------------------------- Via Workers World News Service Reprinted from the Feb. 21, 2002 issue of Workers World newspaper -------------------------
STOCK MARKET IN DECLINE: REACTION TO ENRON? OR SOMETHING DEEPER? By Milt Neidenberg A stench of fear is wafting over the U.S. stock market. Continued volatility--up one day, down the next--suggests the market indexes will continue on a downward slippery slope. "Stocks fell last week as worries about corporate accounting collided with a marketplace already troubled by weak corporate earnings. Investors largely ignored economic reports that hinted at possible recovery," says the New York Times Data Bank Section for Feb. 10. In that week, the Dow Jones, Nasdaq and Standard & Poor's 500 indexes all declined. The article blamed it on the Enron fallout. Are more Enrons about to unravel? Are there fears that corporate earnings figures conceal very large losses? Yes, says Michael O'Haire, head of block trading for Lehman Brothers. He expressed what most Wall Street bankers and corporate heads are worried about as he reflected on the uncertainty of the market: "I thought we were coming out of the cobwebs, but every rally is met with selling. Fear and panic are in the marketplace, and people don't want to hold stocks overnight or over the weekend." (New York Times, Feb. 8) In truth, Enron is not unique. It is a reflection of the economic recession that the financial wizards began admitting to last March. No one has a crystal ball to predict when or if the current decline will become a full-blown stock market crisis. Nevertheless, the panic mode in the market is drawing the attention of Wall Street, Washington and the major media. Politicians of every stripe are commenting and calling hearings to prepare regulations and reforms, hoping to head off more Enrons. The posturing in Congress, where many have been on Enron's payroll, is a sideshow. It's a shallow effort to convince the people that the politicians are determined to wipe out corruption and greed among bankers and corporate heads who were and are still able to skim huge profits in a permissive legal and political environment. They are also making a show of rooting out practices that have allowed Arthur Andersen and other accounting corporations to cook the books to create phony profits and cover up losses. Some financial analysts who agree the economy is in a recession--like Alan Greenspan, chair of the Federal Reserve Board--say they believe it is short lived. He emphasizes economic trends such as productivity increases--which result from an intense increase in exploitation at the workplace even as millions of workers are laid off. Greenspan points to inventory reductions and a return of consumer confidence as the triggers for a fresh new wave of capital investment that will bring with it a recovery, though modest. STOCK MARKET CALLS SHOTS, NOT GREENSPAN Sam Marcy, founder of Workers World Party, wrote an article in the Nov. 12, 1987, issue of Workers World analyzing that year's stock market crash, in which the market dropped 508 points in a single day. Marcy described the process that led to the crash: "The stock market is an integrated element of the entire financial services industry," he wrote. What had been an instrument of capitalist prosperity "now will turn out to be the instrument to facilitate the wholesale expropriation of millions of workers and middle-class people through the loss of their savings, pensions and other retirement funds, insurance funds and other institutions, all of which have played the stock market. The collapse of the market brings about the period of stagnation." Marcy was restating what Frederick Engels--Karl Marx's closest collaborator--said over 100 years ago: "The stock exchange becomes the most prominent representative of capitalist production itself." Engels added prophetically that colonization by the European powers was "purely a subsidiary of the stock exchange," an unprecedented observation that has been confirmed over and over again. Today U.S. imperialism has replaced the European powers in dominating the world markets. U.S. FINANCIAL MARKETS OUT OF CONTROL The U.S. stock market exchanges over one billion shares daily. Fortunes are won and lost as corporate heads and bankers manipulate and inflate stock price per share in relation to earnings. Similarly, in a volatile currency market, almost two TRILLION dollars change hands as traders scan the global markets in search of profit. In the commodities markets, sellers who try to match up with buyers are at the mercy of overproduction of goods and services. Price fluctuations seriously disrupt the flow of global trade. All the above are driven by the profit motive and are prey to the intense competition, suspicion, fear and panic that have permeated the stock market. Retribution has begun. Corporate debt is rising at an alarming rate. Banks are forced to write off huge debts as non-performing, meaning uncollectible, thus reducing the value of the banks' assets. Following the collapse of Enron, leading financial institutions, among them J.P. Morgan Chase, have reported huge losses. Virtually the entire financial services industry, inextricably bound to the stock market, suffered losses of one kind or another. Most important to workers and their families, of course, were the losses suffered from their 401(k) pension plans. Even before the Enron debacle, a wave of bankruptcies hit the steel industry and other sectors of the capitalist economy. K-Mart, the second-largest retail department store chain, and Global Crossing Ltd., a giant fiber-optic network, have fallen into bankruptcy. This global telecommunications giant is now linked to Qwest, an interstate phone company. Both have carried out business practices that copycat Enron. Tyco International, a huge conglomerate that bought 350 companies in the last year, is being compared to Enron, with its offshore private partnerships. Articles in the Wall Street Journal, mouthpiece for the overall interests of the U.S. ruling-class elite, have charged that Tyco, which employs 230,000 workers, did not disclose to investors billions of dollars in acquisitions. In this climate of panic and fear, the thieves are falling out among themselves. A Journal article on Feb. 11 contained what was, in effect, a warning to its own class: "History confirms that a lot of stock analysts and investors have been discovering that burst bubbles and accounting controversies tend to go hand in hand and the stock market can take years to recover fully from a bubble. ... Corporate bankruptcies and unraveling frauds were among the hallmarks of the 1930s following the 1929 crash." In April 2001, one month after the announcement that the U.S. was in a recession, Stanley Fischer, former second-in- command at the International Monetary Fund and now a vice- chair at Citigroup, spoke on these staggering problems to a group of Latin American central bankers and finance ministers. Fischer warned, "There is clearly a risk that the downturn could be deeper and more prolonged and an investor panic can itself push an economy from a good to a bad equilibrium." The gray clouds hanging over the U.S. stock market are growing more ominous. The stock market is a barometer, a bellwether of difficult days ahead. A deepening of the capitalist crisis would reopen the struggle of the working class and change the character of the entire international situation. - END - (Copyright Workers World Service: Everyone is permitted to copy and distribute verbatim copies of this document, but changing it is not allowed. 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