Wall Street celebrates mounting signs of US slump
30 January 2016
On Friday, the Commerce Department released the latest in a series of economic reports pointing to a dramatic slowdown in the US economy,
with vast global implications. The response of Wall Street was a
euphoric surge on US markets, sending the Dow Jones industrial average
up by nearly 400 points and leading every major stock index around the
world to close sharply up for the day.
The Commerce Department
said US economic growth fell to a near-standstill in the last quarter of
2015, with the gross domestic product (GDP) expanding at an annualized
rate of just 0.7 percent, down from 2 percent in the third quarter. The
grim report included a dramatic fall in business investment and a marked
slowdown in consumer spending.
This followed a report Thursday
that durable goods orders, a key indicator of manufacturing output,
tumbled by 5.1 percent in December in the sharpest monthly fall since
the 2008–2009 financial crisis.
These statistics coincide with a
series of mass layoff announcements by major US corporations. They
include 16,000 layoffs at retailer Walmart, 10,000 at oilfield
contractor Schlumberger, 6,000 at chemical company DuPont, 4,000 at
education resources company Pearson LLC, 2,000 at the Norfolk Southern
rail network, 3,000 at consumer products conglomerate Johnson &
Johnson, 886 at mining company Alpha Natural Resources, 829 at mobile
phone service Sprint, and 800 at technology company VMware.
Also
this week, a number of giant US-based corporations, including United
Technologies, Boeing, Apple and Caterpillar, reported poor figures for
the end of 2015 and even worse estimates for 2016. Apple is anticipating
its first annual revenue decline since 2003. Caterpillar, saying its
revenues fell 20 percent last year and this year’s revenues could hit
the lowest level in six years, announced Friday that it would eliminate
670 US jobs and close five plants in the Midwest.
How is the giddy upturn in stock prices in the face of signs of an economy sliding into recession to be explained?
For
the broad mass of the population, economic stagnation and slowdown mean
a further descent into economic distress, unemployment and outright
poverty. The recent developments explode the claims of economic
“recovery” and confirm that the destruction of decent-paying jobs,
pensions and social services that followed the Wall Street crash of 2008
is not a temporary condition, but only the beginning of a permanent and
escalating attack on working class living standards.
For the
financial aristocracy, on the other hand, the signs of slump are welcome
indicators that the Federal Reserve will continue to pump trillions of
dollars into the financial markets, delaying further interest rate
increases and perhaps rolling back the initial increase it imposed in
December. Bankers and hedge fund speculators were rubbing their hands on
Friday in anticipation of still more cheap credit to underwrite their
parasitic financial operations.
The euphoria on Wall Street was a
demonstration of the essential character of what the government and
media call economic “recovery.” Just over two weeks ago, President Obama
in his State of the Union address praised the economic “surge” that had
made the US economy “the strongest, most durable… in the world,” and
said claims “America’s economy is in decline” were a “fiction.”
There
has been no genuine recovery in the real economy. Instead, a massive
diversion of public resources has been carried out to rescue and further
enrich the financial oligarchy at the expense of the productive forces
and the working class. The focus of domestic policy has been to
subsidize the utterly parasitic and quasi-criminal speculative
activities of the banks and financial institutions, starving the real
economy of productive investment, in order to engineer a further
concentration of income and wealth among the top 1 percent and 0.1
percent of the population.
Now, with the slowdown in China, the
crisis of the “emerging market” economies, the collapse of industrial
commodity prices, and signs that the mountain of debt is unraveling, the
financial elite is demanding even more free cash to prop up its Ponzi
scheme operations.
At the same time, it is demanding the
squandering of even greater sums to finance its wars for geo-political
dominance and economic plunder in the Middle East and its preparations
for war against its nuclear-armed rivals Russia and China.
The
mounting economic crisis, for which the ruling class has no rational or
progressive solution, intersects with and exacerbates geo-political
tensions around the world and social tensions at home. The
corporate-financial elite, fearing the spread of social opposition,
prepares all the more feverishly the means for violent state repression
against the working class.
The deepening economic crisis is
playing out against the backdrop of an election that has already
revealed deep-seated popular alienation from and disgust with the entire
political system and both big business parties, and a profound crisis
that threatens to tear apart the two-party system through which the
American ruling class has exercised political domination for a
century-and-a-half.
There is a growth of working class militancy,
reflected in the opposition of auto workers to the sellout contracts
imposed by the United Auto Workers last year and protests by workers in
Flint against the poisoning of the city’s water supply and by teachers
and students in Detroit against intolerable conditions in the schools.
At the same time, the broad support for the candidacy of Bernie Sanders,
who calls himself a socialist and denounces inequality and Wall Street,
even as he seeks to channel popular opposition behind the Democratic
Party, reflects a political radicalization and growth of anti-capitalist
sentiment among working people and youth.
There is growing fear
within the ruling class of impending social upheavals, reflected in a
wave of articles and studies on social inequality and worried
commentaries on the implications of the support for Sanders. On Friday,
the Wall Street Journal published a column by Peggy Noonan, a
former speech writer for Ronald Reagan, under the headline “Socialism
Gets a Second Life.” She writes, “The rise of Bernie Sanders means that
accommodation is ending, and something new will take its place,” and
adds, “Do you know what’s old if you’re 25? The free-market capitalist
system that drove us into a ditch.”
The coming struggles of the
working class must be guided by the understanding that its interests are
incompatible with those of the financial oligarchy that dominates the
economy and political system. The euphoric response of Wall Street to
economic news that spells growing distress and suffering for countless
millions is a demonstration of an irreconcilable conflict of social and
class interests.
The fight to secure basic social rights—to
decent-paying jobs, education, health care, housing, pensions—and halt
the drive toward a new and catastrophic world war is a fight to break
the power of the ruling financial oligarchy and end its private
ownership of the banks and corporations. It is a fight against the
capitalist system itself.
Andre Damon
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