[Marxism] The "new normal"

Louis Proyect lnp3 at panix.com
Thu Jul 29 07:10:23 MDT 2010


http://wsws.org/articles/2010/jul2010/econ-j29.shtml
The “new normal”: More than one in five Americans at risk of 
destitution
By Barry Grey
29 July 2010

More than one in five Americans in 2009 suffered a household 
income loss of 25 percent or more over the previous year, 
according to a new report sponsored by the Rockefeller Foundation 
and entitled “Economic Security at Risk.” The report documents a 
steady increase in economic insecurity since the 1960s, and 
concludes that annual income losses of 25 percent or greater 
increased by 49.9 percent between 1985 and 2009.

“Putting this tend in terms of population,” the report states, 
“approximately 46 million Americans were counted as insecure in 
2007, up from 28 million in 1985.” The head of the research team 
that prepared the report, Yale University Professor Jacob Hacker, 
told an interviewer, “What we’re seeing, basically, is what we’re 
calling ‘the new normal.’ We’re slowly ratcheting up this level of 
economic insecurity.”

The research group has devised what it calls the Economic Security 
Index (ESI), which measures the share of Americans in a given year 
who experience at least a 25 percent decline in their available 
household income and who lack a financial safety net to replace 
the lost income. Such a sudden income drop—usually due to the loss 
of employment, high medical expenses, or a combination of the 
two—often leaves people facing destitution.

The report does not include 2010, when long-term joblessness has 
become endemic. The ESI for this year will doubtless be 
considerably higher than for 2009.

The study notes that a staggering 60 percent of Americans 
experienced at least one income loss of 25 percent or more over 
the 1966-2006 period, and that losses of this size have become 
more common across most income sectors since the mid-1980s.

“Those with the most income and education have faced the least 
insecurity,” the report states. “The less affluent, those with 
limited education, African-Americans and Hispanics have faced the 
most. Virtually all groups, however, experienced significant 
increases in insecurity over the past 25 years.”

The study also found that the size of the typical income drop has 
grown, from 38.2 percent between 1985 and 1995 to 41.4 percent 
between 1997 and 2007. And the level of income insecurity relative 
to unemployment at any given point has risen over the past quarter 
century. In 1985, the unemployment rate was 7.2 percent and the 
ESI was 12 percent. In 2002, when the jobless rate was 5.8 
percent, the ESI was 17 percent.

The report relates the protracted rise in economic insecurity to 
the explosive growth of both medical costs and household debt, and 
the decades-long increase in the concentration of wealth at the 
very top of the economic ladder. It notes the finding of the 
Congressional Budget Office that between 1979 and 2006 average 
after-tax income rose by 21 percent for the middle fifth of 
American households, but increased by 112 percent for the richest 
10 percent of households and 256 percent for the top 1 percent.

The sharp rise in economic insecurity documented by the 
Rockefeller Foundation study is the outcome of a three-decade-long 
offensive by the American ruling class against the jobs, wages and 
living standards of the working class. This assault has only 
intensified since the eruption of the financial crisis in 
September 2008, which ushered in the worst recession since the 
1930s. Under Obama, the drive to offload the crisis onto the 
working class has been stepped up, in the form of wage cuts, 
speedup and savage cuts in social spending at the state and local 
level.

The Obama administration extended the Wall Street bailout launched 
under Bush. It then signaled the intention of the ruling class to 
use mass unemployment to permanently lower the wages and 
conditions of American workers toward those of impoverished 
workers in Asia when its Auto Task Force drove General Motors and 
Chrysler into bankruptcy last year. This was done to impose new 
plant closures and layoffs and slash the wages of newly hired auto 
workers to half the previous level.

Next came the so-called health care “reform,” which will lower 
health costs for businesses and the government by rationing care 
and reducing benefits for tens of millions of workers and 
retirees. Since the passage of the health care overhaul, the 
administration has abandoned any economic stimulus measures in 
order to focus on slashing the budget deficit by attacking basic 
social programs upon which millions of working people rely.

The result of these policies is a record rise in corporate 
profits, based almost entirely on the reduction in labor costs 
through layoffs, wage and benefit cuts, and speedup. In many 
cases, companies have reported sharply higher profits, even though 
their sales and revenues have declined.

In an article headlined “Industries Find Surging Profits in Deeper 
Cuts,” the July 26 New York Times reported that US corporate 
profits jumped by 40 percent between late 2008 and the first 
quarter of 2010. It noted that by next year, analysts expect 
profit margins to reach 8.9 percent, a record high.

The Times wrote that among the S&P 500 companies that have 
reported their second-quarter results, 175 in all, more than one 
in ten had higher profits on lower sales, nearly twice the number 
in a typical quarter before the current recession. Among the firms 
that have reported earnings for the second quarter, revenues rose 
6.9 percent on average while profits surged 42.3 percent.

The article cited the motorcycle producer Harley Davidson, which, 
despite falling sales, last week posted a $71 million profit, more 
than triple its profit a year ago. Last year the company cut 2,000 
jobs, over a fifth of its work force, and plans to slash another 
1,400 to 1,600 jobs by the end of next year. Harley stock surged 
13 percent the day it released its quarterly results.

Other companies that have improved their bottom lines despite 
falling sales and revenues include General Electric, JPMorgan 
Chase, Hasbro and Ford. The latter’s North American operations are 
expected to earn more than $5 billion in 2010, despite a revenue 
plunge of $20 billion since 2005. Over the 2005-2010 period the 
company has slashed its North American workforce by nearly 50 percent.

The same day as the Times report, the Wall Street Journal ran an 
article noting that the financial markets are generally punishing 
companies that report expansion plans and rewarding those that 
plan either no new hiring or further layoffs.

This class-war policy is further enriching the financial 
aristocracy. The Wall Street Journal on Tuesday published its list 
of the past decade’s highest paid US corporate CEOs. At the top 
was Oracle chief executive Lawrence Ellison, who has pocketed 
$1.84 billion over the past ten years.

His average yearly take of $184 million helped Ellison compile his 
estimated fortune of $28 billion. Some idea of the lifestyle of 
Ellison and his fellow CEOs can be gleaned from the fact that the 
Oracle CEO owns several fighter jets, a $200 million estate in 
California complete with a man-made lake, and mansions in Malibu 
and Rhode Island.

The total income of the 25 CEOs on the Wall Street Journal list is 
$13.5 billion, an average of $540 million per executive over the 
decade.

Such avarice and obscene levels of wealth are the reverse side of 
growing economic insecurity, poverty, homelessness and hunger for 
millions of working people in America and billions more around the 
world.




More information about the Marxism mailing list