I thought we could look at the real stuff...
THE PEOPLE
AUGUST 1998
VOL. 108 NO.5
'COOLING' ECONOMY SPARKS
SEARCH FOR EXPLANATIONS
Recent reports on the state of the U.S. economy have been somewhat
restrained. No big headlines about a continuing "booming" economy.
Instead, rather muted presentations of the latest economic statistics as
they were released, mingled with cautious suggestions that there might
be trouble ahead. As one headline put it: "The Rosy Economy Develops a
Blemish as Factories Slow."
The lead editorial in the latest edition of BUSINESS WEEK magazine (July
20) was a bit more blunt in expressing its concern as to where the
economy appeared to be heading. "A run of recent surprises," the
editorial declared, "makes for a darkening economic outlook."
Others, including the usual collection of capitalist economists, college
professors, columnists, etc., expressed similar concerns about the
direction the economy was taking. Some of them tempered their
disquietude with the rationale that the slowdown was following a years'
long "expanding economy," so things were still pretty good. Others
blamed all the negative developments in the United States on the Asian
crisis with some of the problems aggravated by such events as the
General Motors strike.
However, what is happening to the economy in capitalist America has
happened many times before without any Asian crisis or GM strike. It is
part and parcel of the roller-coaster nature of what the defenders of
capitalism like to call the "free enterprise" system--a period of
depressed economic activity following a period of so-called prosperity.
Accordingly, there is more to the latest developments than factories
slowing. The "slowdown" has been evident in many more areas of
economic activity.
The Department of Labor in its latest report, issued prior to this writing,
set the official rate of unemployment at 4.5 percent, a 0.2 percent
increase. Shortly thereafter, the National Association of Purchasing
Management, which surveys and reports the manufacturing activity of
various companies, reported that the business of most of the companies
they surveyed had weakened rather than strengthened in June. That
was the first drop in two years.
There was also a report that the Conference Board's leading indicator
(its indicator of future economic activity) did not change from April to
May. This is taken as an indication that while the economy may still be
"on track," it will probably be "sluggish."
And a report by the Commerce Department indicated that construction
was down 1.5 percent in May--the worst drop in over four years. (The
Commerce Department had also reported a 2.6 percent drop in offers for
durable goods.) "The three indicators...released today indicate that this
economy is weakening and weakening rapidly," said Stan Shipley, chief
economist at Merrill Lynch & Co.
Inventories, though, are up--up 40 percent and valued at $100 billion--
because export possibilities suddenly dried up. In turn, stockpiles of
unsold goods has caused a slowdown in production down to its lowest
level since 1995. The ever-present but seldom identified "analysts" are
said to expect that the 5.4 percent growth claimed for the first quarter
of this year may be a mere 2 percent--or less--for the rest of the year.
That, at least, would afford manufacturers the chance to whittle down
their overloaded inventories.
Also, not only was the rate of consumer borrowing greater in April than
it had been in March, but the rate at which consumer credit increased in
April was almost three times the rate of increase in March. Moreover,
the rate of personal savings had dropped 3 percent to 3.5 percent
during the last five years. In a recent statement, the Fed cautioned
bankers not to assume "that the unusually favorable economic
environment of the last few years will continue indefinitely."
In the meantime, all the talk about a 4.5 percent unemployment rate
being so low that it allegedly creates a labor shortage is of little
consolation to the thousands of workers who are still being thrown in
large numbers on the industrial scrap heap. (Incidentally, it is said that
the Fed would NOT like to see the unemployment rate drop any lower.
Neither would the exploiting capitalist class generally. It would prefer--
and always has preferred--a substantial unemployment rate. With a
supply of labor greater than the demand it is easier to keep wages
down.) The following are examples of some recent layoff actions.
-On June 4, Motorola Inc. announced it would eliminate 15,000 jobs,
which would reduce its workforce by 10 percent.
-Four days later, Nabisco announced a reorganization plan that would
close some of its factories and lay off "more than 3,000" of its
employees.
-A new round of layoffs by the Lam Research Corp. will cut between
800 to 1,100 jobs. The company had already cut 700 jobs last February.
Most of the new cuts will take place at Lam's Fremont, Calif.,
headquarters.
-Applied Materials Inc., the largest semiconductor equipment
manufacturer, has announced a plan that will reduce its workforce by
almost 15 percent.
-It has been reported that the Compaq Computer Corp. is planning to cut
15,000 jobs after its planned merger with Digital Equipment Corp. is
completed.
-The Sunbeam Corp. has announced plans to close eight plants and cut
6,400 jobs.
-On June 10, the Ultramar Diamond Shamrock Corp. said it would cut
466 jobs and get rid of 14 percent of its stores.
-The Rockwell International Corp., changing from military business to
commercial electronics, announced 3,800 job cuts.
-Snap-On Inc., a tool and equipment company, will close five factories,
five warehouses, 40 to 45 small offices and lay off 1,000 out of its
workforce of 12,000.
-Texas Instruments has announced a restructuring program under
which it will sell its memory chip business to Micron Technology,
thereby divesting itself of over 4,000 jobs. It will then cut 3,500
additional jobs. What Micron's plans may be was not indicated.
-Novellus Systems Inc. will cut 180 jobs or 10 percent of its workforce.
-The Iomega Corp. has announced cost reduction plans that include 700
layoffs.
Taking all the above developments into account, the future does not
look promising for the American working class. Poverty, job insecurity
and all the other social miseries inherent in capitalism, bad as they are,
threaten to get worse. To improve their lot, the workers have to attain a
clear understanding of the capitalist origins of their economic and social
problems, organize economically and politically on a more militant and
classwide basis, and begin the struggle to build a socialist economy
which alone can serve their needs. This entails a socialist transformation
of society, the elimination of profit-motivated production and the
establishment of a socially owned economy in which production is
carried on for use in accordance with the decisions of democratic
workers' organizations.
--NATHAN KARP
[EMAIL PROTECTED]
