The slow-burning depression conditions and growing boss attacks facing workers today — with no end in sight — are rooted in a historic worldwide economic crisis of falling capitalist production and trade.
The capitalist rulers have sought to revive profitable production by turning to their central banks and implementing a combination of “quantitative easing” money-printing binges along with slashing interest rates. Interest rates in the U.S. have been kept at nearly zero percent since 2008. Tokyo and the rulers of a number of countries in Europe have imposed negative rates on more than $13 trillion of government and corporate bonds. These schemes have utterly failed to increase investment or production.
“The sense that central banks have control over the economy leads to a feeling of comfort in that at least ‘somebody’ is in control,” wrote Matthew Kerkhoff in an Aug. 29 Dow Theory Letters column titled “The Illusion of Power.” He added, “It can be difficult to swallow the idea that gyrations in our economy are uncontrollable, even though that’s really how it is.”
Because their profit rates have tended to fall for decades, the capitalists have held back on investing in capacity-expanding plants and production. Instead they’ve turned to speculation on stocks, bonds, derivatives and other forms of commercial paper, or hoarding their cash. And they’ve attacked the working class, cutting jobs, safety conditions and rights of working people in an effort to boost profitability at our expense.
“Net investment has been running at the lowest rates since the Great Depression,” notes MarketWatch, “suggesting that U.S. investment itself is in a depression.” Since the steep economic downturn of 2008-2009, employment in U.S. manufacturing is down nearly 1.5 million workers and the median family annual income has dropped more than $3,000.
Inventories have swelled. “It isn’t because companies ramped up production,” economist Leslie Norton told Barron’s in an Aug. 22 interview. “They bought the lie that consumer spending would turn up any moment, and produced at the same pace. Now they find themselves with a monster inventory overhang.”
Slumping trade worldwideCombined with declining production, trade has tumbled. One of the best indications of this is the Baltic Dry Index, which measures how much it costs to ship raw materials, from grains to coal to metals. The index has plummeted from 11,000 points in May 2008 to below 300 earlier this year, the worst it’s ever been. It’s just below 800 today, still historically low.
One important factor is that shipping bosses in China and elsewhere had ordered a slew of new vessels, betting on an upturn in trade, but the opposite has been the case. “Shipyards have been shrinking” and “shipowners have gone from ordering ships in droves to scrapping them,” reported the Journal.
The recent bankruptcy of Hanjin Shipping, the seventh largest container carrier worldwide, has stranded dozens of ships carrying more than half a million cargo containers valued at $14 billion at sea. They were denied access to ports over disputes with terminal bosses over who would pay docking fees, container storage and unloading bills.
Workers stuck on these vessels face dire conditions with diminishing supplies of food, water and fuel. Because of cuts in air-conditioning, “the heat is driving the crew crazy,” the captain of a Hanjin-operated ship in the South China Sea told the Wall Street Journal.
At major U.S. ports, from New York to Georgia to California, trucking companies recently purchased tens of thousands of big rigs, but many sit idle today.
As commodity prices have fallen, U.S. farm incomes this year will hit their lowest level since 2009. Farmers are expected to harvest the largest U.S. corn and soybean crops in history, but increased production worldwide means heightened competition and U.S. farmers’ income will decline for the third straight year.
Facing prices below their costs of production, many farmers are cutting expenditures on basic equipment. Deere & Co., which produces tractors and combines, has announced a series of layoffs this year, cutting over 2,000 jobs.
World trade gloomThe worldwide character of the crisis was highlighted at the recent meeting of the G-20 capitalist regimes held in China Sept. 4-5. The gathering was marked by the growing economic place of Beijing in world production and trade, as well as the growing trade rivalries propelled by the worldwide capitalist crisis.
The meeting also reflected Moscow’s heightened role in world politics, from Eastern Europe to the Middle East. It was a sharp contrast to the 2014 G-20 meeting, where Russian President Vladimir Putin was treated as a pariah by U.S. and European capitalist rulers, leaving the meeting before it ended saying he needed to get some sleep.
The G-20 is composed of the imperialist governments of Australia, Canada, France, Germany, Italy, Japan, the U.K. and the U.S. Others include Argentina, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Korea, South Africa and Turkey. The European Union is also a member.
“The global outlook for growth remains subdued,” said a report issued by the International Monetary Fund following the meeting. “Despite record-low interest rates, investment continues to disappoint, reflecting demand conditions as well as high corporate sector debt and weak financial sector balance sheets in many countries. Weak investment further dampens underlying potential growth.”
Capitalism, not Saudi conspiracy, behind oil price drop
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