[Marxism] American nightmare

Louis Proyect lnp3 at panix.com
Wed Mar 4 07:43:42 MST 2009


http://mrzine.monthlyreview.org/prashad030309.html
American Nightmare
by Vijay Prashad

     They used to tell me I was building a dream,
     and so I followed the mob,
     When there was earth to plow, or guns to bear,
     I was always there right on the job.
     They used to tell me I was building a dream,
     with peace and glory ahead,
     Why should I be standing in line,
     just waiting for bread?
     -- Yip Harburg, "Brother, Can You Spare a Dime" (1931)

On February 6, 2009, the United States government's Bureau of Labor 
Statistics (BLS) released its monthly "Employment Situation Summary." 
The first paragraph of the report contained startling data.  In January 
2009, the U.S. economy lost almost 600,000 jobs (the highest figure in 
34 years).  The official unemployment rate rose from 7.2 per cent to 7.6 
per cent (the highest in 16 years).  Since December 2007, which the BLS 
identified as the start of the current recession, the U.S. economy has 
lost 3.6 million jobs (2.8 million lost since September 2008).  In the 
quiet, measured language of this data-collection agency, "in January, 
job losses were large and widespread across nearly all major industry 
sectors."  The scale of the number is unimaginable.

A White House forecast, released by the Bush administration days before 
it left office (January 16), pointed out that the U.S. economy would 
lose 235,000 jobs a month in 2009, or 2.8 million jobs.  This estimate 
now seems modest.  In November 2008, Goldman Sachs revised its own 
earlier estimate to suggest that in 2009 the unemployment rate would be 
over 7 per cent (it was 5.6 per cent then).  President Barack Obama went 
on air shortly after the BLS released its report.  This was in itself 
remarkable since BLS reports are normally of no interest to the general 
public and are rarely reported on by the mainstream media.  Obama 
acknowledged that this particular report bore "devastating news" and the 
data "could not be more serious."  The head of Obama's Council of 
Economic Advisers, Christina Romer, warned that if the government did 
not act swiftly "we are likely to lose millions more jobs and the 
unemployment rate could reach double digits."

Obama recognized that while this number was enormous, "this is not an 
abstract debate.  It is an urgent and growing crisis that can only be 
fully understood through the unseen stories that lie underneath each and 
every one of those 600,000 jobs that were lost."  Factories close their 
doors, small businesses pull down the shutters, houses are abandoned to 
foreclosure: people who lived their life with the promise of the 
American Dream are rapidly abandoned even though they have put in their 
hours for decades.

The numbers are magical.  Inside that 600,000 figure are 207,000 
manufacturing jobs; this is the largest decline of manufacturing jobs in 
a single month since the high point of deindustrialisation (1982). 
Alongside this figure is 734,000 "discouraged workers," people who have 
stopped looking for jobs because they do not think they are out there. 
If you add these two figures, the picture is even more dismal.  The 
decline in manufacturing has meant a gradual parity in the number of men 
and women in the active workforce.  In the past year, men accounted for 
eight of the 10 lost jobs, and more men gave up looking for work than women.

Boston Globe columnist Ellen Goodman points out, "You not only have a 
near-equal number of women in the workforce, you have a lot of women in 
formerly two-earner families who've become the breadwinners. 
Breadwinners?  Or should I say crustwinners.  The other dubious part of 
this 'equality' for families is that even if women fill half of the 
payroll jobs, they don't bring home half the pay checks.  They still 
earn 78 cents for every male dollar.  In two-worker households, husbands 
earn close to two-thirds of the income and usually hold the job with the 
health insurance."  That is gone.  Women's jobs (in health care and 
education, for example) might be more stable for the present, but they 
are also less profitable.

Inventory sits in warehouses and in retail stores as sales go down. 
Like a blood clot, these unsold goods clog up the system, dampening any 
need to increase production.  The U.S. Commerce Department released its 
own dreary report, showing that new orders received by U.S. factories 
fell by 3.9 per cent in December, following a 6.5 per cent slump in 
November.  Retail sales for January fell by 1.6 per cent (according to 
the International Council of Shopping Centers).

The verdict of the Washington Post was stark: "If the jobless rate keeps 
rising at the pace it has for the past two months, it will hit double 
digits in the summer and reach its highest rate since the Great 
Depression in the fall. . . .  Companies in nearly every sector of the 
economy have cut jobs or announced that they would take other steps to 
save on cost, including freezing or reducing pay or eliminating 
contributions to employee retirement programs" (February 7, 2009).  The 
January numbers, in other words, will be dwarfed by those figures that 
come for February, March, April, May, and June.  No one wants to 
consider what is going to happen after midsummer.

Those who watch the way the government collects the numbers are wary of 
this data.  Government figures are only so good as the methodology used 
by its agencies.  In 1995, the Clinton administration convened the 
Advisory Commission to Study the Consumer Price Index.  Bill Clinton 
appointed Michael Boskin, the former head of President Bush's Council of 
Economic Advisers, to head the commission.  The Boskin Commission's 
report (1996) recommended that the BLS revise its method for sampling. 
As a result of this report, the BLS conducted a form of statistical 
pruning, cutting its household sampling size from 60,000 to 50,000.  An 
important aspect of this cut was the reduction of households from inner 
cities, which have a disproportionate number of non-white residents and 
also of impoverished families.  Further, the BLS began to exclude 
"discouraged workers" from its calculation of unemployment.

With Boskin's new method, the poverty rate fell, as did the unemployment 
rate, and it was notable that (without the inner-city data) suddenly 
blacks enjoyed better economic health than before.  This fabulous world 
renewed enthusiasm for the American Dream even as the reality hidden in 
segregated slums was quite different.

Statistician John Williams (whose newsletter is available at 
www.shadowstats.com) reanalyzes the government numbers using the 
pre-Clinton era methodology.  He finds that the current unemployment 
rate hovers between 13.5 per cent and 18 per cent (using two different 
data sets and formulae).  As Williams lifts the statistical camouflage 
off the faked numbers, the situation seems more drastic.  As columnist 
Alexander Cockburn put it, "the air is whistling out of the American 
economy."  It is this deflating balloon that worries even those within 
the inner circle of American power.  Obama's leading economic adviser, 
Lawrence Summers, recently said that the government must "contain what 
is a very damaging and potentially deflationary spiral."  The people who 
have lost their jobs have no cushion to maintain their lifestyles.  The 
social security nets have been eviscerated, and of these, unemployment 
benefits are minuscule (indeed, because employers are penalized when 
their former workers go on unemployment, there have been many cases of 
workers being fired so that their departure does not increase the 
unemployment insurance that a firm must pay).  Additionally, since the 
1980s, the saving rate has plummeted.

The latest Survey of Consumer Finances shows that households have less 
wealth than in 2001.  The saving rates went down from 9 per cent in the 
1980s to 5 per cent in the 1990s to 0.6 per cent over the past few 
years.  Unemployed people with no wealth and access to modest social 
insurance will certainly foreclose on the homes that they hoped would 
build them wealth; this will create less incentive for banks to lend, 
and once more lead to further job cuts.  The cycle is inevitable and 
bleak.  The North America chief economist of BNP Paribas Bank, Brian 
Fabbri, told the Washington Post: "The economy is suffering.  Things are 
getting worse, not better.  Everything is weakening at a faster pace 
than we have ever seen.  You don't need to embellish" (February 5, 2009).

Stimulus Measure

The downward spiral of the U.S. and world economy has challenged the 
intellectual house of Milton Friedman's monetarism.  Things are at such 
a sad pass for proponents of laissez faire that the Cato Institute (a 
libertarian foundation) ran a full-page advertisement in the New York 
Times extolling its beleaguered principles.  Even the most conservative 
Republicans (such as Senator Lindsey Graham) are resigned to such 
extreme steps as bank nationalization.  This would have been unheard of 
a few years ago.

Former Federal Reserve Chairman Alan Greenspan offered his own mea culpa 
before Congress as the theory that control of money supply is enough to 
provide a stimulus now sounds ludicrous.

Obama arrived in Washington with a proposal to raise $775 billion in 
stimulus spending.  Within weeks he was able to push this Bill through 
Congress, which agreed to lift the amount to $787 billion.  Admittedly, 
the thrust of the earlier Bill was changed quite dramatically: the 
legislature diverted much of the direct spending proposals towards 
further tax cuts.  But, nevertheless, the idea that the U.S. government 
was going to borrow towards "shovel ready" job creation projects is 
quite astounding.  The list of how to spend the money is already long: 
infrastructural spending, expenditure towards research and development, 
and outlay towards education.  There are many ideas, and many 
outstretched hands.  Whether this money will actually create jobs 
quickly enough is an open question.  The government says that the 
stimulus measure might create or maintain 3.5 million jobs.  This would 
just about stem the tide of the jobs hemorrhaged over the past few 
months.  As the chair of the Progressive Caucus in Congress, Lynn 
Woolsey, said, "the first thing to recognize is that while the Bill 
isn't perfect, it's $800 billion better than what we had a few weeks ago."

Goldman Sachs' economic analysis team looked at the stimulus package and 
concluded that the Bill "is unlikely to do much more than stabilise the 
U.S. economy in the near term.  Unless recovery in the private sector 
proves to be much stronger than we expect over the next two years, we 
think more stimulus will be needed before the end of 2010."

Obama inherited a federal deficit of $1.2 trillion.  His spending will 
raise this to over $2 trillion, with every expectation that this will 
rise to $3 trillion.  Obama's Treasury Secretary Tim Geithner unveiled a 
plan with few specifics, dodging one large problem (an economy with 
insolvent banks) by offering trite promises about another (the 
joblessness).  If the banks are indeed beyond salvation (the 
International Monetary Fund estimates that the bank losses are now at 
$2,200 billion), then it is unlikely that the various stimulus packages 
will do more than act as a stop-gap measure until something is done 
about them.

The government will make stimulus spending routine to prevent a social 
collapse until it comes to terms with what Martin Wolf of the Financial 
Times calls the "zombie institutions," whose toxic presence is going to 
undermine the ability of hard-working people to get good jobs.
Vijay Prashad is George and Martha Kellner Chair in South Asian History 
and Professor of International Studies, Trinity College.  He is the 
author of eleven books, most recently, The Darker Nations: A People's 
History of the Third World (The New Press, paperback 2008), which was 
picked by the Asian American Writers' Workshop as the nonfiction book of 
2008.  This article first appeared in Frontline 26.5 (28 February - 13 
March 2009); it is reproduced here with the author's permission.




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