For the last several months, the corporate press has been riddled
with joyous reports hailing the end of the economic crisis. These
have accelerated in 2011, as “optimistic” monthly reports on
“created jobs,” a soaring stock market and all-time high profits
have created an almost giddy atmosphere among the capitalist class.
For them, crisis has been averted and it is back to business as
usual.
But, for working people, the crisis may actually be getting worse.
Misleading statistics on jobs
The most recent employment numbers have been cause of much
cheering—after two years of an official unemployment rate of nearly
10 percent and little gain seen in the private sector, the U.S.
economy gained 218,000 jobs in March as part of a full-point
reduction in unemployment, now officially down to 8.8 percent.
Unfortunately, that figure does not reflect reality. The official
rate does not take into account underemployed people scraping by on
part-time work, nor does it count those who have “fallen out of the
labor force;” that is, people who have been unemployed for long
enough to have either used up their eligible unemployment benefits or
have simply stopped looking for work. Workers of color and people
ages 16-25 are the worst hit.
Over 260,000 working people have fallen out of the labor force,
removing them from the tally of the officially unemployed, but they
are no less desperate for work. In fact, the proportion of American
adults employed or actively seeking work is only 64.2 percent, the
lowest level in 25 years. In other words, while official unemployment
has dropped, the actual number of unemployed, work-eligible adults
has risen.
Given that current estimates suggest that the economy has to add
over 150,000 jobs every month just to keep up with population growth,
it is safe to say that the employment picture has only worsened since
the recession’s start in 2007.
Attacked on all sides
While workers find it increasingly difficult to find work, the
recession’s trigger, the subprime mortgage crisis, has continued.
Mortgage-backed securities became many investors’ asset of choice
following the tech bubble of the late 1990s. Subprime mortgages,
which are designed for people without the credit ratings and income
required for traditional loans, were and are considered risky
investments individually. But lax financial rules allowed the loans
to be combined with other mortgages and packaged as “safe”
investment instruments that, as the housing market soared, made
billions of dollars for the capitalists.
According to the cyclical nature of capitalism, though, the
housing bubble burst once there were more homes available for sale
than there were buyers who could afford them. Housing values
plummeted, taking with them the values of securitized mortgages,
which in turn set off a maelstrom of bank collapses, bankruptcies and
layoffs. It took two years for profitability to return.
So why risk another collapse? Because the loans are simply too
attractive for investors to pass up. As long as interest rates remain
historically low, the yield on subprime assets remains higher than on
government bonds; and loans can be made cheaply with high potential
for large profits.
Subprime mortgages may still be attractive to working people
hoping to own a home of their own. But while investors have learned
that they can count on the federal government to bail them out should
the market go sour, workers’ exposure can mean absolute ruin should
prices fall further or their ability to pay is compromised.
Predators and parasites rewarded
The risky practices of bankers and investors magnified the crisis,
which produced losses. But just over three years later, corporate
profits are ballooning: in the final quarter of 2010, profits topped
an annual after-tax rate of $1.25 trillion, a
new all-time high in current dollars.
JP Morgan Chase, one of the entities at the very heart of the
financial meltdown and a large recipient of federal bailout money,
saw its profits rise 47 percent over 2009, raking in $4.8 billion.
Lloyd Blankfein, whose tenure as CEO of Goldman Sachs saw the same
culpability and reward for failure, received $19 million in total
compensation for 2010, including a $5.4 million cash bonus.
Those bonuses seem large, but they pale in comparison to the
overall profit of the corporations. Where is all that profit going?
Not into job creation, as we have seen, contrary to the claims of
politicians who shamelessly serve the capitalist class. The profits
are used to crush competition, acquire more profitable assets and
expand operations. After falling to a low of just over 7,500 late in
2008, the Dow Jones Industrial Average has soared back over 12,000
reflecting the huge rise in current dollar profits.
And if nearly 20 percent of the real labor force is out of work,
keeping regular economic activity stagnant, what creates those
profits? The answer is workers’ productivity—not from more
workers working, but from fewer workers working harder to keep the
few jobs left to them.
The Great Recession has been a boon to the capitalists, who have
used it to further strengthen their power in society and enrich
themselves from the public till. But it has been a continuing
disaster for poor and working people, for whom increased corporate
profits through sped-up labor and risky investments have proven to be
nothing more than continued vulnerability to unemployment and
homelessness.
It does not have to be this way. As history has shown, working
people can band together to throw off the shackles of the capitalist
system and its savage cycles and create for themselves a classless
society based on shared wealth and the common good. We need socialism
now more than ever!
