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Vol. 79/No. 35      October 5, 2015

 
(lead article)
Gov’t bankers debate rates as
depression for workers grows

 
BY BRIAN WILLIAMS  
The Federal Reserve in mid-September decided to keep interest rates at effectively zero percent, where they’ve been for nearly seven years. The debate on whether or not to raise them shows that the capitalist rulers have no idea what to do about the economic crisis.

Former Treasury Secretary Lawrence Summers argued against raising interest rates because the production crisis and its effect on jobs will last awhile. “The idea that you are promoting financial stability by shocking markets seems misguided,” he told the Wall Street Journal Sept. 16, the day before the Fed vote.

“The main impact of suppressed interest rates is to encourage yield-seeking speculation,” fund manager John Hussman wrote Sept. 21 in a letter to investors. The effect, he said, is “to reduce the long-term accumulation of productive capital, and to foment serial bubbles and crashes.”

The slow-burning depression in the U.S. is not the result of government policy, nor can any policy reverse it. The crisis is rooted in a decades-long trend of declining profits and a slowdown in capitalist production, trade and employment.

In response to the 2008-2009 economic downturn, the steepest since the Great Depression of the 1930s, the government implemented “stimulus” measures in hopes of getting production going again. In addition to dropping interest rates to nearly zero, the Federal Reserve began a six-year “quantitative easing” money-printing scheme to pump funds into the financial system.

But with declining profit margins, the great majority of bosses won’t invest in hiring workers and expanding productive capacity, no matter how cheap the money is. Instead, they speculate in paper “assets,” from bonds to derivatives to hedge funds and stocks — the prices of which have risen to record levels.

It took five years for industrial production to reach the output level it had prior to 2008. And the bosses achieved this with 2 million fewer workers through speedup and intensified work, resulting in deteriorating safety conditions. According to the Labor Department, workplace fatalities last year were more than 4,700, the highest reported level in six years.

U.S. industrial production continues to stagnate. In August factory activity fell to its lowest level since May 2013, as capacity utilization fell to 77.6 percent from 78 percent.

While the official unemployment rate dropped from 10 percent in October 2009 to 5.1 percent in August — an argument presented by some for raising interest rates — these figures don’t accurately reflect the millions who can’t get full-time jobs and millions more that government statisticians consider too discouraged to be part of the workforce.

Amid the capitalist upturn, many workers have seen their wages decline, according to a new report by the National Employment Law Project. The steepest drops are for workers in health care, food services and retail stores, which comprise many of the newly created jobs. Between 2009 and 2014, real wages fell 8.9 percent for restaurant cooks and 6.2 percent for home health aides.

The economic crisis and the way it falls on the backs of the working class, along with the capitalists’ inability to find any way out, raises moral and political questions for a growing number of workers about the capitalists’ capacity to rule.

One of the reasons the Federal Reserve gave for not raising interest rates was concern for “developments abroad.” The capitalist crisis is more worldwide in scope than at any time in history.

Pundits touted China’s economic growth as a way out of the crisis, but today slowing production and trade there — a normal part of the development of capitalism, especially in time of crisis — is having a ripple effect worldwide. Chinese authorities project the lowest economic growth this year in more than two decades.

Japan’s exports to China fell 10.8 percent in the first half of this year. In South Korea, where one-quarter of exports go to China, shipments declined by 8.8 percent in August. The South Korean-based Daewoo Shipbuilding & Marine Engineering Co. announced Sept. 1 it would cut its operations by one-third.

The value of Brazil’s exports to China fell 19 percent in the first seven months of the year. Beijing is Brazil’s biggest trading partner, buying large amounts of iron ore, soybeans and other commodities. Over the past year some 900,000 jobs were eliminated in Brazil. For those still working, real wages dropped by as much as 5 percent in May, reported Bloomberg News.  
 
 
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