Showing posts with label boom and bust. Show all posts
Showing posts with label boom and bust. Show all posts

Wednesday 5 September 2018

Phoney Figures Conceal The Savage Insanity.



        Though this article from Its Going Down, original source, Anathema, was referring to America, it applies to the entire capitalist world. The three pillars of the capitalist cathedral that are necessary for its survival are, increase market share, reduce costs, and increase profit margin. Of course these are impossible to maintain in a finite world. Disaster for the many is the only outcome of such an insane system, its destruction is the only road open to a sane and just world, and that task is up to us, the ordinary people of this world, the corporate parasites will fight tooth and nail to hold on to their privileged insanity.  
        The following essay from Anathema argues that the success of “our” economy that we are told about over and over, from a variety of parasites, is nothing more a cycle of boom and bust that is designed to explode every few years, trapping us both in poverty and jobs that we hate.
        Despite constant governmental controversies and the raging disaster that is the global capitalist system, in late August President Trump was able to announce record-setting economic success as the U.S.’s bull market became the longest running in its history. For those struggling to find work and stay afloat, it may be surprising to hear that the economy is doing better than ever and unemployment at an all-time low. How is that possible?
       To start with, the stock market is not an accurate indication of how well the economy is actually doing. Even to many capitalist experts, the current valuations of the market seem like a serious stretch. But more importantly, to correctly assess current economic phenomena would require a historical perspective on capitalism and certain insights into its tendencies that no mainstream economist is willing to take on — hence professional analysts’ sometimes amazing inability to understand or predict economic trends.
       A basic tendency of the capitalist system is that it needs to keep expanding in order for it to preserve itself. At this point in its history, global capitalism has been struggling for some time to find new markets and other ways to continue growing profits at the massive rate that is now necessary. Its growth has happened through increasingly constricting labor costs in a number of ways – through employers decreasing full-time jobs with benefits, automating more jobs, and employing temporary, part-time, or even unpaid labor, as in the notorious case of prison inmates. Some specific manifestations of this have been the rise of the gig economy, which, in promoting “flexible” working arrangements, cuts the costs and responsibilities that corporations would have if they maintained a permanent workforce; the adjunctification of labor in universities, in which professors are hired on a cheaper, temporary basis instead of the university maintaining tenure-track lines; and a major shift towards what’s called just-in-time production, which similarly involves a dramatic increase in temporary work, as employers adjust their workforce based on supply and demand.
       So the fact that Walmart is posting high earnings does not mean, as mainstream analysts are suggesting, that consumer power is up and the economy will keep doing great. It just means that Walmart is a corporate distributor using just-in-time supply chains to crush labor and reduce costs to the absolute minimum. Meanwhile, news media is reporting unemployment in the U.S. is at 3.9%; it seems poised to hit 3.7%, the lowest it’s been since 1969. As we’ve written previously, this low number is actually the result of more and more people giving up on looking for work and no longer being officially counted in the “workforce.” This number has nothing to do with the total population of the U.S. and the significant actual changes in the nature of labor mentioned above. It is hopelessness and misery that are spreading, not the number of jobs.
         At what point will global growth actually peak, and another recession kick in? The U.S.’s current economic success is in part the result of the Trump administration’s massive tax cut, spending increases, and aggressive stance on trade, all of which have been calculated to grow the market for now without necessarily holding up well in the long term.
       Moreover, trade tariffs and the looming reality of Brexit stand to lead to a loss of investment confidence and tank the markets; however, it seems very possible that the escalatory trade threats with China are just Trump politicking and that nothing will actually happen until after the midterm election. The real sign of a looming recession is wage inflation, meaning the rise in the price of goods that happens when wages increase.
       It seems obvious, given the reality of employment conditions in this country, that there will not be any significant wage growth any time soon. Average hourly wages have risen only 2.7% in the past year, which is much lower than usual in a strong economy. What the current market’s success really indicates, then, is ongoing success by employers in keeping their workers underpaid and unstable, while pushing more and more people out of the job market altogether. While labor organizing and reforms may occasionally still have some successes, to reverse these trends and go back to better labor conditions under capitalism is structurally impossible for the capitalist system, which depends on increasingly minimizing labor costs.
      The only way forward for this economy is for the obscenely rich to get richer through devastating the livelihoods of more and more of the world, crushing the ability or will of the latter to do more than survive, let alone rebel.
        The two sides of the cancerous capitalist nightmare, the privileges of corporate parasites depend on the poverty of the many.


Visit ann arky's home at radicalglasgow.me.uk


Tuesday 30 August 2011

IT'S NOT THE 30's - IT'S FAR WORSE!!!


       
             As the "financial crisis" rumbles on with the pundits looking for growth, and in some case looking with a microscope to get some encouragement, there is the tendency to spout figures about the future recovery and give percentages. This isn't science speaking, this is guesswork and it is also based on the theory that we got out of it last time, so we will get out of it this time. Not always a sure bet. Capitalism develops, it changes and morphs into a different type of exploiting beast. What happened after the 30's can not be taken as standard procedure. After all it took the second world war to drag the old capitalist beast out of the depression. I doubt if even that would work this time round. Like I said, today's big fat capitalist beast is a different animal all together.
        In an interesting article on "AWorld to Win", Fawzi Ibrahim argues that the present crisis demonstrates that global capitalism has for the first time reached the “critical zone” – the point of “capital deficiency”. Below is a short extract from his article. Well worth a read.


         In a boom, profits are high; capital accumulates, yielding even more profits which are then invested to produce more profits and so on. However, if for any reason the rate of profit falls, then profits would follow suit unless more capital is invested to counterbalance the fall in the rate of profit. The amount of additional investment necessary to compensate for a fall in the rate of profit would depend on the original or baseline investment.
         For instance, a small initial capital of £10m at an annual rate of profit of say 5% would yield a profit of £500,000. If the rate of profit fell by 1%, to 4%, the profit would drop to £400,000. To compensate for this drop and keep profit at the same level of £500,000, investment must go up to £12.5m, a rise of £2.5m, and a relatively small amount which may not be too excessive for the market to provide. However, if the baseline investment was £10bn instead of £10m, then the additional investment necessary to maintain profits for the same drop in the rate of profit would be 1,000 times greater at £2,500m. If the rate of profit fell by more than 1%, an even greater additional investment would be necessary.
         In a highly developed economies such as those of the USA and the UK in which the baseline capital investment is in trillions, even a relatively small drop in the rate of profit would necessitate additional investment in billions if profits are to be maintained. If profits are to increase, as it is the aim of all corporations, the additional investment would have been even greater.
In general, therefore, as capitalism develops and capital accumulates, the baseline investment increases and with it the additional investment necessary to counteract a fall in the rate of profit. At some time, when capital accumulation reaches the astronomical levels we have today, a tipping point is reached at which the increase in investment necessary to counterbalance a drop in the rate of profit becomes prohibitively high, greater than the amount the market can provide. This is the “critical zone”, the zone of capital deficiency.
         While the outward symptoms of the great depression of the ‘30s and the present financial/economic meltdown are very similar – bank failures, economic downturn, unemployment, hardship and near-collapse of the system – the underlying terrains are anything but; in fact they are polar opposites. The 30s’ depression was one of abundance, capital abundance; that of 2008-09 is one of deficiency, capital deficiency.