$$$ boom: bonanza for the rich, but misery for working class
The following, an abridged version of a report by the Communist Party Economics
Commission, is part of the discussion in preparation for the CPUSA's regional
conferences on ideology scheduled for Oct. 23-24:
The decade of the 1990s has seen far-reaching changes, affecting all countries,
including the United States. The decade began with the disastrous development of the
counterrevolutionary destruction of the Soviet Union and its basic socialist
structure, along with similar setbacks throughout Eastern Europe, devastating the
economy, culture and living conditions of the people.
This gave U.S. imperialism a great boost towards its goal: to be sole superpower. The
United States has pursued this aim with cruelty and the ruthless killing, directly and
indirectly, of many millions.
Meanwhile, the gap between the super-rich and the rest of us grows wider. The United
States has led in economic and technological growth, in the profits of its ruling
class, in the rate of exploitation of labor and in the export of capital.
It has been corrupted and has, to some extent, corrupted the rest of the world
culturally - exemplified by the glut of advertising and the spread of drugs, gambling,
etc.
Monopolization of industry has proceeded very rapidly, as has the spread of
inequalities within, as well as between, classes. Especially glaring is the
intensification of racism.
There has been rapidly expanding inequality between the U.S.-led bloc of imperialist
countries - including NATO members in Europe, Japan and Canada - and the rest of the
world, which is objectively neo-colonial.
As the living standards of more than a billion people in these countries have been
drastically reduced, the plunder of resources and labor by American and other monopoly
corporations has been unrestrained.
For two years the capitalist world has been in the grip of a severe financial crisis,
which is still spreading. The neo-colonial countries bear the brunt of the crisis.
Among the most advanced capitalist countries, Japan has been most seriously hit. Its
government is intervening in a big way in the attempt to overcome the crisis, with
uncertain results.
In the U.S., the decade began with a rather mild crisis in 1990. But starting with the
second half of 1992, there has been a continuous recovery, and at this stage, aspects
of boom for eight years without interruption.
However, the current increase in idle capacity is one indicator that a crisis may be
looming. European countries have gone through crises at different times during the
decade. Economic growth has been powered by computerization of society and by rapid
advances in communications technology, including the Internet.
Financial extremes have developed, notably the rise in prices on the stock market
reaching far beyond the growth in economic activity and profits. This is an important
factor ripening a major crisis of overproduction.
Militarization
The main driving force of the U.S. economy is soaring military outlays.
Military spending is budgeted to increase $110 billion over a six-year period, ending
$50 billion higher than in fiscal 1999. To that has been added $10 to $20 billion for
the war against Yugoslavia. This initiated the U.S. campaign to control all of
southeastern Europe - on the road to the Ukraine and the Caspian Sea area with its oil
- and northeastward toward Moscow.
The anti-Communist content of this drive signifies that the Cold War has never really
ended but has taken on new forms and targets. The attitude of the most powerful sector
of the U.S. ruling class is expressed by The New York Times and its foreign affairs
columnist, Thomas L. Friedman. The cover of the March 28 New York Times Magazine shows
a gigantic fist wrapped in an American flag. The article's subhead reads, "From
supercharged financial markets to Osama Bin Laden, the emerging global order demands
an enforcer."
"That's America's new burden," Friedman wrote. "The hidden hand of the market will
never flourish without a hidden fist. McDonald's cannot flourish without McDonnell
Douglas, the designer of the F-14. And the hidden fist that keeps the world safe for
Silicon Valley's technologies is called the United States Army, Air Force, Navy and
Marine Corps."
Friedman sees his view as fitting in with globalization of the economy. But while
liberals see globalization as the interaction of economic forces everywhere without
government intervention, Friedman sees it as an environment in which the United States
can take control of the world and its capitalists can reap maximum profits.
The U.S. working class
A modest rise in real wages and decline in unemployment has occurred over the past
year. But the situation of the lowest paid and poorest section of the working class
has worsened. Federal Reserve Chairman Alan Greenspan has stepped up propaganda about
"spot labor shortages" pushing up wages "unduly," and that any further reduction in
unemployment will slow economic growth.
But there are still 5.8 million officially counted as unemployed, or 9.9 million
according to the officially acknowledged fuller "alternative" measure of unemployment.
Many times more workers with jobs are threatened with the wave of "downsizing"
pervading corporate America.
Because of the slash in anti-poverty benefits at federal, state and local levels,
especially the drive to get people off welfare, conditions have actually worsened for
many who get jobs: low wages, expenses for child care, getting to and from work, etc.
The Clinton-Gore team has even stopped mentioning their previous low-keyed support for
a dollar-an-hour rise in the minimum wage. As a result, reports from many major
population centers indicate rising impoverishment, more people resorting to food
kitchens to reduce hunger, and an increase in evictions. Economic discrimination
against African Americans, Latinos and other people of color continues. Many of the
"good jobs" in high-tech industries are effectively closed to all but a handful.
The slight drop in minority unemployment is welcome, but minorities are
disproportionately working two and three low-wage, part-time service jobs to survive.
As always, they are likely to be "first fired" in the next economic downturn.
In a recent speech, Greenspan uncharacteristically said what he clearly meant: the
U.S. economy is "steadily depleting the pool of available workers," that is, providing
jobs to the unemployed. He warned that this might enable workers to win pay increases
and reduce the rate of exploitation.
Commenting on this, economist Paul Krugman wrote that there is something "unsavory"
about the thinking of central bankers like Greenspan. "Even liberal economists like
myself grudgingly accept the conclusion that a responsible Fed must sometimes raise
interest rates in order to limit the number of jobs and maintain a suitably high rate
of unemployment," Krugman said. "But the scene remains an ugly one. A group of
comfortable men and women in suits are deliberately acting to limit the job prospects
of some of their worst-off fellow citizens."
But Krugman, like British Prime Minister Tony Blair and his counterparts in
continental Europe, is a reformist who ends up helping the ruling class against the
working class.
It is the Marxist-Leninist Communists who work towards substituting socialism for the
capitalist system, to build a socialist system that will provide full employment and
determine wages consistent with a planned, balanced economy.
The continuous downtrend in real wages since 1973 has been accompanied by the more
extreme impoverishment of the lowest paid workers, along with a spectacular upsurge in
the take of those at the top.
Since 1968 the real minimum wage has declined 32 percent, practically one-third. The
situation would be even worse, except for the modest minimum wage increase forced
through the Republican Congress in 1996 by an increasingly militant labor movement.
Hundreds of thousands of low-wage workers have been helped by recent organizing
victories like that of the 80,000 home health-care workers in California earlier this
year.
These are not yet enough to change the overall picture, but are laying the base for
future political as well as contract victories.
Meanwhile, executive compensation has gone through the roof. The highest paid CEO,
Disney's Michael Eisner took in $576 million in 1998. In 1978, the highest paid got
"only" $2 million.
This year, the highest paycheck announced so far is Charles B. Wang's of Computer
Associates International - $670 million! That's over $1,500 per minute.
In the time it takes to drink a cup of coffee, Wang gets as much as a minimum-wage
worker earns in an entire year of full-time work. According to the AFL-CIO, a worker
earning $25,000 in 1994 would get $138,350 today - if his pay increased as fast as his
bosses'! We estimate that 22 percent of gross profits - surplus value - goes for the
compensation of high-ranking executives and that share has been rising.
What are the qualifications for such high-paying jobs? The most important in recent
years has been the ruthlessness and effectiveness in reducing labor costs by some
combination of speedup, longer hours of work for their employees, and, most of all,
laying off thousands of workers.
Financial contradictions
Throughout the first part of the 1990s, consumers saved about 6 percent of their
income. But thereafter the rate of savings declined continuously, vanishing by
December 1998 and becoming minus 1.1 percent by May 1999.
The net "dissaving" so far this year is unprecedented since the great crisis of the
1930s, and has given rise to expressions of concern in the business and financial
press.
The continuous "bull market" of recent years has much to do with these results. For
millions of people, the stock market has become a medium of gambling. Capital gains on
investments have become an important share of income for the half of the population
above the median income. That includes direct investment in stocks and bonds and
investment in mutual funds based on such investments.
The number of shareholder accounts in equity mutual funds went up 450 percent during
the 1990s, reaching 104 million in 1997. Assets in these funds also multiplied nearly
10 times, reaching $2.4 trillion in 1997.
The prices of corporate stocks have multiplied about 10 times since 1980, perhaps
three times as fast as the increase in corporate gross profits.
Shareholders have seen their stock portfolios increase in value (on paper) so they
borrow freely to pay for current purchases.
If the stock market falls, millions will default, resulting in foreclosures and
repossessions. The vulnerability of the stock market is most graphically expressed in
the prices of internet stocks, the medium of stock market gambling for many.
Initial Public Offerings (IPOs) of such stocks, which have done no business and have
no prospect of becoming real factors, are immediately gobbled up at 5 to 10 times the
initial offering price. Companies floating a dream and a prayer have market valuations
equal to those of giants like General Motors.
Barron's columnist Alan Abelson warns, "Ignorant investors, buying wildly speculative
stocks on credit define an accident waiting to happen. It could be triggered by a
string of unbroken down days. The new on-line brokerage firms have no experience
handling such situations."
Contributing to financial instability, consumer debt is at its highest levels, with
the biggest increase among the lowest 40 percent of the population. Criminal loan
sharks have been displaced by "legitimate" loan outfits that charge extortionate fees
to get workers to their next paycheck. New, tougher bankruptcy laws will provide the
"vigorish" to force their victims to pay up.
The 30 percent drop in stock prices in 1987 did not trigger a general cyclical decline
in the economy. But overall conditions are much more vulnerable today, and a major
bear market (downturn) is more likely to be associated with a crisis of overproduction
in the "real" economy. Odds are strongly in the direction of a real "bear market"
sometime in the next five years.
World financial crisis
The world financial crisis, now two years old, has spread further. In Asia, where the
crisis started, there has been easing, but no real stabilization. The crisis has
deepened in Japan. U.S. companies have started to buy up distressed corporations, real
estate and privatized state property at bargain prices.
The crisis has spread further in South America, where the United States has a more
sizable and leading economic and political involvement. Brazil, Chile, Ecuador,
Venezuela and Peru face increasing unemployment and currency crises.
The human costs are shown by the 15 percent decline in purchases of food staples in
Argentina. Mexico is the only major Latin American country that has stabilized its
situation, partly because of the strong influx of U.S. capital under NAFTA, at great
cost to U.S. and Mexican workers.
Throughout the rest of Latin America, expectations of declines in Gross Domestic
Product this year have widened as unemployment soars - to 10 percent in Chile, 14
percent in Argentina. Several Central American countries are still suffering economic
crises because of devastating hurricane damage.
The world financial crisis has spread to southeastern Europe, most acutely to
Yugoslavia as a direct result of the U.S. bombing attacks. Albania, Macedonia,
Hungary, Romania and Bulgaria are also involved.
It is difficult to see how Russia can avoid default on its huge international debt.
Washington is attempting to trade a few billion dollars of IMF loans - which would be
earmarked solely to cover payments due on the existing debts - for unilateral Russian
disarmament.
Despite the crises surrounding it, the Chinese economy continues to grow, assisted by
large government programs to offset unemployment as industries are rationalized.
Official data show a growth rate of more than 8 percent this year.
Washington recognizes China as basically a socialist country, despite the inroads of
capitalist enterprises. As such it sees China as an enemy and conducts a steady flow
of propaganda against it on grounds of "human rights," Tibet and spying, with warnings
against Chinese actions to support its sovereignty over Taiwan.
The strong Chinese economy, and the ability of Cuba to escape the world financial
crisis, shows the superiority of socialism over capitalism.
Unfortunately the AFL-CIO has joined the official U.S. chorus of anti-Chinese
propaganda, echoing CIA distortions about human rights violations and singling out
Chinese imports as a cause of job losses in the United States.
The world financial crisis will be resolved by the kinds of programs pushed through
the IMF and the U.S. Treasury, at the expense of the working class in the countries of
the world. It can also be resolved by successful working class revolutions.
The U.S. has strengthened its role as the dominant imperialist power in the world. The
U.S. economy has, for now, been stabilized through military stimulus and profits from
cheap access to world oil, natural and agricultural resources, and labor. Loot flows
into the U.S. from world capitalists seeking a safe haven.
Most of the benefits have gone to the wealthiest of the capitalist class, which is
largely united behind an aggressive political and economic agenda at home and abroad.
The Communist Party, on the other hand, advances a program for meeting the needs of
the people: full employment through massive public works programs paid for by cutting
military spending and taxing the rich; doubling the minimum wage and Social Security
benefits, reducing the workweek, major affirmative action programs, repealing
anti-labor laws and all-out support for union organizing drives.
Conditions for a financial crisis are developing. Such an inevitable downturn will
worsen the conditions of those already suffering and remove the illusion of stability
and prosperity from many who appear to benefit from today's economy.
During an economic crisis, the weakness of capitalism becomes visible to large
numbers.
While big business will try to shift the full cost onto the working class, our ability
to resist takebacks and extend our rights depends in large measure on the strength and
direction of the labor movement and other people's movements, not least of which is
the Communist Party
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