the zany supermarket tabloid proved to be far more prescient than
the Nobel laureates, academics, and popular pundits who postured as learned
economists yet never saw the collapse coming.
Ten Years On
The global economy never fully recovered from the crash of 2008. Instead, it
has stumbled along from one setback to another, with economic growth only
marginally topping population growth. When both the enormous loss of wealth
from the crash and the obscenely unequal distribution of the wealth recovered
since the crash are configured, it is fair to say that the vast majority of the
world's population have seen little or no recovery. In
fact, the casualties from the crash continue to pile up.
The
For three months in a row, since January, durable goods orders (excluding
volatile transportation orders) have dropped. Industrial production fell 0.1%
in January and was unchanged in February. Factory output dropped 0.4% in March
from February and was only up 0.8% from a year earlier.
Bank loan growth has slowed. Retail sales slowed by 0.3% in
February and 0.2% in March. Inflation, as a measure of consumer demand,
dropped 0.3% in March. Retail stores are closing in unprecedented numbers and
retail employment growth has slowed.
Sales of new cars—the principal driver of consumption growth since the crash—
has fallen for three straight months. Auto dealers are now offering buyer
incentives that are greater than the labour costs of
production (labour costs are less than $2500 per car,
on average). Incentives account for 10.5% of average sticker price ($31, 435).
Yet the average car sits for over 70 days on the lot.
Used car prices were down 8% in February, another sign of declining demand. And
auto loan defaults are on the rise.
The
In stark human terms, the
With reduced earnings, more and more workers are drawing on their retirement
savings: 20% of 401(k)s have been reduced through
self-loans.
Not surprisingly, household debt in 2016 grew the most in a decade. Unlike in
the lead-up to the crash, mortgage debt is growing modestly, still below the
explosive growth rate of that time. Instead, the growth in debt is in credit
cards, auto loans, and student loans. Auto loan debt has reached $1.2 trillion,
while student debt has risen to $1.3 trillion.
Student debt is particularly crippling. There are 42 million outstanding loans.
The average student loan debt jumped from $26,300 in 2013 to $30,650 in 2016.
Defaults went from 3.6 million in 2015 to 4.2 million in 2016.
And senior citizens are saddled with growing debt as well. In 1998, 30% of
people 65 and older were in debt. In 2012, the percentage of seniors in debt
reached 43.3. Growing debt comes in the wake of the collapse of net worth since
2005, when it topped $300,000 among those 55 to 64. By 2013, average net worth
within that group dropped to $168,900 (even below the net worth of $175,300
reached in 1989).
Talking heads and media "experts" hail the job market. But they
seldom delve deeply into its performance. Put simply, capitalists are hiring
additional workers, rather than purchasing labour-saving
equipment, because labour is cheap and flexible. The
failure of organized labour to defend or advance labour's relative position has served as a disincentive for
capitalist investment in new technologies and equipment. They see no need to do
so, when labour power can be used on demand, with no
restrictions, and at low costs.
That trend is clearly reflected in the most recent period's historically poor
growth in productivity, among the lowest periods of productivity growth since
the Second World War. Contrary to the widespread hawking of the idea that most
workers are in danger of being replaced by robots, corporations are showing
little interest in the introduction of new or old technologies. They are
spending very little on equipment. While the technology may be there,
capitalists have shown little need for it, given low labour
costs.
As Shawn Sprague shows in a recent BLS paper, since 2009 the growth of
aggregate hours-worked has grown more quickly than the growth of non-farm
business output. This fact demonstrates that US capitalists feel little
pressure to "save" labour while restoring
profits during the so-called "recovery." Rather than having existing
workers work more hours, they are hiring more workers at low wages and
contingently. Profits rebounded nicely because the working class had been
slammed by the downturn, rendering the employment costs so low that there was
no need to invest in labour-saving equipment.
This harsh truth has been ignored by economists and labour
leaders alike because it shows the complete bankruptcy of class collaboration
as an approach to social justice for workers.
Today, capital is profoundly afraid that, with reduced unemployment,
competition for labour power will drive up the costs
of labour and erode profits. The Trump tax change
package, favourable to corporations and the
repatriation of profits, is one ruling class response to this anticipated
problem.
Despite the return of an overheated housing market with escalating prices
(lagging new construction is fueling demand), no
systemic accumulation crisis comparable to that of 2007-2008 appears on the
immediate horizon. Instead, the post-collapse era of stagnation and
deteriorating living standards continues for the working class.
As the shrinking income and mounting debt of working people erodes aggregate
consumption, the possibility of a business cycle contraction grows more and
more likely. The long, tepid expansion transferred nearly all its gains to the
wealthy few, leaving little but debt or asset cannibalization for the majority.
With declining retail sales, especially auto sales, and the growing weight of
personal debt, the likelihood of further consumption growth is in doubt.
A business cycle contraction will only further weaken the position of working
people, setting them up for a further dose of sacrifice and pain.
Isn't it time to get off the capitalist roller coaster?
(The above article is from the June 1-15, 2017, issue of
People's