‘Recovery’ falters

Mass unemployment remains; capitalism at an impasse

By Fred Goldstein

The sound of the stock market crashing on June 4, when the Dow Jones Industrial Average lost 324 points in one day, was the sound of Wall Street catching up to economic developments.

The realization is dawning on the financial gamblers and speculators that their hopes for a capitalist recovery are slipping away. The trillions of dollars in bailout funds and stimulus funds have been unable to pull the capitalist economy up enough to start a genuine recovery.

The market plunged over the release of the official government jobs numbers for May. The speculators had had their hopes raised by rumors that May would see a big jump in job creation in the capitalist economy — that is, in business-created jobs. But the government report showed that of the 431,000 new jobs created, 411,000 were from the government hiring people temporarily to work for eight weeks on the 2010 Census.

Private businesses hired a net total of only 20,000 workers in May. With 30 million workers unemployed and underemployed, this means that the capitalist economy basically stood still from the point of view of job creation.

It should be added that even with the few private jobs that were added, the disparity in employment between Black, Latino/a and white workers is actually getting worse. And the crisis of youth unemployment is still deepening.

Wall Street’s worry: profit creation

It hardly needs to be emphasized that Wall Street’s woes over the lack of job creation have nothing to do with concern for the workers. Even though these financial sharks live on speculative profits made from buying and selling financial instruments of one type or another, they know full well that the ultimate source of real profit is the exploitation of labor. The labor of the workers creates all the wealth that the corporations pay out in dividends and that the speculators gamble with.

To them, a failure of job creation is, in essence, a failure of profit creation. That is what worries them first and foremost. Of course, they are worried that expanding long-term mass unemployment could in the long run lead to social uprisings. But in the short run, the market went down on the realization that capitalist exploitation was slowing.

Even more telling about the overall crisis conditions battering the workers right now are the government statistics on the state of the recovery. What the capitalist pundits do not want to talk about is that the weak recovery had already showed signs of decline and instability before these jobs numbers came out.

Capitalist recovery faltered last quarter

The government’s Bureau of Economic Analysis compiles the numbers that are used as the official gauge of economic growth or decline. According to them, the overall decline of production that started in December 2007 ended in the third quarter of 2009, and the ensuing capitalist recovery has continued into the first quarter of 2010.

The bourgeoisie wants to emphasize that the recovery has continued for three quarters in a row. What they don’t want to discuss is that in this last quarter, that is, the third quarter of the recovery, there was a precipitous decline in the rate of growth of economic activity compared to the previous quarter.

The numbers, according to the BEA, are as follows: third quarter 2009, 2.2 percent growth; fourth quarter 2009, 5.5 percent growth; first quarter 2010, 2.3 percent growth — and this is now being revised down to 2.1 percent.

This is an unorthodox recovery, stimulated by capitalist government spending, which amounts to the printing of money. But even in this early stage of the recovery, it is already showing signs of weakness and instability. If the enormous already-existing problems of unemployment and budget cutbacks were not enough to set off alarm bells in the heads of leaders of the working class, these latest economic numbers should. These developments do not in any way correspond to a normal capitalist recovery.

Engels on normal capitalist recovery

In a normal capitalist recovery, growth in production and output feeds upon itself to produce a continuous expansion.

Frederick Engels, Karl Marx’s closest collaborator, gave the classic description of the capitalist boom-and-bust cycle in his work “Socialism, Utopian and Scientific,” published in 1880.

“As a matter of fact, since 1825, when the first general crisis broke out, the whole industrial and commercial world ... [is] thrown out of joint once every 10 years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsalable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy. ... The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filters off ... until production and exchange gradually begin to move again. Little by little the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation which finally, after breakneck leaps, ends up where it began — in the ditch of crisis. And over and over again.”

It is the repetition of this boom-and-bust business cycle that in the past has driven capitalist production forward to achieve higher and higher levels over time. On the ruins of each crisis, the bourgeoisie built up bigger means of production. Giant firms, strong firms swallowed up smaller and weaker ones. Capital became more and more centralized and concentrated. Vast sums were invested in advancing technology in order to intensify exploitation and expand into larger markets.

This is how the capitalist recovery fed its own growth. It expanded investment, pulling workers into the work force to replace the destroyed or obsolete means of production. The older factories, machines and so on were obsolete not in the sense that they were no longer useful but in the sense that their use in production no longer yielded the higher rates of profit attainable with newer technology.

In the past, each crisis contained within it the seeds of a recovery. But today there is no sign of what Engels described: a slow-paced beginning breaking into a trot, then a canter and a full-scale gallop. The economy has not even gotten past a crawl before it is beginning to slow down already. This is because the recovery is not based on the normal capitalist process of expansion but upon the intervention of the capitalist state.

State financing can’t save capitalism

Thus, it is clear that the bailouts and stimulus spending cannot fuel a self-sustaining capitalist recovery — even the $10.5 trillion spent in the U.S. and the several trillion in Europe and Japan. The trillion-dollar bailout planned for southern Europe, even if the warring capitalist bandit states can actually carry out such a collective action, will not overcome the crisis of European capitalism, which cannot be separated from the crisis of U.S. or Japanese capitalism. This is a crisis of world capitalism.

On the one hand, world capitalism has been dependent in the latest crisis on the capitalist governments to keep it from collapsing. On the other hand, even massive capitalist state financing cannot create a capitalist recovery. Moreover, the trend is going in the opposite direction. In the United States, for example, tens of thousands of jobs at all levels of government have already been eliminated due to the budget crisis, which is a product of the overall capitalist crisis. And this is just the beginning. Unless there is a concerted struggle by the workers, the huge budget-cutting plans that are now in the works, especially on the state and local level, will greatly increase unemployment, more than offsetting any state intervention to create jobs.

All this confirms the Marxist analysis of the present crisis showing that capitalism has reached an impasse. Historic overproduction, based upon three decades of advancing technology, shedding labor and lowering wages around the world, has created a capitalist future of stagnation, mass unemployment and slow growth at best. The inevitable collapse of the system is now on the historical agenda once again.

The repetitive paroxysms of crises within the financial system are a reflection of capitalism having reached a qualitative turning point — the point at which it cannot start itself up again by economic means alone.

Its decades of expanding productivity have created a productive system that has outgrown the world markets it created. In a word, capitalism has outgrown the planet and must be destroyed and replaced by socialism if the people of the planet are to survive. Any temporary stabilization should not obscure this historical fact.

The writer is author of the book “Low-Wage Capitalism,” a Marxist analysis of globalization and its effects on the U.S. working class. He has also written numerous articles and spoken on the present economic crisis. For further information visit www.lowwagecapitalism.com.

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