People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


Vol. XXXIII

No. 35

August 30, 2009

 

Editorial

 

GLOBAL RECESSION

 

Capitalism's Logic: Profits Before People

 

NEARLY exactly two years after a global financial collapse that hit the world with a severity not seen since the great depression of the 1920s and 1930s, two giant financial corporates  of the collapsed Wall Street emerged from the ruins.  JP Morgan Chase announced a record $ 2.7 billion profit in the second quarter of 2009.  Earlier, another giant Goldman Sachs reported record gains in the same quarter. 

 

This they have done at the expense of one of the biggest rescue operations by the State under capitalism.  They have benefited from billions of dollars of bailout packages from the ordinary tax payers funds and cheap government financing  to climb over.  19 US big banks  received  over $ 140 billion and president Obama in his budget proposals for this year  is seeking the US Congress's approval for as much as $ 750 billion to prop-up the financial system. 

 

These reported profits, however, do not suggest a turn around in the recession or tiding over the crisis.  Recovering on the basis of the cushion provided by the government, JP Morgan took over two former Wall Street giants - Bear Stearns and Washington Mutual - last year in two government assisted  transactions. On the other hand, scores of regional and small banks continue to collapse all across the USA.  53 have failed so far this year and the Federal Deposit Insurance Corporation expects many more to follow. 

 

At the other end of the spectrum, the US department of Labour's website shows an unemployment rate of 16 per cent for February 2009.  US experts  estimate a rate of 25 per cent of healthy American men  between ages 16 and 64 as not working.  Through manipulation of figures, the employment  rates are depressed.  One expert says, “These games allow the US government to report a current unemployment rate of just 8.1 per cent even though  its own data of unemployed Americans who want to work indicates an unemployment rate of around 20 per cent”.  Another report suggests that  the 16 per cent unemployment rate of the Labour  Bureau  means that over 24 million  people were unemployed for May 2009.  Official records report that the USA lost 247,000 jobs in July 2009 alone.  Interestingly, there is also a report that the productivity of the workers has shot up by more than 6 per cent in the second quarter of 2009.  This has been climbing throughout the recession.  Clearly, much of this is because of the depression of wages.  Growing unemployment and depression of real wages is the gift for the working people as compared to the gift of huge bailout packages for the corporates. 

 

On the other hand, nine of the financial firms that were among the largest recipients of the bailout packages paid more than 5,000 of their traders and bankers bonuses  of more than $ 1 million apiece  for 2008 according the New York Attorney General.  In January this year, president Obama  called financial institutions shameful for giving themselves nearly $ 20 billion in bonuses when the economy was faltering and the government was spending billions to bailout financial institutions.  Obviously, this doesn't seem to have had any impact on these financial institutions.  The bonus pools  of these nine banks that received bailout packages  this year was $ 32.6 billion while their cumulative  losses  were over $ 81 billion.  They will once again get bailout packages to `cover' these losses.

 

This is the capitalist way of emerging from recession by putting profits before people.  While common people continue to get ruined, tax payers money continues to be doled out in unprecedented amounts to bailout the corporates.  Additionally, the US government has also lowered its interest rates to near zero in order to  help the corporates with cheap credit.  This is the capitalist way of emerging from the crisis  which, in the first place, they have created at the expense of intensifying the economic exploitation of the people. 

 

Instead, if such huge amounts involved in the bailout packages were utilised  through public investments, this would have resulted in large scale  generation of employment.  This, in turn, would have contributed to enlarging the aggregate levels of domestic demand which, in turn, would have boosted sustainable growth of manufacturing.  This would have been an approach that would have put people before profits.  Similarly, instead of giving bailout packages, if these financial corporates were outrightly nationalised, then such manifestations of nauseating capitalist vices such as `bonuses to executives' could have also been prevented. 

 

However, to expect a humane solution under capitalism is not merely naïve but is unscientific.  For capitalism is a system whose raison d'etre  is the maximisation of profits.  This can only happen with greater exploitation of the working people.  Clearly, the popular struggles for bailout packages for the people rather than corporates must be mounted as an integral part of the overall struggle for the socialist alternative to capitalism.

(August 26, 2009)