CB
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$$$ boom: bonanza for the rich, but misery for working class
The following, an abridged version of a report by the Communist Party Economics Commission, is part of the discussion in preparation for the CPUSA's regional conferences on ideology scheduled for Oct. 23-24:
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Financial contradictions
Throughout the first part of the 1990s, consumers saved about 6 percent of their income. But thereafter the rate of savings declined continuously, vanishing by December 1998 and becoming minus 1.1 percent by May 1999.
The net "dissaving" so far this year is unprecedented since the great crisis of the 1930s, and has given rise to expressions of concern in the business and financial press.
The continuous "bull market" of recent years has much to do with these results. For millions of people, the stock market has become a medium of gambling. Capital gains on investments have become an important share of income for the half of the population above the median income. That includes direct investment in stocks and bonds and investment in mutual funds based on such investments.
The number of shareholder accounts in equity mutual funds went up 450 percent during the 1990s, reaching 104 million in 1997. Assets in these funds also multiplied nearly 10 times, reaching $2.4 trillion in 1997.
The prices of corporate stocks have multiplied about 10 times since 1980, perhaps three times as fast as the increase in corporate gross profits.
Shareholders have seen their stock portfolios increase in value (on paper) so they borrow freely to pay for current purchases.
If the stock market falls, millions will default, resulting in foreclosures and repossessions. The vulnerability of the stock market is most graphically expressed in the prices of internet stocks, the medium of stock market gambling for many.
Initial Public Offerings (IPOs) of such stocks, which have done no business and have no prospect of becoming real factors, are immediately gobbled up at 5 to 10 times the initial offering price. Companies floating a dream and a prayer have market valuations equal to those of giants like General Motors.
Barron's columnist Alan Abelson warns, "Ignorant investors, buying wildly speculative stocks on credit define an accident waiting to happen. It could be triggered by a string of unbroken down days. The new on-line brokerage firms have no experience handling such situations."
Contributing to financial instability, consumer debt is at its highest levels, with the biggest increase among the lowest 40 percent of the population. Criminal loan sharks have been displaced by "legitimate" loan outfits that charge extortionate fees to get workers to their next paycheck. New, tougher bankruptcy laws will provide the "vigorish" to force their victims to pay up.
The 30 percent drop in stock prices in 1987 did not trigger a general cyclical decline in the economy. But overall conditions are much more vulnerable today, and a major bear market (downturn) is more likely to be associated with a crisis of overproduction in the "real" economy. Odds are strongly in the direction of a real "bear market" sometime in the next five years.
World financial crisis
The world financial crisis, now two years old, has spread further. In Asia, where the crisis started, there has been easing, but no real stabilization. The crisis has deepened in Japan. U.S. companies have started to buy up distressed corporations, real estate and privatized state property at bargain prices.
The crisis has spread further in South America, where the United States has a more sizable and leading economic and political involvement. Brazil, Chile, Ecuador, Venezuela and Peru face increasing unemployment and currency crises.
The human costs are shown by the 15 percent decline in purchases of food staples in Argentina. Mexico is the only major Latin American country that has stabilized its situation, partly because of the strong influx of U.S. capital under NAFTA, at great cost to U.S. and Mexican workers.
Throughout the rest of Latin America, expectations of declines in Gross Domestic Product this year have widened as unemployment soars - to 10 percent in Chile, 14 percent in Argentina. Several Central American countries are still suffering economic crises because of devastating hurricane damage.
The world financial crisis has spread to southeastern Europe, most acutely to Yugoslavia as a direct result of the U.S. bombing attacks. Albania, Macedonia, Hungary, Romania and Bulgaria are also involved.
It is difficult to see how Russia can avoid default on its huge international debt. Washington is attempting to trade a few billion dollars of IMF loans - which would be earmarked solely to cover payments due on the existing debts - for unilateral Russian disarmament.
Despite the crises surrounding it, the Chinese economy continues to grow, assisted by large government programs to offset unemployment as industries are rationalized. Official data show a growth rate of more than 8 percent this year.
Washington recognizes China as basically a socialist country, despite the inroads of capitalist enterprises. As such it sees China as an enemy and conducts a steady flow of propaganda against it on grounds of "human rights," Tibet and spying, with warnings against Chinese actions to support its sovereignty over Taiwan.
The strong Chinese economy, and the ability of Cuba to escape the world financial crisis, shows the superiority of socialism over capitalism.
Unfortunately the AFL-CIO has joined the official U.S. chorus of anti-Chinese propaganda, echoing CIA distortions about human rights violations and singling out Chinese imports as a cause of job losses in the United States.
The world financial crisis will be resolved by the kinds of programs pushed through the IMF and the U.S. Treasury, at the expense of the working class in the countries of the world. It can also be resolved by successful working class revolutions.
The U.S. has strengthened its role as the dominant imperialist power in the world. The U.S. economy has, for now, been stabilized through military stimulus and profits from cheap access to world oil, natural and agricultural resources, and labor. Loot flows into the U.S. from world capitalists seeking a safe haven.
Most of the benefits have gone to the wealthiest of the capitalist class, which is largely united behind an aggressive political and economic agenda at home and abroad.
The Communist Party, on the other hand, advances a program for meeting the needs of the people: full employment through massive public works programs paid for by cutting military spending and taxing the rich; doubling the minimum wage and Social Security benefits, reducing the workweek, major affirmative action programs, repealing anti-labor laws and all-out support for union organizing drives.
Conditions for a financial crisis are developing. Such an inevitable downturn will worsen the conditions of those already suffering and remove the illusion of stability and prosperity from many who appear to benefit from today's economy.
During an economic crisis, the weakness of capitalism becomes visible to large numbers.
While big business will try to shift the full cost onto the working class, our ability to resist takebacks and extend our rights depends in large measure on the strength and direction of the labor movement and other people's movements, not least of which is the Communist Party