The ‘Great Recession’ ended in the second quarter of 2009, according to the economists. The Dow Jones stock exchange index has broken through the 13,000 mark; employment is up; unemployment is down; production is up; exports are up, and consumer confidence is up. The US economy is apparently recovering. There are even whispers about the possibility of the stock market breaking through its 14,198 high from October 2007. But how robust is this recovery? Steve Palmer reports.
Behind the numbers
At first glance, the numbers might seem impressive: 3% rise in GDP in the final quarter of 2011 (annual rate), employment up by 227,000 in February, and unemployment down to 8.3% from 9.1% six months ago. But as soon as we lean on these numbers, they start to crumble away. A closer look at the GDP figure shows that it was mainly accounted for by growth of inventories – materials, work in progress, and unsold final products – and that once these are subtracted the rate is much less impressive, just 1.1%. The jobs growth number looks a lot less impressive when one realises that, at this rate, it will take five or six years to replace 5.3m jobs lost during the recession and 4.7m jobs needed to keep up with the growth of the working population. The unemployment rate is not an adequate measure of true unemployment: when we count those who are forced to work part-time or who want to work but have stopped looking, the rate goes up to 14.9%.
Further, it’s not as if US capitalism has put the recession behind it: the housing market is still in disarray. Nationally, house prices are down one-third from 2006 levels; foreclosures, which had been in decline, are about to increase again, after a key legal case has been resolved; and almost 20% of Federal Housing Administration loans are 30 days past due or more. Between them, Fannie Mae and Freddie Mac own more than 200,000 foreclosed homes. The nation’s banks own more than 600,000 single-family homes, according to RealtyTrac, a housing tracking service. There are increasing defaults on ‘Muni’ debt – the municipal debt of State and local governments.
Roots of recovery
Let’s take a closer look at the roots of the recovery. Living standards have been frozen over the last period. The real weekly earnings of production and non-supervisory workers have barely changed since the recession supposedly ended in the second quarter of 2009. There has been massive upward redistribution of wealth over this period. Between 2009 and 2010 the top 1% enjoyed an average income growth of nearly 12%, and the top 0.01% enjoyed a 21.5% increase. The total income of the top 1% of households in 2009 ($1.32 trillion) was 25% greater than the total income of the bottom 50% of households ($1.06 trillion). Right at the bottom of the scale, the World Bank defines poverty, world-wide, as living on $2 or less per head per day. Some 1.46 million US households, including 2.8 million children, lived in this extreme poverty in 2011. Over the same period, corporate profits have surged by 48.4%, and the Dow Jones index rose by 29.3%.
Throughout, the US has had the firm padding of imperialism to cushion the worst of the crisis – over the recent period, profits from overseas have been around a third of total profits. Indeed, when the going was really rough, in the fourth quarter of 2008, overseas profits were 52.3% of all US profits. This rise in profits at the expense of the working class is the major cause of the recovery.
In addition, there has been a steady growth in debt, helping to maintain demand even as workers grow poorer. The largest contribution to the growth of this debt by far, has been the Federal government.
Prospects
Will this recovery last? Capitalism is stuck: US companies are sitting on $2.23 trillion in cash, money capital; there are 12.8 million unemployed. These facts combined with the rising debt, point to still inadequate profitability preventing capitalists from investing. This means attacking the working class.
Apart from the standstill in living standards, further attacks on the working class are continuing: on the right to work, on pension promises, on education and social services. Given the passivity and confusion in the US working class right now, these attacks will cut deeper. Whether they will be adequate to restore profitability and for how long, we cannot tell in advance.
Fight Racism! Fight Imperialism 226 April/May 2012
