Economic Highlights

New Delhi, 19 August 2011

Disbelief In US

IS CAPITALISM COLLAPSING?

By Shivaji Sarkar

Is it the beginning of the end of another super power – the United States, and its ally mini-powers – the Euro zone?

Many would call it the reflection of the worst fears or an extended imagination. The very thought sends shivers down the spine of many developing and would be developed nations such as India. It is neither easy for the supers or laggards to cope up with a changing equilibrium, both economic and political.

But Americans themselves – known for their over confidence and arrogance - are not very hopeful. The government that was the last word in the New World is seemingly losing its grip over its own populace. It is democratic disbelief that sweeps the US. This is epitomised by the McKinsey Global Institute estimates. It does not believe in what the US President Barack Obama says. It says it will take 60 months – five years – for jobs to return to pre-recession levels this time around.

The Time magazine debunking the myth of US recovery has written, “This is not your father’s recovery. It might not be recovery at all”. In short, nobody believes in the latest Fitch rating agency announcement that the US could have the highest credit rating of AAA instead of Standard & Poor’s downgraded AA plus.

Even the US Federal Reserve Chairman Ben Bernanke a month earlier had stated that the recovery was proving to be “uneven” and “frustratingly slow”. He has valid reasons. Consumer spending is touching a never-before low as per US government manufacturing surveys. Housing price, a key indicator for the US economy is at its lowest since 1930s Great Depression. Unemployment, largely an unknown phenomenon in a country, where job-hopping has been the norm, is reaching an unimaginable proportion.

It has been building into the system. Since a mammoth takes time to collapse, nobody had paid much attention to the gradual job losses during the past over ten years. It was being taken in its stride and belief that a “better” worker had more of a chance of getting a better job. The jobs were not only declining but the greed for corporate profits was switching jobs to the low-paid countries on short-term contracts. It has been a major loss of the working class across the globe.

As workers across the globe fought to snatch jobs from each other, corporate profits swelled. All governments were throwing the doors open to the corporates even calling for reforms in labour laws – an euphemism to deny them whatever rights they had got after the Chicago May Day movement.

For the sake of “investment”, governments, in the US, Euro zone and Third World, were throwing in the towel. Heightened investments are still considered as panacea for creating jobs in countries such as India, China and rest of the Third World. The “investment” phenomenon works on higher technological updates, higher profits by right or wrong (more of it) means and creating a myth of higher skill demands.

The last – higher skill – syndrome has created a psychological complex among the working class, has made education expensive, again bolstering corporate profits; and denied jobs to the “average” worker in the US and rest of the world. It has created social problems as families break down and find educating their children increasingly more difficult.

The American workers are at the receiving end since the era of globalisation began. They lost more jobs than anywhere else in the world. So the same is now happening in the Euro zone, infested with severe debt crisis in Greece, Italy, Spain, Ireland, Portugal which is now straining comparatively robust economies of Germany and France.

In the US and Euro zone, and also in countries like India, as workers are losing their jobs, corporate are becoming cash rich. In the US the corporate alone is having a $ 2 trillion reserve, but it shows no sign of wanting to spend howsoever the US government might want.

The situation is not very different in India. Corporate profits are soaring even in an economy that is sliding. More people here are also losing jobs and the corporate continues to give sermons to the Government to give it more concessions.

The US corporate is no different. Workers thrown out of jobs are looking for $2000 income a month, which is difficult to have even after selling their family possessions. As against this, the US corporate earned $ 1.68 trillion as profit!

The next and the obvious step would be the fall of the corporate. The market in the US is cracking up as the buyers aren’t there for they have to take a double bite of job loss and rising inflation. Isn’t something similar happening here as India also sees a severe dip in industrial and manufacturing production and higher food prices?

The moot question is: How long will the corporate be able to thrive now? It may turn into a cruel lesson. Its exploitative behaviour and ignoring workers could cost it heavily. The corporate owners might survive as they would siphon off funds to their own coffers. But what they are forgetting is that they are thriving on benefits unpaid to the workers. They also think that their Government would further borrow to bolster their profits even at the cost of cutting benefits to workers – pension, unemployment allowance, education student loans and health.

Shockingly, the corporate has a stranglehold over the government. It has partially succeeded as the Obama administration agreed on $ 917 billion cut over ten years. But this may be the beginning of the end of corporate dominance. It is the workers, the common man, who feed the corporate. If they are mistreated, paid poorly and capped with inflation they would not have enough to sustain the pillars of capitalism – the corporate system. The consumer would vanish and so would the corporate profits.

Another problem the US and Euro zone face is the rise of financial and banking system and the vanishing entrepreneurship – something India is still known for. Since 1980s, fewer new businesses have been created there. This has further added to the problems of the youth. Today the youth unemployment rate in the US is 24 per cent and is rising. In the Euro zone too it is becoming a severe problem.

Capitalism may really be collapsing. But the workers of the world have yet to unite – or are they already as being seen in the Arab uprising, Anna Hazare outbursts and the occasional US workers road protests. It is time governments learn. Else it might singe the world. The beginning may well be seen in the London riots. --- INFA

(Copyright, India News and Feature Alliance)