Reflections on U.S. Economy, September 2009
In the short-run, it is very likely that a total financial collapse has been averted and that the free fall in the United States of Gross Domestic Production (GDP) and employment has come to an end. There will probably be an increase in GDP for the third quarter, 2009 and most mainstream economists and the media will say that the recession is over. This will be true in the way that recession is officially defined. However, in the more important sense of people's economic lives, employment is likely to continue falling or increase at a rate slower than the increase in population meaning that unemployment, measured and unmeasured, is likely to continue growing. Given the high rates of unemployment and underemployment and the lack of bargaining power of workers, real wages are likely to continue to fall as are employee benefits. Given the continued budget deficits of most States and cities, public employees are also facing a future in the short run of no wage increases. Public services will continue to deteriorate. Housing foreclosures are likely to continue at a high rate. Poverty and unemployment will remain high. As Barbara Ehrenreich and Dedrick Muhammad, pointed out in the New York Times, Sunday, September 13th, 2009, an economic depression has been created in the Black community in the last two years and is likely to persist. In communities based on manufacturing and construction there has also been an economic depression with no end in sight.
The 2009 stimulus package of the Obama Administration although smaller than desirable and somewhat misdirected has had a positive effect in stimulating output and employment and in averting a full-scale economic depression. The other part of economic policy that begun under Bush and has been continued by Obama has been the injection of huge infusions of money into failing banks, and financial institutions such as AIG and Fannie Mae. Without these infusions, these institutions would have gone bankrupt. However, far cheaper and more economically just policies such as direct mortgage relief to homeowners, and nationalizing financial institutions with the purpose of providing credit to support people in need and desirable investment by businesses and cooperatives and public investment were not considered. This is because of the power of Wall Street and the extreme capitalist ideology of the Democrats and Republicans.
A generalized economic depression has been averted in the short run but with the likelihood that another and possibly even more severe financial collapse and recession/depression is likely to reoccur in the not too distant future. The necessary structural changes in the economy and significant financial regulation that would provide some economic stability and reduced financial speculation are increasingly remote.
There are different social structures of accumulation that shape capitalist development. The one that has structured the U.S. economy and global economy for the last 30 years has been a neoliberal one, marked by growing inequality of income and wealth, privatization, deregulation of corporations and finance within and between borders, and the dominance of financial capital. The financial bubble and near collapse were the non-surprising outcomes of this financialization.
A new social structure of accumulation has been promoted by liberal economists such as Robert Reich, Jamie Galbraith, Paul Krugman and Joseph Stiglitz. It would incorporate much tighter regulation of finance, universal health care, massive public investment in rail, mass transit, green technology, public subsidies for the develop of alternatives to oil based energy systems, some increases in taxes on the wealthy and restrictions on executive income, and increased public spending for education and for reducing poverty. It is what Van Jones in his book, Green Collar Economy, has called a Green New Deal. This would still be capitalism and would not end exploitation and poverty, militarism and imperialism, nor environmental destruction and alienation. We would still need to replace an unjust and unsustainable economic system. It would not end economic depression and the business cycle. However, this Green Newe Deal would reduce the probability of another even worse financial collapse and severe economic recession/depression in the next few years. While clearly being insufficient for economic and social and environmental justice, it would provide a social structure of accumulation for reducing unemployment and increasing somewhat, equality.
The conditions for a future financial bubble and collapse have not been altered. Wall Street has not been restrained. It is highly unlikely that even in the midst of the worst recession/depression since the 1930's that financial derivatives and the casino economy will be meaningfully regulated. The economic system is still very fragile and highly leveraged with debt. Although unlikely in the immediate future, the financial system could quickly unravel if the market for securities in commercial mortgages or another type of securitized asset (bond) collapses. The top 10% of the population now have an income equal to the bottom 90% of the population; the 13,000 households with the highest incomes have an income equal to the 40 million with the lowest incomes. (Left Business Observer, #120). Besides this inequality being obscene, it means that the majority will continue to go increasingly into debt to buy what they need. Consumer debt will grow.
The so-called economic recovery we will increasingly be hearing about will be a jobless recovery. Employment will probably start growing no later than summer, 2010 but unemployment and particularly underemployment will stay high. Unless wages grow significantly which will not happen unless there is a huge growth in the militancy and strength of the labor movement, consumption spending will be restrained, limiting the growth of employment. Manufacturing will continue to decline and the quality of life for the majority and global warming will worsen unless we rise up and organize and revolt.
The possibility of growing social movements is real and hopeful. The Obama Presidential campaign has led to an increased interest, especially by young people and Black people in public affairs and social change. The gloss of Obama's victory is wearing off. The U.S. occupation of Afghanistan is increasingly unpopular at home. So is the frustration and anger at the absence of meaningful healthcare reform. The limitations of what President Obama can or wants to do are becoming more apparent every day.
Just like the expectations raised by John Kennedy and the limitations of the reforms he proposed spurred massive activism in the 1960's, this can happen again now. Let us build and connect movements and issues as we organize and struggle for significant and meaningful reforms and revolution.
Don't Mourn, Organize!
Si Se Puede!