[Marxism] More on the "boom"

Louis Proyect lnp3 at panix.com
Mon Jun 28 10:11:59 MDT 2004

In Defense of Marxism website
The paradox of prosperity
By Michael Roberts

The pundits of capitalism are talking up success. In the US, each piece 
of economic data is greeted with enthusiasm. All the ‘experts’ on the 
business TV channels and in the newspapers are crowing that the American 
economy is really motoring. The officials in the Bush administration 
grin with pleasure at all this talk of economic recovery.

And it is not just in the US that economic growth is on the lips of the 
apologists of capitalism. After 14 long years of stagnation and 
deflation, Prime Minister Koizumi of Japan tells his parliament that 
Japan is now growing even faster than the US. Profits are up and 
consumer and company debt is coming down. It’s all looking good in the 
land of the rising sun.

And indeed, at first glance, the economic figures seem to justify all 
the euphoria. In the first quarter of this year, the US economy expanded 
at an annual rate of 4.5%. Japan rocketed up at over 6%. Similarly 
average household incomes were reported to have risen at a 5% rate in 
the first three months of this year and as we complete the half-year, 
that rate has hardly slackened. And it is not just consumer spending. 
Jobs are coming back in the US and Japan. For three years, Japanese and 
American workers have suffered over 3million job losses as corporations 
cut costs and shifted factories and operations overseas to places like 
China, India and Eastern Europe.

But now in 2004, the jobs are coming back – so the figures argue. Since 
April, over 700,000 extra jobs have been created in the US. At the same 
time, the average wealth of the American, British and Australian 
households has risen as house prices continue to rocket up. Much of this 
extra wealth has been spent as families take out larger mortgages and 
spend the difference.

So the crisis is over? After the threat of major recession back in 2001, 
has the capitalist world turned the corner? Well, all is not what it 
seems. First, Europe is conspicuous by its absence from this tale of 
joy. In the heart of Germany, France, Spain and Italy, unemployment 
remains stubbornly high at anything between 8-15%. Economic growth is 
below 1% in Germany and barely above 2% in France or Italy. And in 
Germany house prices are actually falling despite mortgage rates below 
3%! As a result, German and French households are tightening their 
belts. They are keeping control of their spending.

But that’s not the full story. The reality is that America’s prosperity 
is skin deep. In the heartland of America there is little sign of 
increased income, rising house prices or more jobs. Much of these most 
desirable things are to be found on the coasts of California or New 
York, or in the desert resorts of Las Vegas or Tucson. In Detroit, 
Cincinnati and Chicago, there is little joy.

The reality of daily existence for even so-called middle America or for 
that matter middle England is two parents working long hours in order to 
obtain sufficient income to get decent health insurance, good schools, a 
reliable car and pay for a big mortgage and the annual holiday. There is 
no end to this process for many families with children. US healthcare 
premiums have surged over 40% in the last three years and another 15% is 
in the pipeline for this year. And increasingly, there is the prospect 
of working until you are 70 in order to get a decent pension, now that 
contributions have been squandered in the stock markets by pension fund 

The prosperity that is talked about goes to the top only. Take the US. 
In the 1950s the chief executive of the average corporation earned about 
40 times more than the average worker. Outrageous you might say. Well, 
in the year 2000, the average CEO earned 530 times the wage of the 
average worker. And even after the clampdown on corporate executive pay 
following the scandals of Enron etc., and the recession of 2001, CEOs 
are still ‘earning’ 250 times more!

Basically the working class of America has not benefited from the 
economic recovery since 2001. According to official figures, their share 
of total national income has fallen to its lowest level since 1951. 
Indeed, the average salary of a US worker dropped to $35,310 last year 
from $44,570 in 2001! And the workers of Indiana, Ohio, Illinois and the 
other big industrial states of the US still see no new jobs that can 
replace the ones they’ve seen disappear over the last four years, many 
of which have gone overseas to China, India, etc.

full: http://www.marxist.com/Economy/prosperity_paradox_MR0604.html


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