Letter from the US: Recovery for the rich, depression for the poor
Workers in the United States know they are losing ground in the current Depression, as they are watching the rich going in the opposite direction.
A decline in real wages comes on top of stagnation of wages in the three previous decades.
A new report issued by the International Monetary Fund (IMF) says: “The recent recovery in the United States appears unusual from a historical perspective … with a much stronger rebound in profits relative to labor income.
“One explanation is that workers’ fear of long-term unemployment has led to more subdued wages relative the labor productivity growth during the recent recovery.”
How can we be speaking of a “Depression” and a “recovery” happening at the same time in the US (and world) capitalist economy?
New York Times columnist Paul Krugman compares the situation with the Great Depression of the 1930s. After the initial crash, there was a period of recovery which led to another downturn around 1937. But the whole decade was marked by stagnation and high unemployment.
This is the kind of period we are in now.
The IMF report found Americans are lagging far behind their counterparts in Europe. Only workers in two advanced economies in Europe have fared worse during the recent recovery: Spain and Greece.
The IMF also says that while profits are up everywhere, total labour compensation has risen in every leading economy except four: the US, Greece, Ireland and Spain.
The change in the relative share of total income going to labour has fallen sharply in the US since the trough of the downturn. It has risen slightly in Europe as a whole.
Should workers in the US be looking to Europe for guidance? That’s not the way it looks from here, peering across the Atlantic.
What we see is a Europe in deep economic turmoil and trouble, with some countries, including Britain, already teetering on a new downturn, high unemployment, and “austerity” for workers.
We can be envious of the fact that many European workers still have a higher social wage, government benefits won in struggle in the past, than US workers have. But the austerity drive in Europe is attacking those benefits.
And, in much of Europe the electoral system, while geared to maintaining capitalist rule, is more democratic than in the US. The voice of working class resistance to the capitalist offensive can peek through, even if it is muffled.
Or not so muffled, as in the case of the anti-austerity Coalition of the Radical Left (SYRIZA) in Greece which came second in the May 6 elections and is polling way ahead for the June 17 follow-up election.
In the US, we are in the midst of an electoral farce to beat all electoral farces. The Democrats and Republicans are really two wings of a single capitalist party, whose major “difference” is over how much to cut the social wage and how fast, and how much to privatise everything from jails, education and even the postal system.
The grotesque spectacle of billions of dollars being spent on vacuous advertisements for the candidates of both parties makes the 2012 elections not only farce but buffoonery.
One thing we can identify with in Europe is mass mobilisations against the capitalist offensive. The Occupy movement is part of that.
The situation for US workers is even worse than it appears in the IMF report. The IMF includes in the workers’ share of national income wages, salaries, interest, capital gains and stock compensation and compares this to business profits.
Workers do get some interest on their savings, some stock income and capital gains, but the bulk of these incomes go to the rich. The salaries of the top officers of JPMorgan Chase are not exactly in the same category as the salaries of the bank tellers they lord over.
The IMF also doesn’t include cuts to the social wage. The attack on the social wage in the US is picking up steam.
One example is unemployment benefits. A recent article in the NYT said: “Hundreds of thousands of out-of-work Americans are receiving their final unemployment cheques sooner than they expected, even though Congress renewed extended benefits until the end of the year.
“The cheques are stopping for the people who have the most difficulty finding work: the long-term unemployed. More than five million people have been out of work for longer than half a year.
“Federal benefit extentions, which supplemented state funds for payments up to 99 weeks, were intended to tide over the unemployed until the job market improved.
“In February, when the program was set to expire, Congress renewed it, but also phased in a reduction in the number of weeks of extended aid and effectively made it more difficult for states to qualify for the maximum aid.”
As a result, hundreds of thousands of long-term unemployed won’t even get their cheques through the end of the year when the program expires.
[Barry Sheppard was a long-time leader of the US Socialist Workers Party and the Fourth International. He recounts his experience in the SWP in a two-volume book, The Party -- the Socialist Workers Party 1960-1988, available from Resistance Books.]