Sunday, June 24, 2012
In case you need more confirmation that the US economy is out of balance, here are three charts for you.
1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't).
2) Fewer Americans are working than at any time in the past three decades. One reason corporations are so profitable is that they don't employ as many Americans as they used to.
3) Wages as a percent of the economy are at an all-time low. This is both cause and effect. One reason companies are so profitable is that they're paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those "wages" are other companies' revenue.
In short, our current system and philosophy is creating a country of a few million overlords and 300+ million serfs.
That's not what has made America a great country. It's also not what most people think America is supposed to be about.
So we might want to rethink that.
With her 1962 book, Silent Spring, Rachel Carson got DDT and other synthetic pesticides banned and saved bird life. Today it is humans who are directly threatened by technologies designed to extract the maximum profit at the lowest private cost and the maximum social cost from natural resources.
Over the past few days, The New York Times has published several terrifying reports about New Jersey’s system of halfway houses — privately run adjuncts to the regular system of prisons. The series is a model of investigative reporting, which everyone should read. But it should also be seen in context. The horrors described are part of a broader pattern in which essential functions of government are being both privatized and degraded.
First of all, about those halfway houses: In 2010, Chris Christie, the state’s governor — who has close personal ties to Community Education Centers, the largest operator of these facilities, and who once worked as a lobbyist for the firm — described the company’s operations as “representing the very best of the human spirit.” But The Times’s reports instead portray something closer to hell on earth — an understaffed, poorly run system, with a demoralized work force, from which the most dangerous individuals often escape to wreak havoc, while relatively mild offenders face terror and abuse at the hands of other inmates.
It’s a terrible story. But, as I said, you really need to see it in the broader context of a nationwide drive on the part of America’s right to privatize government functions, very much including the operation of prisons. What’s behind this drive?
You might be tempted to say that it reflects conservative belief in the magic of the marketplace, in the superiority of free-market competition over government planning. And that’s certainly the way right-wing politicians like to frame the issue.
But if you think about it even for a minute, you realize that the one thing the companies that make up the prison-industrial complex — companies like Community Education or the private-prison giant Corrections Corporation of America — are definitely not doing is competing in a free market. They are, instead, living off government contracts. There isn’t any market here, and there is, therefore, no reason to expect any magical gains in efficiency.
And, sure enough, despite many promises that prison privatization will lead to big cost savings, such savings — as a comprehensive study by the Bureau of Justice Assistance, part of the U.S. Department of Justice, concluded — “have simply not materialized.” To the extent that private prison operators do manage to save money, they do so through “reductions in staffing patterns, fringe benefits, and other labor-related costs.”
So let’s see: Privatized prisons save money by employing fewer guards and other workers, and by paying them badly. And then we get horror stories about how these prisons are run. What a surprise!
So what’s really behind the drive to privatize prisons, and just about everything else?
One answer is that privatization can serve as a stealth form of government borrowing, in which governments avoid recording upfront expenses (or even raise money by selling existing facilities) while raising their long-run costs in ways taxpayers can’t see. We hear a lot about the hidden debts that states have incurred in the form of pension liabilities; we don’t hear much about the hidden debts now being accumulated in the form of long-term contracts with private companies hired to operate prisons, schools and more.
Another answer is that privatization is a way of getting rid of public employees, who do have a habit of unionizing and tend to lean Democratic in any case.
But the main answer, surely, is to follow the money. Never mind what privatization does or doesn’t do to state budgets; think instead of what it does for both the campaign coffers and the personal finances of politicians and their friends. As more and more government functions get privatized, states become pay-to-play paradises, in which both political contributions and contracts for friends and relatives become a quid pro quo for getting government business. Are the corporations capturing the politicians, or the politicians capturing the corporations? Does it matter?
Now, someone will surely point out that nonprivatized government has its own problems of undue influence, that prison guards and teachers’ unions also have political clout, and this clout sometimes distorts public policy. Fair enough. But such influence tends to be relatively transparent. Everyone knows about those arguably excessive public pensions; it took an investigation by The Times over several months to bring the account of New Jersey’s halfway-house-hell to light.
The point, then, is that you shouldn’t imagine that what The Times discovered about prison privatization in New Jersey is an isolated instance of bad behavior. It is, instead, almost surely a glimpse of a pervasive and growing reality, of a corrupt nexus of privatization and patronage that is undermining government across much of our nation.
It is now coming on close to four years since the collapse of Lehman Brothers in the autumn of 2008. The events of the past several months underscore two fundamental features of the crisis that emerged out of the subsequent financial collapse: 1) that it is systemic, not temporary; and 2) that it is global, affecting every country in the world. Globally integrated capitalism has created a globally integrated catastrophe.
This week, a series of economic figures were released confirming this analysis. Hopes from bourgeois commentators that the debt crisis in Europe could be offset by economic growth in Germany, or that weakness in the West as a whole could be counterbalanced by strong production in Asia, are being dashed with each passing day.
In fact, production in both Germany and China is contracting, in large part due to falling exports. According to Thursday’s figures, Germany’s composite purchasing managers index hit a three-year low, falling to 48.5 in June from 49.3 a month before. The HSBC China Manufacturing Purchasing Managers’ Index likewise fell to 48.1 in June, down from 48.4 in May. It was the eighth consecutive month of readings below 50, indicating contraction.
Other major “developing” economies are doing no better. India’s economy grew only 5.3 percent in the first quarter of the year, its lowest growth rate in nine years and down nearly four percentage points from 2011. The Brazilian Central Bank said last week that the country’s economy probably contracted in April compared with a year earlier, the first such yearly decline since late 2009.
In the United States, the center of world capitalism, the Obama administration is seeking to cover over with honeyed words what is clearly a sharp downturn, following a largely nonexistent “recovery.” The Federal Reserve reported this week that all the basic indicators of economic health have slowed since March, but proposed no serious measures in response.
Corporations are freezing hiring and banks are cutting off loans under conditions of mass unemployment. This week, the number of Americans filing new claims for unemployment benefits remained at very high levels. The four-week moving average for new claims is at its highest since December. According to the Labor Department, the number of available jobs dropped by 325,000 in April, the single biggest monthly decline since September 2008.
Europe reels from one crisis to the next. The stock market surge following the bank bailout of Spain hardly lasted a day before the prevailing sense of gloom in financial circles returned. The general sense of political paralysis was compounded by the ill-fated outcome of the G20 summit in Mexico, which was supposed to conclude with a common agreement on Europe, but in fact ended in discord among the major powers.
Amidst the perplexity in ruling circles, and in the face of bitter and growing conflicts between the major powers, the bourgeoisie does have a conception of how it will respond to the crisis: with the most ruthless, determined and unending assault on the working class. It has reacted to each phase of the crisis with bank bailouts and ever more savage austerity, in effect orchestrating the largest upward transfer of wealth in modern history. The crisis is expressed in the most bitter class warfare.
What has happened to Greece shows the working class of the world what is being prepared in every country. A quarter of the workforce is unemployed—including more than half of the country’s youth—and Athens Wednesday saw thousands lining up for a distribution of free produce in a scene that evoked the Great Depression of the 1930s.
On Thursday, MSCI, a global stock index compiler, said it has put Greece’s economy on review to become the first country in the world to be downgraded from the status of a developed country to a “developing” one.
The reference to “developing” is, however, entirely misplaced. World capitalism, through the giant banks, is inflicting on the working class of Greece a shock reversal in their conditions of life. As one economic commentator noted, “In a sense they really need a new category, blown-up developed markets.” The representatives of the ruling class are acknowledging that their actions are producing a historic retrogression.
In January 2008, several months before the collapse of Lehman Brothers and amidst growing signs of a collapse of the US housing bubble, the World Socialist Web Site explained, “The turbulence in world financial markets is the expression of not merely a conjunctural downturn, but rather a profound systemic disorder which is already destabilizing international politics.” Hopes promoted by bourgeois commentators that somehow a new global equilibrium, a new basis for world economic growth, could be found, have been dashed. The crisis is, in the most profound sense of the term, a crisis of the world capitalist system.
The global character of the crisis requires a global response from the working class. It is a basic premise of Marxism that the workers of every country are united by their common class interests, interests that are determined by their common relationship to the capitalist system of production. This is true now more than ever. The ruling class, in its ruthless defense of a failed economic system, demonstrates with each passing day the burning necessity for world revolution.