The Proletarian Situation As U.S. Imperialism Declines (Part 8)
[Part 1] [Part 2] [Part 3] [Part 4][Part 5][Part 6][Part 7][Part 8][Part 9]
Domestic Economy Bidenomics: the failure of the Inflation Reduction Act
Presidents don’t make the economy, the economy breaks them, or so a saying could go. They are, for a time, the chief executive officer of the capitalist ruling class’s central committee. Despite the media focus on the speakership song and dance in congress and at the ever earlier far reaches of the presidential campaigns, none of the capitalist politicians have a clue!
The world is changing faster than they can digest the fact of U.S. imperial decline. They quibble over the ideal money mechanics for central banking. But production of commodities, not speculation in financial instruments, will determine the real strength of the economy. The quantitative easing (money printing and cheap interest) response of the central banks to the 2008-09 Global Financial Crisis succeeded in reinflating the speculative markets without bringing back manufacturing and producing real commodities. Going into the COVID crash, depending on foreign manufacturing and logistically backlogged inventories gave the U.S. and the “first world” centers a taste of the vulnerabilities of service sector economies. Finance capital sectors are dependent on parasitic and increasingly speculative gambits to repatriate surplus values, manufactured, extracted or refined abroad. All the fictitious capital digitally created as the monetarist solution to the 2008 crisis could not float the absence of real production. Government debt skyrocketed giving the fake fiscal conservatives a fake cause. BRICS+ started the slow dedollarization, and interest rates skyrocketed, impacting businesses’ cost of working capital. To survive, businesses feeling the crunch must either drive down production costs by cutting workers hours and relative wages (relative to productivity) or find themselves in line at bankruptcy court. This is how the Bidenomics plan is and continues unfolding on Main Street.
The issue for workers is that for decades wages have stagnated and floated below long term price inflation. Expanding employment becomes more profitable driving unemployment down because relative wages stagnate (relative to consumer prices.) This is seen during the long recession from 2008 until COVID employment recovers as prices inflate. Yet, for the statisticians at the Fed, the economy is burning too hot and their only solution is rising interest rates. Democrats’ self congratulatory bluster at having created 13 million jobs is politicking in face of the unfolding crisis. The recently touted 4.9% quarterly GDP growth is a blip, a snapshot in time a moment before the unavailability of credit flattens the construction sector for a year or more. The reopening after COVID would have created millions of jobs regardless of the administration.
The chart below from the U.S. Bureau of Labor Statistics shows the manufacturing sector unemployment rate over time, showing 3 recessions in this century. COVID was a rapid recession, but the recovery was not a special success and the preceding “Trump boom” was mostly spin too.
It seems obvious that when unemployment goes up prices go down, and vice versa; short term fluctuations seeking some sort of equilibrium in a slow and steady chipping away of the worker’s share. But look at the post COVID price inflation in the next chart relative to employment and wage recovery.
Absolute dollars up, purchasing power DOWN: The 1982 dollar has eroded some 64%.
More workers are putting in more labor hours of work, but in relative terms, on a class wide basis, for less purchasing power. Hidden behind grand proclamations of success claims at having curbed the bear with Bidenomics are other Fed statistics, showing 5% of the workforce are taking on two and three jobs; no doubt to make up for what they lost to inflation and the end of the COVID relief programs!
For all their self congratulatory back slapping the DNC and Biden loyalists have overlooked the real economy, child welfare, the basic measure of moral and ethical standards. The NYT reports on September 12, 2023 that childhood poverty has doubled with the end of the pandemic era relief during the much boasted about Biden recovery, now ‘running too hot.’ Even at full steam and overheated, the world’s most powerful capitalist power cannot take care of its children. Neither can it take care of its elders. Baby boomer impoverishment faces a possible government benefits shutdown. Born during recessions they have worked their whole lives only getting by. Government shutdown in prospect raises the possibility of a Social Security payments shutdown. Some 70 million collect Social Security and all but a few depend on these payments.
The U.S. is prepared to sell unlimited treasury notes to China. But that’s no longer happening! Selling $100bn in 12 months is nothing compared to what Yellen might be able to do, including issuing new treasuries at higher and higher interest rates. But China and Japan are the largest countries cutting their holdings of U.S. treasuries, and they’re not the only ones. At some point the U.S.-issued debt will become unserviceable when interest rates will have to come down, accompanied by quantitative easing to flood the market with worthless money to service the debt. Rates will have to come down or there won’t be any lending, like in the fall of 2008. This sharpens the bourgeois appetite for war.
And it’s not just the government which is having a hard time servicing debt. Note how Quarter 2, 2023 credit card loan delinquency rates reached 2.77%, having receded during the COVID subsidy programs, they came roaring back with Bidenomics, surpassing all rates since 2012. The hiatus in delinquencies was afforded by unemployment benefits, business loans, childcare credits, the eviction and student debt moratoriums, with those programs removing the squeeze. Declining real wages and inflating prices are resulting in more families suffering delinquencies.
Across the industrialized nations (G7) the recession looms as consumer demand drops. In the U.S. housing starts are falling off just before open season on politicians for the 2024 presidential elections. The hype of Bidenomics will fade as inflation is not brought under control, interest rates remain too high to get business to bite and de-dollarization has treasury bond sales dropping. The Jackson Hole Fed announcement of August 26th said inflation is still too high and the Fed will continue to raise prime interest rates to push inflation down. The “prime” is the interest rate BANKS have to pay to borrow funds they lend to you for more.
The Biden carbon politics has behind it J.P. Morgan Chase, Citibank, Bank of America and Morgan Stanley, investing trillions in oil and coal as are the Chinese in the lesser developed countries. Whereas their total agricultural investment in these countries in the same period comes to only $350 million. To keep right wing Democrats in line, Biden has had to junk enforcement of environmental laws and quit blocking projects that destroy the environment where Black, Brown and Native American populations live.
The twin “third rails” of politics, of congressional political survival are sharp class dividing issues, the war budget and Social Security. The war budget is more of a sub rosa third rail; it is so third rail that rarely anyone refuses the opportunity to genuflect, i.e., vote to spend. Many more politicians can survive having made a career of attacking Social Security than challenging funding of the imperialist military project (in its entirety or in its parts.)
Domestic Economy: Why do I have to take two jobs to put food on the table for my family?
By the numbers: We can see a steady upwards trend of workers with two full time jobs, literally working themselves to death.
Or by percent:
The Inflation Reduction Act failed to alleviate the actual conditions of working people. These charts show no recovery after the 2008 crash for 1-job incomes, hence first a stagnant high number and percentage of folks working 2 jobs, then the COVID interruption, followed by a renewed rise. To say this is controlled now because numbers are not yet as high as in 2017 is to jerk the public.
In the U.S., overall consumer price index (CPI) inflation in July 2023 was down to 3.2% (a benchmark that employers are using when they project into the future to keep wages where shareholders want them.) A closer look at the categories reveals a harder post-COVID landing than Biden is touting. Impacting (pulling down) the overall CPI, are drops in energy commodities price inflation which was highly over-inflated during COVID.
In 2023 U.S. consumer energy prices are down 12.5% while food is up 4.9% (food at home 3.6% and away from home 7.1%). Most of the food eaten away from home is not a luxury, it is the workers transiting to and from work grabbing food on the go. And while overall energy prices are down, extreme weather events drive homeowners and renters alike to crank the heaters and air conditioners excessively, for longer periods and further across formerly temperate regions.
Rent inflation accounts for 32% of the consumer price index. Currently at 7.689% rent inflation is more than double the base inflation rate of 3.2%. And we all know who pays rent!
Investopedia credits “supply chain improvements” and interest rate hikes, not the Inflation Reduction Act (IRA) for the decline in inflation.
Heading into the 2024 November elections the Democrats hang their hat on two pegs: one, that they are not Trump and two that the IRA of 2022 has allowed the U.S. to skirt the unfolding international recession. The only tool the Fed has is adjusting interest rates, and for now that means raising them, driving up the rate for financing business, necessitating an increase in the rate of profit to cover the rent cost of capital, or requiring businesses to cut back on the rate of production to minimize the need of borrowing; this means “redundancies” translated into Trumpian lexicon this means “you’re fired!”
Business Insider documents the churn and burn, chewing up and spitting out thousands of workers jobs across whole industries in 2022-2023, with no sign of slowing, particularly in tech companies. And this is on Biden’s watch, with Trump’s Fed chief Powell at the helm, with no mass movement in the streets to challenge Biden or Powell! Strikes and threats of strikes, the 60th anniversary of the March on Washington may relieve some social pressure, but it is obvious from a high number of summertime strikes that the masses want change and the leaders of the mass movements and unions work overtime to keep either their demands or the resulting trade agreements within the parameters which leave the ruling capitalist class unscathed.
Domestic Economy: Corruption, Personality Politics….the Miasma of Oz!
Housing starts and other people’s family economies are overshadowed in the media by trolling the families of the corrupt politicians. Should the U.S. president be the grand grifter D.J. Trump, whose spawn banked billions on his name, cutting deals from China to Saudi Arabia; or should it be Biden (Dark Brandon) whose son’s wealth, while a pittance compared to Trump’s kids’ shake, is formidable and highly attributable to his father’s connections rather than his deft business acumen. The Bidens have no compunction against making business with China one day and castigating and warring against it the next. No doubt the Burisma affair was just one of many U.S. businesses made to win Ukrainian oligarchs from the pro-Russia side of the world economy to the pro-U.S. side. This brouhaha is 99% political swordplay; it’s not especially consequential in a $14 Trillion economy and diverts our view from the true robber barons of today and their ill-gotten gains.
Yet workers and the broader public are concerned with corruption. The perception of corruption is used by both the left and right in their propaganda and media campaigns, not only in the U.S. but around the world. It is far easier to point at the detestable character in the other political camp in order to whip up feigned or real mass anger than to report about the rate of exploitation as a measure of productivity vs labor time, as explained by the Labor Theory of Value. From FOX to MSNBC no one wants workers discussing the secret of how surplus values (profits) are extracted throughout the labor process. If we understood this, all workers would demand shorter hours! Because by employing labor longer than is needed for labor to reproduce itself (and the expended tools and machinery etc.,) the capitalist mode of production’s ownership rights allows the business owners to own the surplus values created by surplus labor power. For example, if it only takes a worker 4 hours to produce sufficient values for their daily wages and to cover the cost of other inputs to the production process (management, accounting, and interest on capital,) the owner (capitalist class) keeps the other four hours (multiplied by every worker in the enterprise) as the bosses’ share!
In a small shop this amounts to very little, so real surplus values may not actually show as profit for the small company until an enterprise has 10 or more workers. Such is the variability that results in high percentages of startup failures. Every month some 30,000 businesses start up. Statistics say that in two years 70% of them will be belly up. That creates a perpetual churn of frustrated, failed, petty bourgeois, whose entrepreneurial and American Dream burst and whose Horatio Alger ideology shouts back at them “you are a loser!” We have seen that when this layer of the petty bourgeoisie is hurting, and when they do not have a strong workers movement explaining that it is characteristic of big capital to eat small capital, they fall prey to all sort of xenophobic, anti-semetic, racist, patriarchal, homophobic rage. All the irrational precursor ingredients of fascism. Better it is for the big capitalist to allow the failed entrepreneur to stew in this frustration than understand that monopoly capital rules the roost and the system, that it wasn’t the ‘scapegoated other’ who crushed their dreams.
When did you ever hear a panel of labor analysts, activists, and economics professors explain this on FOX, CNN, or MSNBC? Maybe you can find an errant Marxist in the recesses of YouTube, but not in commercial mass media. Today’s political discourse from the loudest platforms is all about who’s morally despicable and corrupt behavior best serves as red meat for an understandably poorly-informed base. This is not new, jockeying for moral high ground in politics is as old as the tale is long. And finger pointing sometimes has political credibility repercussions too, but few if any dire personal consequences for the capitalist class and their politicians.
Bill Clinton, whose wealth skyrocketed after serving, will not go down in history for throwing millions of poor off welfare, and putting 10,000 new cops into the inner cities to terrorize Black and Brown people; rather he will be remembered for debating the meaning of “is” and getting impeached for lying about getting blow jobs from his intern. The rapist Trump will pay a few million kopecks for his pleasures but it hasn’t impacted his fortune or freedom to date. He has other worries in other courts. It is unlikely Supreme Court Justice Thomas will have to pay for receipt of grandiose gifts, nor will he step down or recuse himself in conflicted cases, otherwise the entire supreme court game implodes. Thomas will not be remembered for sexual harassment of Anita Hill, which Biden and other Democrats dismissed. While he will be remembered for overturning Roe, the Democrats will downplay Biden’s role elevating him to the court. Folks like Hunter Biden, name-dropping his way to cherry-pick business deals and substantial wealth may face conviction while Jared and Ivanka are riding high on the Saudis’ billions and will not be held to account. It’s who your friends are, clearly.
Barely below the surface the Biden and Kushner corruptions are financial expressions of two opposing competing foreign policy initiatives of the ruling capitalist class. Saudi Arabia has been leaning towards Russia, cutting oil production and moving away from the petro-dollar into the BRICS and de-dollarized trading. Trump, Tucker Carlson, and MAGA fascists either feign neutrality towards Russia or outright support it and Putin. Their calls for negotiations, breaking with NATO and for the U.S. to stop funding the war are in no way anti-imperialist. Their intention is to drive a wedge between Russia and China and keep their cozy relations with Putin and Prince Mohammed bin Salman. Hunter Biden’s fiasco is not really about the hookers and cocaine, that is only red meat internet clickbait. The alleged collusion or quid pro quo is that his enterprise received $11 million in Ukrainian business between 2013-2018 and that is only one nexus between the U.S. capitalist class, the capitalist state and the U.S./Nato project to isolate and dismember Russia. Joe Biden, Lindsey Graham, Victoria Nuland, are the tip of a bipartisan neocon initiative revitalizing the Dulles brothers’ post WWII covert operations in Ukraine. An old play with a new title.
Most workers and small firm owners, successful and failed alike, are infuriated at the culture of corruption, and how the big capitalists and their corporations make decisions about war and peace for their financial advantage. Yet there is no mass anti-war movement in the U.S. today. The workers are restrained by their unions’ ubiquitous support for Democratic Party foreign policy. This allows the space for the isolationists and those not so afraid to be outwardly pro-Russia on the left and right to find common ground standing for peace, negotiations, liberation of dependent nations, free trade and acceptance of the end of the unipolar century. The ironic, de facto bloc of Starbucks and Trump, Elon Musk, Boeing and Cornel West!
***
[Part 1] [Part 2] [Part 3] [Part 4][Part 5][Part 6][Part 7][Part 8][Part 9]
