Economic landscape By David Eisenhower Political economy isn't an exact science. The onset and depth of a crisis of capital can't be predicted with eclipse-like accuracy. This is not to say that crises are "bolt out of the blue" events. There are definite warning signs. Bourgeois economists are quite attentive to these in their capacity as watchmen of capital. Indeed, most devote so much energy to the conditions of capital that they routinely ignore the everyday crises of working families, a convenient oversight given that their economic prescriptions invariably do harm to the conditions of the working class. Currently, the economic profession is looking with growing alarm at its indicators. What do they see? A drop in Gross Domestic Product growth. Rising unemployment. Weakening capital spending. The dissipation of the "wealth effect" following the plunge in the stock market. The end of hyper-growth in the Internet sector. A hike in interest rates. Slowing corporate profits. A steep rise in bad loans and the probability of more defaults, with the debt-to-equity ratio at 83 percent and rising. Mounting concerns over consumer and credit card debt. A looming glut in commercial real estate properties. A spike in oil prices. As Wall Street economists like Henry Kaufman scan the horizon, they can't see any "economic drivers" in sight. All they see are mounting inventories, heavy debt burdens, sluggish growth throughout the world, budget surpluses and rapidly tightening lending standards. It is difficult to imagine that the outcome of recent economic policy can continue to be achieved. The rate of corporate and household debt expansion is unsustainable. Household debt (excluding margin debt) reached 100 percent of disposable income in the first quarter of 2000, while corporate debt payments topped $185 billion in the third quarter of 2000 (Wynne Godley, Drowning in Debt, Levy Institute). The U.S. currently attracts 85 percent of the cross-border net flow of funds, which has painlessly covered America's balance of payments deficits. According to MIT economist Lester Thurow, this can't last. He anticipates that as the U.S. economy slows down, the flow of funds will be redirected, triggering a "run on the dollar," which only a "big increase in interest rates" could remedy. This path, Thurow writes, "leads to recession." (Boston Globe, 11/28/00) The U.S. working class has not benefited from the dot.com stock boom and "globalization." Sweatshop imports, a flood of economic refugees, fiscal and monetary policies to keep the lid on wages, union-busting and wholesale violations of international agreements guaranteeing the right of workers to unionize have combined to force workers to augment their stagnant wages through debt. (See Kate Bronfrenbrenner's study, "Uneasy Terrain," for a detailed analysis of U.S. violations of labor rights.) The Levy Institute Forecasting Center recently issued the following press release: "The economy is most likely headed toward a combination of severe recession, financial crisis, and international economic trauma. 'The cyclical weakness already apparent in the United States, spreading debt problems, reversing wealth effects, and the slow down in the international economy are mutually reinforcing and widely underestimated. Observers will continue to be surprised by the magnitude of unfolding troubles.'" With "troubles" on so many fronts one thing is guaranteed: the political/intellectual defenders of capital will do all they can to force the working class to absorb the costs of crisis and "recovery." Having not benefited from the "boom," workers are going to be handed the bill for the bust. A Bush administration, for example, would propose Reagan-like tax cuts for the wealthy and substantial increases in military spending, disguised as an anti-recession program. The socioeconomic consequences of eating up the current budget surplus and cutting existing social programs cannot be fully anticipated, beyond their negative effects for most workers. In addition, a lot depends on whether the developing view of the U.S. as a "rogue nation" is consolidated in a larger process of geopolitical realignment. There is no question, however, that confidence in U.S. leadership (and the "tribute" that flows from it) is in question. Differences over the U.S. missile defense scheme, U.S. electronic spying on allies, U.S. resistance to reducing greenhouse gas emissions, U.S. rejection of the jurisdiction of the International Criminal Court, U.S. violation of international agreements guaranteeing the right of workers to organize, U.S. human rights violations and blatantly corrupt electoral practices are, at the minimum, straining relations. If, as a consequence, the flow of funds were to be diverted away from the United States, then the crisis of capital would become even more acute.
