Behind the US ‘recovery’

It is taken for granted in the bourgeois financial media that the US is experiencing a ‘recovery’ of its economy; debate then moves to the possibility of it pulling the rest of the world out of stagnation and deflation. It is true that the US economy gives the impression of some kind of growth since the depths of the Great Recession: the Dow Jones Industrial Average, a stock market index, has risen from a low of 6547 in March 2009 to around 17500 today – an increase of more than 260%. Since the second quarter (Q2) of 2007, before the crunch hit, real GDP has risen by 8.5%. The official unemployment rate has fallen from 9.9% in Q3 of 2009 to just 5.7% five years later.

So, ‘legally’, this is a recovery, but the headline figures hide some awkward facts and there are a number of points to be made. The first is that it is a pretty miserable recovery. Past recoveries have reduced unemployment far faster and reached previous GDP levels far quicker. The second is that over this period, there has been a huge rise in labour productivity, faster than the rise in GDP. From Q3 of 2007 to the same quarter of 2014, business productivity overall has risen 10.1%; in manufacturing it has risen 12.9%. These gains have not been translated into new jobs. In fact, during the same period, business employment has declined 1%, while manufacturing employment has fallen by a huge 12.4%.

Rising inequality

The benefits of the productivity increase have not gone to employees, whose share of domestic income has fallen from 54.4% in 2009 to 52.1% in 2013, but to capitalists, whose profits have grown as a share of domestic income from 7.2% to 10.0%. This is part of the explanation of the massive inequalities in wealth and income between the richest and poorest US citizens. The top 1% enjoyed an estimated 95% of the income growth from 2009 to 2012, while the other 99% experienced pre-tax income growth of 0.4%. By 2012, the top 1% received 23% of pre-tax income and the top 10% had a 50.4% share, the highest level since 1917. If we turn from income, which is a flow of money, to wealth, which is the value of somebody’s assets less whatever debt they owe, the picture becomes even more extreme: the top 0.1% of US citizens, 160,000 households, owned 22% of total wealth.

Deepening poverty

Why has the unemployment rate declined so much? The reason is that millions of people have simply abandoned the search for work: the employment to population ratio – the share of the population who are in employment, which is usually steady over time – has fallen from 62.8% to 59.0% over this period. Today, if the ratio were still 62.8%, then there would be an additional 16.95 million people in employment. What these people are now doing is unclear. Probably many of them have been forced to find work in the ‘underground economy’ where they do not register in official statistics: from dog-walking, baby-sitting, cash-in-hand construction work, day labouring etc, to prostitution and drug-dealing. The underground economy has been estimated at some $2 trillion (current US GDP is around $17.5 trillion).

While the investment portfolios of the rich and the super-rich bulge ever fatter, poverty remains untouched by the ‘recovery’. In 2013 45.3 million US citizens (14.5% of the population) were in poverty, 14.7 million (19.9%) of them children. 33.3 million adults and 15.8 million children suffered hunger; people went hungry in every county in the Union without exception – this is obscenity in the richest country in the world. Poverty and hunger were even worse among single parent, black and Hispanic households.

Financial engineering

What is behind the huge rise in the stock market if the growth in economic activity has not been very impressive? Because companies have been unable to find profitable investment opportunities, they have turned to financial engineering, playing around with their financial organisation, to increase their apparent worth. As we have pointed out in previous reports, they have been engaging in ‘buybacks’. In a buyback, a company repurchases its own shares and retires them. This reduces the overall equity of the company, along with the number of shares, tending to push up the earnings per share and the share price, reorganising the financial structure without any improvement to its production capabilities. The Standard & Poor’s Buyback Index of public companies that have engaged in buybacks has outstripped the performance of the S&P 500 stock exchange index. There have been some $2 trillion worth of buybacks since March 2009. In the last two years, the sales growth rate has averaged 2.6% per quarter, while earnings per share grew by 6.1% per quarter. Clearly, the performance of stocks is no reflection of the real progress of the US economy. During Q3, of 2014 companies indexed in the S&P, 500 spent $143.3bn on buybacks; a year-on-year increase of 16%. Over the previous 12 months, companies spent $567.2bn on buybacks; a year-on-year increase of 27%. Overall 374 companies in the index engaged in buybacks in Q3. These are the highest levels since the beginning of the financial crisis in 2007-08.

The proportion of company cash flow used for share repurchases has almost doubled over the last decade, while capital expenditure, which would improve company production and operational capability, has declined. The failure to make capital investments is reflected in the average age of company fixed assets, which has reached 22 years, the highest level since 1956. Capital investment is risky and has relatively slow returns; it is much easier to meet investor pressure for quarterly improvements, to quieten activist investors and to boost executive pay (substantially composed of shares and options) by means of buybacks.

Another avenue for increasing the size of capitals is through centralisation – mergers and acquisitions (M&A) of other companies. The last year has been a record year for M&A activity – some $3.5 trillion, up 47% from 2013. Ten of the year’s 15 largest acquisitions took place in the United States where volume climbed 51.4% to $1.53 trillion. Yet despite pouring trillions of dollars into buybacks and mergers, some $1.49 trillion in cash languished, uninvested, in corporate accounts.

The recovery has been built on a mixture of financial engineering and increased exploitation. Its beneficiaries have not been those who made it possible, but the very richest US citizens. In its wake are left the hidden unemployed and a huge proportion of the population who are living in poverty. This is the reality of the US ‘recovery’.

Steve Palmer

Fight Racism! Fight Imperialism! 243 February/March 2015

Ferguson burns as racist cop walks free

Once again the people of Ferguson have had to display their righteous anger in protest over the death of Michael Brown. This time it was provoked by the announcement that Brown’s killer, Officer Darren Wilson, would not face any indictment. This was compounded by Wilson’s remorse-free announcement that his conscience was clear. What feeling breathing person, faced with this injustice and contempt, could easily restrain themselves from venting their anger? The furious people of Ferguson burnt cars and businesses and fought the police. In response the ‘Civil Rights’ fire brigade showed up to pour cold water on the popular rebellion, to condemn rioting and insist that all protests be peaceful, ie ineffectual. But their efforts at collaboration were themselves ineffectual as justice-minded people across the United States and internationally protested against this travesty of justice. In California, roads were blocked for three consecutive nights and hundreds arrested as they marched through Oakland and Los Angeles.

The St Louis county prosecutor is Bob McCulloch. McCulloch’s father, brother, nephew and cousin were all – officers. In 1964 his father Paul, died in a gun battle with kidnapper Eddie Glenn. Glenn was black. His father’s death was a major theme in McCulloch’s political ads when he first ran for office. McCulloch was invited to withdraw, but instead he took the very political decision to punt the decision to indict to a grand jury. Why would he do this instead of following the typical route: hold a preliminary hearing and have a trial court judge make the decision about whether to indict?

Since there is no grand jury system in Britain, it is worth reviewing what this institution is in the US and what’s wrong with it. Jurors are not vetted for bias or other improper factors, so the process is unbalanced from the start. The prosecutor controls its proceedings, drafting charges and deciding which witnesses should or should not appear. There is no obligation to present evidence in defence of anyone being investigated or in their favour. It hears evidence ex parte (ie without participation of the subject or subjects of investigation). While the subject can appear as a witness before a grand jury, they are not allowed any legal representation, nor can they confront or cross-examine other witnesses. Failure to appear before the grand jury is liable to contempt of court charges, punishable by incarceration for the remaining term of the jury. Basically, the jury only hears the prosecutor’s side of the story and, without rebuttal, this can naturally seem very persuasive, leading grand juries almost always to indict or not indict people on the prosecutor’s recommendation: one chief judge complained that a prosecutor could get a grand jury to ‘indict a ham sandwich’. It should really be called the Prosecutor’s Private Jury!

McCulloch dumped thousands of pages of the investigation into the grand jury’s lap and invited them to make a decision. He spun his decision as enabling a free, fair and impartial process without his involvement. How ridiculous! He knew before he started that the chances of indicting Wilson by this route were remote and this is clearly why he chose it. Wilson killed Brown, but McCulloch murdered any chance of justice.

This experience is repeated in dozens of cases, week after week across the United States. Just days before the Ferguson grand jury verdict, police in Cleveland, Ohio were suspended for shooting dead 12-year-old Tamir Rice in a playground after he was seen brandishing a fake gun. We remember how Officer Johannes Mehserle shot unarmed Oscar Grant at point blank range as he was restrained lying face-down on an Oakland subway platform. This murder was captured ‘live’ in dozens of videos, in front of scores of witnesses and prosecutors had no choice but to charge Mehserle with murder. Even so, Mehserle got off with the wrist-slap of a two-year sentence for involuntary manslaughter. In Missouri, with no video evidence and the usual institutionalised racism perpetuated by scum like McCulloch, Michael Brown stood no chance of receiving any justice. In the United States, it is basically open season on black males for police officers, without fear of any serious consequence, a monstrous state of affairs. Yet the United States government has the nerve to lecture other people about supposed injustices they have perpetrated? What hypocrisy!

Justice for Michael Brown!
End state violence against people of colour!

Steve Palmer

Fight Racism! Fight Imperialism! 242 December 2014/January 2015

Mid-term blues in the United States

The US mid-term elections, where 36 Senate seats and all 435 House of Representatives seats were contested, were held at the beginning of November. Polls had been divided about the predicted outcome, but when the dust settled Republicans won 244 House seats versus 186 for the Democrats, and 53 Republican seats in the Senate versuss 46 for the Democrats (five House races were undecided at time of writing, while Louisiana’s Senator will be decided in a December run-off election).

The Republicans were better organised and better financed than during previous elections. Billionaire brothers Charles and David Koch, strong supporters of right-wing Tea Party candidates, spent $77m on TV adverts; American Crossroads, a front for rich Republicans and big business, spent $70m on advertising. Altogether Republicans spent $205m on TV ads while the Democrats spent $132m. The Republicans also had the benefit of various recently enacted ‘Voter Identification’ laws, ostensibly to prevent personation, but actually benefiting Republicans by tending to undermine the ability of non-Republicans, young people, the poor and people of colour to vote. As an example Texas accepts a gun permit as proof of citizenship, but not student identity cards. In Kansas, some 22,000 people were stopped from voting because they lacked approved proof of citizenship.

The Republicans now control the whole Federal legislature. Despite claims that the result gives Republicans a ‘mandate’, this is not true, since there was no clear-cut national issue, nor even a clear Republican agenda; turnout was only 36.4% down from 40.9% in the 2010 midterms and the lowest since the 33.9% turnout in the wartime 1942 elections. Big business, which Republicans normally represent, has a clear agenda: corporate tax reform, immigration reform, new trade agreements, support for Obamacare (from insurance and healthcare companies), curbs on environmental control of emissions, support for the Keystone XL pipeline (a pipeline shipping crude oil from Canada to Nebraska, controversial because of the danger of polluting the vast Ogallala Aquifer), and opposition to regulation of fracking (hydraulic fracturing). Elements of this programme run head-first into collision with the right-wing Tea Party agenda. The Tea Party is hysterically opposed to immigration reform, which they see as a form of amnesty. Deeply racist and insecure about the swelling proportion of Latinos in the US population it is determined to fight a losing battle to try and prevent millions of undocumented migrants from becoming citizens. By contrast big business wants a stable labour force and reserve army of labour to keep wages down. Similarly Tea Party supporters are blindly opposed to Obamacare, while big business is generally is favour of it. The reasons behind capitalist support are not difficult to find. Since Obama signed the Patient Protection and Affordable Care Act (popularly known as Obamacare) into law, the shares of four major insurers – Aetna, Cigna, Human and UnitedHealth have more than doubled in value while the S&P 500 stock exchange index has increased by 70%. Obamacare will shower $2 trillion of subsidised health coverage and spending on the insurance, healthcare and pharmaceutical industries over the next 10 years. They know which side their bread is buttered, have invested heavily in systems, training and procedures to harvest this windfall and don’t want a bunch of right-wing crackpots cutting off this intravenous lifeline. Consequently, for the last year, the Republican establishment has been quietly organising to reduce the presence of right-wingers in the House and Senate. Behind the scenes discussions with donors and judicious support from the national Republican Party have been used to weed out the most blatantly sexist and racist candidates and to encourage the selection and election of candidates supportive of the big business agenda.

So Barack Obama faces another two years as President with a Congress completely controlled by Republicans. Compared to past years, this won’t make much difference however: Washington has been unable to pass a Federal budget since 2010 and has experienced gridlock on most major political issues. Obama’s personal ratings are at their lowest ever. After all the broken promises of ‘Change You Can Believe In’, progressive Democrats have had enough of Obama. To Latinos, he is the ‘Deporter-in-Chief’, expelling more undocumented immigrants from the US than any previous President. Only the black community is still loyal, despite many betrayals: after all, there is no alternative and anyway Obama is peddling that powerful drug, ‘Hope’: with its perpetual promise of a better future, it numbs people to their present pain.

It is not clear what Obama’s programme for the future is, except muddling through. Although lifting the Cuban blockade has been aired, there is no important constituency in favour and some very vociferous and powerful ones against. Scared of Israel behaving like a loose cannon in the Middle East, Obama has put a high priority on negotiating a deal with Iran which would limit its nuclear program in return for lifting US sanctions. There are strong internal forces pushing sections of the Iranian ruling class in that direction, but agreement is not going to be easy. Negotiations are in their final stages, but there is a high likelihood that the Republicans, or a section of them, who condemn Obama for being ‘soft on Iran’ will try to increase sanctions, bringing down the whole house of cards that has been put together.

The Republicans have opposed immigration reform, and the Executive Order that Obama will implement, which protects some five million Latino immigrants from deportation, has enraged them, despite the desire of big business for some solution. Democrats recently proposed legislation, negotiated by Obama with leading software companies such as Google and Microsoft, which would have placed some curbs on NSA surveillance. Republicans were up in arms and immediately rejected it, despite their claimed support for the rights of the individual, condemning Obama for being ‘soft on terrorism’. Then there is the Keystone XL pipeline, which requires passage of legislation: environmentalists have been urging Obama to veto it, while Republicans are vociferously for it.

However, in other areas Obama is giving his full support to the ruling class. Democrats on the Senate Intelligence Committee have prepared a report detailing torture under the Bush regime. Not only are Republicans opposed to its publication, but Obama is too. The White House refuses to allow release of the report until changes are made that will render it unintelligible. In addition the US administration has been dissembling and engaging in legal hair-splitting with the UN over its interpretation of the United Nations Convention Against Torture, in an attempt to preserve some of the Bush-era loopholes which supposedly legally permitted torture.

Obama has authorised tens of billions of dollars to upgrade nuclear laboratories and extend the lives of aging warheads. The Department of Defense will, in addition, step up spending on nuclear forces by 10% per year for the next five years – an increase of about $10bn. Further, the Obama administration has told the Pentagon to plan for 12 new missile submarines, up to 100 new bombers and 400 land-based missiles, either new or refurbished. Quite an achievement after coming into office talking about a path to eliminate nuclear weapons, for which he won the Nobel Peace Prize!

Steve Palmer

Support the struggle of prisoners in Georgia

Fight Racism! Fight Imperialism! 240 August/September 2014

Recent years have seen repeated protests and hunger strikes in US penitentiaries, as prisoners in the world’s largest and most brutal system of incarceration desperately attempt to highlight the consistent use of solitary confinement as a form of torture, together with a sea of other abuses which, had they taken place anywhere else on the planet, would have resulted in an international outcry. The persistence of protesters in California has succeeded in galvanising some national and international attention; however similar actions in Georgia have been largely ignored. In December 2010 tens of thousands of Georgia prisoners participated in the biggest work strike in US prison history, alongside a hunger strike (see ‘Georgia prison strike’ in FRFI 219). There were further protests in 2011 and earlier this year. FRFI has received a letter from Tamarkus Wright, setting out the background to the February/ March 2014 protest in the Georgia Diagnostic and Classification Prison/Special Management Unit (GDCP/SMU).

‘I’m from Long Beach California and moved to Georgia about 15 years ago...On 25 September 2008, I was wrongfully convicted for a murder that I had nothing to do with at all. There were no witnesses who testified in my trial of my being the shooter. Even the lead detective gave her testimony that there was no physical evidence nor any other evidence to place me at the crime scene but I was still convicted to life and come up for parole in 2020. Right now I’m at my Habeas Corpus petition...I have found so many errors that are going to get my case overturned. So I should be out of prison by 2015-2017. If God’s Will.

Over 69% of prisoners in the Georgia prison system have been wrongfully convicted of crimes that they didn’t commit nor having evidence to conviction. In Georgia if the person doesn’t like you they can lie and say that you did something, or think that you’ve done something and you will be convicted. This system is very, very crooked and they’re what you call the real definition of the new “Jim Crow Law”* oppressors, and I am against the oppression.

On 20 September 2012 at the Smith state prison in Georgia while watching two correction officers beating this poor white guy just because he was married to a black woman, I jumped in to stop the oppressors continually beating the guy for no reason, but because of the respect that I have throughout the prison system those who were around jumped in as well. But it only started a small riot...after the riot was under control by staff, I was taken to an area and beaten with black sticks and with the fist of the staffs, while in handcuffs. I was beaten very badly but I didn’t care because I was willing to die that day just to save that poor harmless guy’s life.

On 21 September 2012 I was transferred here to the SMU and have witnessed so much oppression by administration and staffs. Such as prisoners being beaten by staffs, thrown on strip cell for days without a mattress to sleep on. Nor being fed, threatened by staffs, fed bugs in food, fed cold food, fed less calories than 1,200 calories on a good day when the policy requires to be fed 2,800 calories daily. Prisoners being sexually assaulted, sexual harassments, and these things are being hid from the public.’

On 20 January 2014 prisoners at the GDCP/SMU submitted a list of their grievances to the prison administration, naming a specific member of staff as responsible for sexual misconduct towards prisoners, and demanding an independent investigation. In the time-honoured fashion of covering up institutional abuse, the prison appointed an internal investigator who, unsurprisingly, conducted a cursory inquiry, rejected every one of eight prisoner complainants’ testimony that they had been the victims of sexual assault by the staff member and did her best to brush the whole matter under the carpet.

Prisoners in the GDCP/SMU continue to seek support for their struggle. Readers are encouraged to write to:

Tamarkus L Wright GDC# 1070891

Robert Watkins GDC# 1245402

Rodrick Henderson GDC# 294536

Isaiah Meadows GDC# 1202688

Ernesto Castillo GDC# 1291603

Ricky Mosley GDC# 1218550

Gregory Lawson GDC# 1000792447

at GDCP/SMU, PO Box 3877, Jackson, GA 30233, USA.

* The Jim Crow laws, enacted between 1876 and 1965, enforced, at state and local level, racial segregation in all public facilities in the southern states of the US.