FEBRUARY 15, 2001

Working Families Shouldn't Pay for Big Business' Crisis

Scott Marshall, National Vice Chair, CPUSA and Chair National Labor Commission

In discussing the economic situation we should remember what Karl Marx said in the third volume of Capital:

"The last cause of all real crisis always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces as if only the absolute power of consumption of the entire society would be their limit."

This important observation is timely in many ways for today. As we discuss the crisis at home we have to remember that in today's world, even more than in Marx's day, "poverty and restricted consumption," is a worldwide capitalist system of global proportions. Truly, global capital does now develop "as if only the absolute power of consumption of the entire society (or planet) would be their limit."

With that in mind, welcome to what some are beginning to call the first New Economy recession.

According to the outplacement firm, Challenger's, Christmas and Grey, who in the last ten years have become the authority on job loss in America, the US economy lost roughly 142,000 jobs in January, a record loss since they have been keeping figures. Indeed, the previous record was December 2000's record of 133,000 jobs lost to the economy in a single month. This was the first time since these records have been kept that announced job cuts totaled more than 100,000 for two months in a row.

Unemployment, a lagging indicator of crisis, rose from 4.0% to 4.2% in January. By official figures unemployment now stands at about 6 million. This, of course, does not include underemployed and discouraged workers.

According to BLS statistics, Black workers were hardest hit. African American unemployment jumped by 0.8 of a percentage point, to 8.4 percent. Latino workers also were hard hit jumping 0.3 of a percent to 6%. Teenagers were also hard hit.

Manufacturing, or goods producing industries, are the hardest hit. As Business Week put it, "goods led the boom and they lead the slowdown."

Auto and steel are among those hit the hardest. Eleven steel companies are in bankruptcy and four more are teetering. Steel is in trouble in large part because most of American steel capacity is aimed at the auto and appliance consumer industry, not structural steel shapes needed for construction and infrastructure.

While the economy has continued to create new jobs, most in the low end of the service sector, manufacturing lost 65,000 jobs in January, mostly in auto, on top of 56,000 jobs in December. Most estimates are that manufacturing has lost 250,000 jobs permanently since June of 2000.

DaimlerChrysler's announcement that it plans to eliminate 26,000 jobs, or 20 percent of its North American work force, was the biggest in a wave of layoffs announced in recent weeks. Here are the biggest layoff plans announced so far in January:

DaimlerChrysler Auto manufacturing 26,000 Lucent Technologies Telecom equipment 10,000 Sara Lee Food processing 7,000 J.C. Penney Retailing 5,500 Textron Conglomerate 3,600 Motorola Telecom equipment 2,500 Sears, Roebuck and Co Retailing 2,400 AOL-Time Warner Internet services 2,400 Intrenet Inc. Trucking 1,700 So California Edison Utility 1,450 Ann & Hope Inc. Retailing 1,400 Amazon.com Internet retailing 1,300 Norfolk Southern Corp Railroad 1,000+ LTV Corp. Steel 1,000 Converse Footwear 1,000 Auto led all industries with 34,959 in cuts in January; telecommunications had 22,060; retail announced 15,244; and computer and other high tech announced roughly 23,000. Another early indication of slowdown is the falling demand for temporary workers. From April to December of 2000 employment at temp agencies fell by 184,000 workers. 39,000 last month alone. This is the biggest drop since the bottom of the last recession in 1990-91. At the same time the service sector has added 871,000 new jobs since June according to the Labor Department. The fastest growing service sector jobs are healthcare, retailing, amusement and recreation, engineering, finance, insurance and real estate. As Marxists, we have to ask, can these jobs be sustained in an economy where the manufacturing sector is in sharp decline? And there are many indications that we are right to ask. For example, the National Association of Purchasing Management, which created an index to measure service employment and prospects, reported that in January their non-farm business index plunged 11%, to the lowest level since they began calculations in 1997.There are other classic indications that a crisis is in the making. Inventories are mushrooming. Factory inventories rose 0.2% to almost a half a trillion dollars in January, the ninth monthly increase. Yet factory shipments fell by 0.2% to $372 billion, the forth decrease in a row. Orders for primary metals fell 3.9% and fabricated metal orders dropped 0.3%. Much imbalance is also concentrated in the auto industry. By December, dealer inventories had grown 15% above the level of the previous year while sales were nearly flat. This pattern increased in January. In fact, Alan Greenspan called the current situation a "major inventory correction," in his Congressional testimony on January 25th. He also said that economic growth is "very close to zero." Others now dispute him and think that revised figures will show an actual contraction in the economy for January. Likewise the news is grim in another classical indicator: capital investment. Business investment dropped in January for the first time since the first quarter of 1992. Especially hard hit were investments in equipment and software, which declined by 4.7% in the fourth quarter, marking the first decline of this kind in 10 years. Industrial machinery and equipment orders fell 3.6 percent, including a 9.5 percent drop in computers. Another wild card indicator is the public and private debt. Consumer debt is skyrocketing. Borrowers are more leveraged and vulnerable than any time since the 1990-91 recession. The savings rate is in decline. And more lower-income people, who were never offered credit before, are piling up debt. The most telling increase in leverage is in the home. Second mortgages and equity credit schemes are more prevalent than ever. In 1990, mortgages amounted to about 35% of the value of houses. That percentage is now nearly 50%. Just a couple more indicators. The Conference Board says consumer confidence is in the tank big time. The National Association of Home Builders housing market index for January fell for the second straight month to the lowest point in 4 years. Of course job loss and unemployment only describe one aspect of what is happening to working people in this period. There are high energy costs, high gasoline costs, rising food costs and rising rents -- big parts of the creeping inflation that strikes hardest at working families. The energy crisis clearly aggravates the overall economic situation as well as putting the hurt on working people. According to the National Association of Manufacturers rising energy and gas prices have cost the US economy $115 billion in the past two years. In Chicago, natural gas heating bills have soared close to 50%. We know comrades and friends whose bills have jumped from the $100 range last year to the $400 range this year. And as we all know this gloomy economic news lands on the backs of those who have not really participated in the long economic expansion of the last ten years. For example, those who have been the victims of so-called welfare reform are now faced with new and deeper economic crisis and poverty, without any entitlements or economic rights. For millions the safety net is all but gone. I should add that the conditions in the US are of concern for capitalists everywhere. At the recent International Monetary Funds meeting in Davos, Switzerland it was a large topic of discussion. The IMF's deputy director, Stanley Fischer, said the slowdown was causing the fund to predict that growth in the global economy would be considerably lower, "possibly in the range of 3.5 percent." That was scaled back from the IMF's prediction of 4.2 percent made last September. There are some interesting, and I think, new features of this economic situation. Most notable is how fast it has developed. It appears now that the economy began to slam on the breaks in the late summer of 2000 with large layoffs beginning in November. Business Week, The New York Times and The Wall Street Journal have all noted the speed of the reaction to rising inventories. Just-in-time methods and computerization of inventory control and sales information has meant that big business reacts more quickly to the slightest negative indicator. Big corporations, auto is a good example, react quickly with job cuts and other cost cutting measures including the stopping of capital expenditures and expansions. There is plenty of evidence that the computer industry has been a driving force in this expansion. Vic Perlo maintained that computers played a similar role in this economy to that played by electricity at the last turn of the century, and that auto played in the 1920's. Businesses of all sizes computerized their operations including those in the manufacturing sectors. Much of this computerization may have been of questionable value and easily shed by corporations, thus feeding the expansion but also making downsizing more rapid and intense as unneeded systems are shed. Another interesting and damaging effect of the current economy for working families is the lack of funds for local governments. This too came on quickly. Of course most working class small towns have been strapped right along. But increasingly, as reported in The Times, even wealthier townships are facing budget shortfalls. Many local governments have gone from surpluses to deficits in a period of months in the last period. We all understand that the global capitalist economy is a very complex jumble. There are no simple indicators or factors that determine its health. At the same time, its very complexity makes it that much more susceptible to small factors setting off crisis. Several economists in the past few weeks have speculated that the very suddenness of job cuts and cut backs in capital expenditure could spark an unintended deeper crisis. Cynics accuse our Party of always predicting economic crisis and collapse. Of course, the point of Marxist analysis of capitalist crisis is not predictions, but fightback and the class struggle. Debates on crisis are endlessly fascinating, but to paraphrase, "The point however is to change it." We don't have to know with the utmost precision the depth and length of the crisis to know we have to act. Enough has happened on the economic front for us to know that the working class is going to catch it in the next year. We can also predict with certainty that there will be a dangerous racist edge. This would be so even without George Bush and the ultra-right in the White House. But given the Bush presidency we can safely predict fresh and accelerated bouts of attack, racist discrimination and jingoism to try and divide and confuse the working class and people. Many are now coming to believe that the reason the ultra-right section of the ruling class was willing to steal this election for George Bush, and thereby cast wide doubts about legitimacy, was precisely because of their need to guarantee that the impending crisis would be resolved on the backs of the working class and oppressed people. And it is probable that many other sectors of big business didn't put up too much of a fight for the same reasons. Just look at Bush's talk about the economic slowdown and the need for his tax give-away to the rich and the corporations. Profits are falling. The ruling class is more than willing to hog the public trough when they feel the bite of economic slowdown and profit shortfalls. Vic Perlo made two reports on the economy in 1999, and they are very interesting reading in light of today's reality. Vic emphasized imperialism, globalization and the dangers of war in this new situation. He was convinced that these last couple of years of expansion were based, in part, on militarism. He cited US imperialism's role in Iraq and in the Balkans. He cited rapidly expanding military spending as a stimulus to the expansion. Bush has clearly signaled that he sees military spending as key to the economy. The ridiculous Star Wars missile defense is their number one priority. Military spending is inflationary and it is dangerous and destabilizing on the world scene. Further we must consider that a global economic downturn will further aggravate trade tensions. Already in the last two months US exports have dropped precipitously causing another big imbalance in the world economy. It is clear that inter-imperialist rivalries are not a thing of the past. Europe is moving ahead with a military force independent of NATO that in the words of a German general will serve our own "independent interests." I think the crisis calls for new urgency and action on international and peace issues. Number one on the agenda of the capitalist class in a crisis, or when they fear a crisis, is how to deal with labor. Wage cuts, union busting, and a general attack on labor rapidly become their number one priority. Today's situation bears that out. No doubt many in the Bush administration think it's payback time for labor because of the AFL-CIO's mighty efforts to defeat the right. But more importantly from their class point of view, profits are declining and they are determined to preserve them. Their attack on labor will be multi-sided. It will include the political side like the executive orders Bush made in mid February that attack and undermine labor's most basic rights to organize and to participate in the electoral process. It will also include naked force. Case in point is the situation in the airlines industry. Labor and the progressive movements need to gear up now to help defend the workers at Northwestern, Delta, United and American. Bush has taken the unprecedented step of declaring the government on the side of union busting before the bargaining is really in full swing. Using the economic situation as his shield he has already enacted emergency powers against the airline unions. What is even more important is the union response. The Machinist union basically told Bush to stuff his threats. In a letter they protested his unwarranted interference in the collective bargaining process and in so many words told him they were prepared to ignore his strike breaking tactics if it comes to that. This is a significant line in the sand drawn by labor. It illustrates one of the most important points about how this period will be different from the Reagan/Bush attacks of the 1980's. It's a whole new ball game with today's labor movement much more inclined to fightback. In this regard John Sweeney's recent speech to the National Press club was of great importance. While couched in civil and mild tones, Sweeney signaled clearly labor's determination to resist the Bush administration and to challenge their every move in defense of working families. It is also important that for the first time he mentioned the need to enforce the core labor agreements of the ILO. This opens the door to resolving differences in world labor on how to enforce labor standards. While we talk about the new fightback spirit in labor it is important also to note that there are signs of resistance down in the ranks as well as in the leadership. Just before coming to New York we heard that the steel local at Bethlehem's Burns Harbor Works is challenging the right of the company to layoff workers. It is hard to overstate the significance of such a challenge to a big corporation's inalienable right to run the show as they see fit. This is almost on the level of challenging their right to own the mill in the first place. Not quite, but it shows serious fightback potential. There is a good deal of sentiment growing for a legislative offensive around saving our manufacturing industries, steel in particular. There is exciting talk about the need to fight for an infrastructure bill to rebuild America with union labor for the needs of the people. We have to note that the sentiment for government action, which includes public ownership to stave off disaster, as the energy crisis in California has shown, is different. A recent poll in California said that 83% of the people believed that the state should build and operate power plants. Mass thought patterns are definitely shifting in a more mass struggle direction. From Seattle and the fight against globalization, to the anger over Bush's theft of the election, to anger about the economic situation, people are thinking differently. So, too, the development of broad mass coalitions and unity. In all of these struggles there is a new understanding of the need to unite all against the monopolies and big business and there is a growing understanding of the need for Black, Brown and white unity in struggle. Our Party's thinking on coalitions and unity is proving to be right in the mainstream of mass struggles. Where does all this leave us as a Party? What is to be done? We don't have all the answers, but we do have the beginnings of some. We are a little ahead of the curve on this one. Because we are tuned into the need for economic fightback in a Marxist and class struggle way we see the possibilities and the potential. We also see the critical interrelations of the political crisis of a Bush presidency with the economic crisis, including the particular features of the energy crisis to boot. This gives us awesome responsibilities to help unite and help build broad economic fightback organizations and alliances. We expect the system to hick up, throw up or worse most of the time. We know that ultimately capitalism doesn't work. We may be a little less stunned by bad economic news. In any case we need to move into action quickly and the Party is of a mind to do just that. To illustrate that point I want to tell you about my club's, our South Chicago club's, response to the genuine economic crisis in South Chicago. Angry Utility Consumers. That is the name of the protest meeting our little club called against the horrendous gas heating bills in our neighborhood. What a pleasure our last two club meetings have been. This all started at our annual Club Conference just three short weeks ago. Club members have been talking about their latest heating bills. Our members are in real trouble and some are worried about their gas being shut off in the spring. (It is illegal to shut off gas in the winter by state law.) Well, we concluded, maybe this is just the issue we should tackle to get our club in motion. We started the meeting with a survey of our members. What groups do we work with? How do we use the PWW? What issues are we working on? Etc. And low and behold we have a lot of mass and coalition ties. We discovered that if we wanted to call a meeting to protest the gas prices we could actually gather quite a coalition centered in our clubs area of responsibility. This comrade could get us the union hall for the meeting, that comrade could contact the churches and get leaflets out, this one could contact CLUW and Jobs with Justice. This one could contact folks we know from the Bush protests, etc. You can see how it went. What a meeting. Everyone, and I mean everyone, took responsibility for something in building the meeting. Everyone left with a job to do and everyone left excited. And it grew from there -- a sign of the times. Our next club meeting was just days before the event. We had distributed at least 2000 leaflets in the community. I say at least because stories began to come in. A Mexican American community center, folks we hadn't known before, took the leaflet and reprinted it themselves and handed it out to everyone who came into their food pantry. We found out a bus driver had gotten one, copied it, and was giving it to passengers. Some unions had picked it up and were passing it around. In this meeting we had a great discussion of strategy and tactics of what we wanted to see happen. It was real and live and connected to what we were doing. It was passionate and it was fun even before we saw the fruits of our work. Then came Tuesday night, just two days ago. We had asked the union for their smaller conference room because we didn't know what to expect. It's a damn good thing they have a large meeting hall -- over a hundred neighborhood folks turned out. They were Black, Brown and white. There were at least five local union presidents (Bruce did great work). There were ministers and community activists. And we were beside ourselves. What a meeting. Bobby chaired it. And it jumped off with a militant tone. Joe Davis, the African American USWA president who hosted the meeting, kicked off with fire at the companies. I won't go into all of the speakers; they were all very good. But then we opened it up to the crowd, and what a response. These folks were mad and ready for action. Bush, his oil company owning buddies, the gas company, they all caught hell from white 80 year old seniors on fixed incomes, from African American church ladies, from ministers, from landlords who didn't want to pass on the costs in rent, from union members who make good money but still are in deep with their bills and facing layoffs, from Latino activists who want to make a documentary about our struggle, and from a Mexican American lady with four grandchildren, a laid-off son and a $1200 gas bill. When Bobbie asked those who had gas bills over $400 to stand, well, over half the crowd jumped right up. We set a protest picket at a local People's Gas office for this Saturday; we set up a coordinating committee and a labor sub group, and a Friday night sign-making party at a club member's house. We took up a collection of over $200 dollars for new leaflets and picket signs for Saturday. We got folks working on the press and media. Many of the folks signed up for leaflet distributions. And club members glowed in the meeting. Joyce did the sign-up sheets; Frank, Bea, and Bill made great speeches to move things along from the floor; Loraine is organizing the picket sign party at her house with some of her block club; Al and I made sure everyone there got a copy of the PWW. It was the greatest. Afterwards, Frank walked up to Benny, a club member who got a lot of leaflets out, and said with a big grin, "See what you started." Truer words. Of course we have to work at all different levels. And I am confident that we will get his kind of response in the leadership levels of the trade unions, among progressive elected officials, in national, regional, state and local coalitions, and at this kind of grassroots club level. I think these kinds of club level initiatives are key for two important reasons. This kind of experience will help us break even more into full blown coalition and mass party building. Encouraging and developing these kind of club initiatives is key to shifting our focus to the clubs and rebuilding the Party at the grassroots, an important objective for us at this moment. I haven't had so much fun since the plant closing fight at Pullman and the "Jobs or Income Now" unemployed fights of the early 80's. The possibilities are fantastic. We can help build economic fightback coalitions and organizations like none we've seen before. I really think this is key to our Convention and key to making the kind of progress we have to have in defeating the ultra right agenda and defending working families t _______________________________________________ CrashList website: http://website.lineone.net/~resource_base