Mass layoffs expose myth of US economic “recovery”
28 February 2012
The recent announcements of mass layoffs by the US Postal Service, Procter & Gamble, and Archer Daniels Midland, together with the bankruptcies of Fuller Brush and American Airlines, have upended claims that the United States is in the midst of an “economic recovery.”
In fact, the US economy remains mired in mass unemployment, with falling real wages and growing poverty a fact of life for millions of people. Small and medium businesses, facing immense pressures to cut costs, are collapsing by the tens of thousands.
The worst of the recent job cuts was conducted by the government itself: the US Postal Service announced last week that it would wipe out 35,000 jobs by the end of September, part of a longer-term plan to eliminate 150,000 jobs.
One well-known corporate name after another has joined the procession of bankruptcies and layoffs, eliminating tens of thousands of jobs combined: Sears, Procter & Gamble, American Airlines, Kodak, Fuller Brush Company (which filed bankruptcy last week), Archer Daniels Midland, IBM.
When last month’s jobs figures were announced, they were greeted by the government and media as a major improvement and a sign of economic recovery. The White House stated on its blog that the report “provides further evidence that the economy is continuing to heal.”
The reality is completely different. In 2011, the US economy created 1.5 million jobs, but the population grew by 2.2 million, and a roughly equivalent number of young people entered the work force. The employment-population ratio, meanwhile, remains at record lows after having dropped by about 5 percentage points between 2008 and 2010.
Mass unemployment remains at staggering levels. According to official figures, 12.8 million people are unemployed, of whom 5.5 million have been out of work for more than six months and 4 million have been unemployed for over a year. The number of “underemployed” people—combining the jobless with those working only part-time when they want and need full-time work—stands at 24 million.
The continued prevalence of mass unemployment has led to the growth of poverty unseen for decades. The number of US households living on $2 per day per person has more than doubled since 1996, from 636,000 to some 1.46 million today, according to a brief released by the National Poverty Center on Saturday. The study showed that about 4 million people in the United States are living on less than $60 per month.
Yet, under these conditions, both parties are intent on cutting assistance to the poor and unemployed still further. This month the Obama Administration and Republicans reached a deal to cut the maximum duration of unemployment benefits from 99 weeks to 73 week in the hardest-hit states, and from 79 weeks to 63 weeks in most states.
The bill also includes provisions requiring the unemployed to submit proof that they are looking for work, as well as allowing states to subject applicants to drug tests as part of the application process. Big-business politicians have defended these demeaning and punitive actions by claiming that the “recovery” means that only laziness or drug addiction can explain the failure of the unemployed to find jobs.
But even the small number of jobs that have been created since the crash—about a quarter of those lost—have been added on the basis of significantly reduced wages and benefits.
The Obama administration set the model for this whole process during the restructuring of the auto industry, where the administration demanded an expansion of super-exploited new hires making $14 per hour as a condition for bailing out the Big Three.
This points to the fundamental nature of the economic crisis, which has been utilized by the ruling class to lower wages and slash social spending throughout the economy, with the aim of boosting corporate profits and the incomes of the super-rich.
Nearly three years after the official end of the recession in June 2009, it is becoming increasingly clear that the crisis of 2008 was not merely another recession, but a transition to a “new normal” where high unemployment is a permanent fixture, real wages are perpetually falling, and third-world poverty a reality for millions of people.
This is because the present downturn is not merely the operation of the normal business cycle, but a general crisis of world capitalism. It reflects the breakdown of the postwar economic order and the historical decline of American capitalism in particular.
The ruling class has responded to the crisis with single-minded determination to destroy the incomes and living standards of working people.
The working class must respond to the crisis with equal determination. The Socialist Equality Party has entered the 2012 presidential election, running independent candidates, Jerry White and Phyllis Scherrer, on a program based on the political mobilization of the working class against corporate America. We call for a counteroffensive of working people to defend their social rights against the capitalists, on the basis of a socialist program.
The only way to guarantee the basic rights of all people is a drastic reorganization of society to meet social need, not the interests of billionaires. We call on all workers and young people to support the campaign of Jerry White and Phyllis Scherrer.
Andre Damon
OBAMA AND HIS CRONY CAPITALISM
Corzine also exemplifies the seamless ties between Wall Street and the Obama administration. A major fundraiser for Obama’s reelection campaign, the now-disgraced banker-politician hosted the president’s first fund-raising event at his Fifth Avenue apartment overlooking Central Park. He was expected by many to be named treasury secretary in a second Obama term.
Corzine is but one of many figures in or around an administration loaded with Wall Street multi-millionaires. Obama’s former White House chief of staff Rahm Emanuel joined his administration after taking time out from Democratic Party politics to earn millions as an investment banker in Chicago. He was replaced by Clinton-era Commerce Secretary William Daley, who left his post as a top executive at JPMorgan Chase to head up White House operations.
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THE REASON OBAMA PUT WILLIAM DAILY INTO THE WHITES HOUSE WAS BECAUSE OF DALEY’S JP MORGAN CONNECTIONS AND BECAUSE HE’S AN ADVOCATE FOR OPEN BORDERS TO KEEP WAGES DEPRESSED FOR OBAMA’S PAYMASTERS!
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The MF Global collapse, the Democratic Party and Wall Street
8 November 2011
The collapse last week of US broker-dealer MF Global has put the spotlight on the parasitic speculation and outright criminality that are at the heart of the US financial system. It has also provided a text book example of the corrupt and incestuous relationship between the American financial aristocracy and both the political system in general and the Democratic Party in particular.
Facing a run on its holdings, a collapse in its stock, and credit downgrades of its debt to junk status, the Wall Street investment firm with $41 billion in assets filed for Chapter 11 bankruptcy protection on October 31.
A last ditch bid to find a buyer for MF Global fell through when regulators discovered that $633 million in clients’ money had gone missing. It is suspected that the company, headed by former Goldman Sachs CEO and one-time Democratic senator and governor of New Jersey Jon Corzine, moved money out of client accounts in an attempt to meet margin calls from its creditors. It is a crime for a firm to use clients’ money to trade on its own account, let alone to pay off its debts.
Multiple investigations have been launched by federal financial regulators, along with criminal probes by the FBI and the US attorney for Manhattan. Last Friday, after having hired a prominent criminal lawyer, Corzine resigned his post as chairman and CEO of MF Global.
The collapse of the firm, the eighth biggest bankruptcy in US history, was the first major corporate failure resulting from the European debt crisis. It demonstrates that nothing has been done since the Wall Street crash three years ago to rein in the speculative activities of financial firms. The same practices that led to the global recession continue unabated.
Several months after taking control of the firm in March of 2010, Corzine began making enormous bets with borrowed funds that the sovereign debt of countries such as Spain and Italy would not collapse. He placed a single bet of $6.3 billion—six times MF Global’s capital—on risky European state bonds, driving his firm’s leverage (its assets to capital) to a ratio of 40 to 1.
When MF Global reported a second quarter loss of nearly $190 million due to the worsening of the European debt crisis, investor confidence in the company collapsed.
The disaster has also shown that along with the reckless speculative practices, the obscene levels of executive compensation are intact. In his 18 months as head of MF Global, Corzine pocketed $14.25 million in total compensation.
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The 64-year-old banker-politician personifies the intimate ties that bind the Democratic Party to Wall Street. Leading Democratic officials, including nominal “liberals” like Corzine, pass seamlessly between the corporate boardroom and government office. They enrich themselves to the tune of millions by engaging in financial manipulation and swindling and then oversee legislation supposedly designed to regulate these very activities.
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Corzine was CEO of Goldman Sachs from 1994 to 1999, precisely the period when the dismantling of corporate and banking regulations—which had begun under the Democrat Carter and expanded under the Republicans Reagan and the elder Bush—was completed under the Democrat Clinton. Corzine left his Wall Street post with a reported fortune of $400 million. He proceeded to spend $62 million of it to get himself elected US senator from New Jersey.
In 2005 Corzine spent another $38 million of his own money to win election as governor of New Jersey. As governor, he imposed brutal cuts in health care, pensions, higher education and aid to the cities, as well as slashing 5,000 state jobs. As a result, he lost his reelection bid in 2009 to right-wing Republican Chris Christie, who has expanded the assault on New Jersey workers.
When Corzine returned to Wall Street the following year he was given royal treatment by government regulators. The president of the Federal Reserve Bank of New York, William Dudley, another Goldman Sachs veteran, gave MF Global entry into the exclusive and lucrative club of “primary dealers”—financial firms chosen to market US Treasury securities. This was despite MF Global’s relatively small size and the fact that it had been fined $10 million one year before as a result of a trading scandal.
When MF Global’s primary regulator, the Commodity Futures Trading Commission (CFTC), moved to impose stricter limits on broker-dealers’ use of clients’ funds, especially to invest in foreign sovereign debt, Corzine lobbied personally against the regulation. Earlier this year, Gary Gensler, the head of the CFTC, suspended implementation of the new rules.
Gensler is another Goldman Sachs graduate, having worked with Corzine at the firm for 18 years, rising to become co-head of finance before leaving in 1997. Gensler has been forced to recuse himself from the CFTC investigation into the MF Global collapse.
Corzine also exemplifies the seamless ties between Wall Street and the Obama administration. A major fundraiser for Obama’s reelection campaign, the now-disgraced banker-politician hosted the president’s first fund-raising event at his Fifth Avenue apartment overlooking Central Park. He was expected by many to be named treasury secretary in a second Obama term.
Corzine is but one of many figures in or around an administration loaded with Wall Street multi-millionaires. Obama’s former White House chief of staff Rahm Emanuel joined his administration after taking time out from Democratic Party politics to earn millions as an investment banker in Chicago. He was replaced by Clinton-era Commerce Secretary William Daley, who left his post as a top executive at JPMorgan Chase to head up White House operations.
Others include Ron Bloom, a member of Obama’s auto task force and then chief adviser on manufacturing, and Steven Rattner, the financier chosen to head the auto task force. Rattner was later forced to step down after being indicted for making payoffs to obtain contracts with New York State pension funds.
Corzine’s troubles will complicate the cynical attempts by Obama and the Democrats to appropriate the anti-Wall Street anger expressed in the Occupy movement and channel it behind the Obama reelection campaign. What, in fact, the MF Global saga and Corzine’s career demonstrate is that the fight against social inequality, poverty and corporate domination of the government is a fight against the Obama administration and both parties of the financial-corporate elite.
It requires the independent mobilization of the working class in a struggle to put an end to capitalism and establish socialism.
Barry Grey
OBAMA’S HISPANICAZATION OF AMERICAN, FUNDED BY OUR TAX DOLLARS AND ENABLED BY HIS POLICIES OF OPEN BORDERS, NO E-VERIFY, NO IDs FOR REQUIRED OF ILLEGALS VOTING:
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“If you look around you, our president and this Congress are dismantling America by design.”
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