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Vol. 80/No. 44      November 21, 2016

(front page)

Trade falters, farmers fail as US economy ‘recovers’

The U.S. capitalist economy is in the eighth year of what the government and capitalist media describe as an economic recovery. But in cities, smaller towns and farming areas, this recovery is marked by stagnation and contracting industrial production, meaning slow-burning depression conditions for tens of millions of working people. We face rising rents, stagnant wages, inflation in food costs and other basic necessities, a fall in median household and farm income, and historic lows in the percentage of workers actually holding a job.

“U.S. Economy Roars Back, Grew 2.9% in Third Quarter,” headlined the Wall Street Journal Oct. 29. But a closer look shows that over the past decade average growth of the real gross domestic product “has plunged to just 1.3 percent,” the lowest since the 1930s Depression, wrote investment advisor John P. Hussman in his Sept. 26 newsletter.

The third-quarter figures are based on a rise of exports, especially soybeans and other grains, and a buildup of the bosses’ inventories. At the same time companies’ investment in plant and equipment continues to decline.

Since the 1970s a downward curve of world capitalism’s accumulation and profit rates has discouraged the bosses from investing in expanding industrial capacity and hiring. Instead, they’ve turned to hoarding cash or speculating on stocks, bonds, derivatives or other forms of commercial paper.

This is what led to the massive buildup in toxic subprime housing loans, packaged together and sold for speculative investment, that imploded in 2008.

Today there is a spiraling auto sales credit bubble with outstanding car loans now topping $1.1 trillion. Subprime auto loans, which account for about one-third of all new car purchases, have grown to $38 billion, up from $2 billion eight years ago. These loans have high interest rates, ranging from 10 percent to as much as 25 percent over six to eight years.

Increasing numbers of workers — 1.6 million in 2015 — are having their cars seized by banks and other loan agencies. It’s glory days for the repo man.

Grain farmers face economic ruin

The bosses’ financial press says trade is on the upswing. “Ships laden with millions of tonnes of US-grown wheat, corn and soybeans have been leaving ports,” reported the Financial Times Nov. 3.

But grain farmers face economic ruin. Reuters ran an Oct. 31 article titled, “Fields of Debt: Falling Prices, Borrowing Binge Haunt Midwest ‘Go-Go Farmers.’”

For the third year in a row farm incomes are declining. With a glut of overproduction and falling commodity prices, grain farmers in Iowa, Indiana and Illinois face rising debts to meet costs of producing wheat, corn and soybeans. Corn, which topped $8 a bushel in the summer of 2012, is now at $3.50. Soybeans prices collapsed from nearly $18 to less than $10. Soft red winter wheat dropped from $9 a bushel to $4.

Production of these crops is expected to reach record levels this fall, as the giant food corporate monopolies — Archer Daniels Midland, Bunge, Cargill and Dreyfus, which control more than 75 percent of global grain trade — seek to expand exports. Feeling the worst effects are working farmers, many of whom borrowed heavily to expand their farms in a desperate effort to plant their way out of a commodity price crash. “Delinquency rates on farmland and production loans are rising sharply,” reported Reuters. Bankruptcy filings for smaller farmers were up 51 percent compared to 2013.

The fact is, world trade is slowing. The volume of global trade was flat in the first quarter of 2016, then fell by 0.8 percent in the second quarter. The New York Times said this is “the first time since World War II that trade with other nations has declined during a period of economic growth.”

Millions of workers have had to accept part-time, temporary, on-call or contract work at lower wages and fewer or no benefits. This has accounted for “virtually all America’s job growth since 2005,” the Christian Science Monitor said. The paper cites a study by Harvard and Princeton economists saying that only 6 percent of the 9.1 million net jobs created over the past decade were regular full-time positions.

Some 94 million workers in the EU face the same situation, the McKinsey Global Institute reports.

The official unemployment rate for October was 4.9 percent and 161,000 jobs were created, the Labor Department said. But manufacturing jobs dropped by 9,000 while low-paying health care jobs rose by 30,500. At the same time, 425,000 “discouraged” workers were wiped out from the workforce.

The so-called labor force participation rate — the percentage of workers who are working or jobless but “actively” looking for work — remains below 63 percent, a 40-year low. More than 94 million people over the age of 16 are not part of the workforce.

In September, 11.4 percent of men between the ages of 25 and 54 were not part of the workforce, a percentage that has risen from less than 4 percent in the 1950s.

Behind all these numbers is the reality facing the majority of working people — economic stagnation, paychecks that run out before you get the next one and nothing different in sight except a new and explosive downturn to come.  
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