Vol. 73/No. 31      August 17, 2009

At the same time, the Journal said that “new signs of stress emerged.” It noted that “unemployment in the euro-zone economies rose to the highest level in a decade and consumer prices there fell, a worrisome sign of deflation”—a backhanded admission that the capitalist crisis will not be over anytime soon.

Speaking at a health-care rally in North Carolina July 29, U.S. president Barack Obama noted a rise in housing prices. “We may be seeing the beginning of the end of the recession,” he said. Just two days later he struck a more cautious note saying, “As far as I’m concerned, we won’t have a recovery as long as we keep losing jobs.”

The annual rate of housing starts increased 3.6 percent from May to June, although housing starts were still 46 percent less than in June of last year. Single-family home starts have risen for two months in a row for the first time since early 2007. Nonetheless, U.S. home foreclosures set a record in the first half of the year, with no end in sight.

The continuing decline in heavy industry and construction has hit both trucking and railroads, with a shrinking demand for raw materials. U.S. railroad shipments are down more than 20 percent compared to last year. Union Pacific railroad alone has laid off 4,400 workers and sidelined 60,000 railcars and 1,900 locomotives.

Newsweek captured the lack of confidence within the capitalist ruling class in its August 2 issue. The cover showed a big balloon that proclaimed “The recession is OVER!*” Then in smaller letters it said, “*good luck surviving the recovery.”  
 
‘Deflationary spiral’
In a July 15 speech in South Africa, Justin Lin, World Bank chief economist, alluded to the fundamental problem capitalism faces regardless of temporary recoveries and stimulus measures. “While the crisis originated in the financial sector,” he said, “the challenge now is in the real sector”—meaning manufacturing and industrial production.

“Significant excess capacity has built up,” he said. “Unless this issue is addressed, we will face a deflationary downward spiral.”

Prices have been flat or have declined in China, Finland, France, Ireland, Japan, Germany, Spain, and Switzerland. Consumer prices in Japan fell 1.7 percent since June. In Germany, Europe’s largest economy, consumer prices fell 0.6 percent over the last year through July—the first annual decline in 22 years.

To working people, a price decline can seem like a good thing. But deflation is part of intensifying competition among capitalists as they contend over shrinking markets and is a product of the long-term tendency of their profit rates to fall. It puts enormous downward pressures on investment in manufacturing and production.

To shore up profit rates, the bosses will try to get more work out of fewer workers, speed up production lines, and slash wages and benefits. They will also go after the social wage, including Social Security and Medicare.

Capitalist businesses across the globe are laying off workers and cutting back on production. In the United Kingdom unemployment among young people aged 18-24 jumped from 11.9 percent to 17.3 percent over the past year. With an official rate of 18 percent, Spain has the highest unemployment in the European Union.

To mask unemployment the German government subsidizes a program that assigns unemployed workers to “transfer” companies. There they get paid to work on their résumé, talk to a job counselor, and get technical training. The thousands of workers in these programs are not counted in unemployment statistics.

Unemployment is also rising in Latin America and Africa, although so far not as quickly as in Europe and the United States.

In the United States more than 100,000 have exhausted their unemployment benefits in the last few months. With extensions, laid-of workers in 24 states can collect benefits for up to 79 weeks. Unless Congress approves another extension, close to 1.5 million people could be cut off by the end of the year.
 
 
Related articles:
South Africa: workers protest conditions of capitalist crisis
Latvia crisis: farmers face lack of payment, low prices
N.Y.: city gov’t pays for homeless to leave town  
 
 
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