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Maoist Internationalist Movement

U.$. economic downturn looks ominous

On December 19th, the Wall Street Journal reported that the IMF (International Monetary Fund) has predicted the slowest global economic growth of the past 10 years.(1) As of December 27th, CNN was reporting that many on Wall Street believe economists who say the U.$. economy has reached bottom in 2001 and will return to growth in 2002. In fact, it remains to be seen whether the U.$. economy will bounce back or come to look like the Japanese economy, which is now enduring its fourth recession in 10 years. A recession is a period of time when the economy actually shrinks for at least 6 months. The U.$. economy is in a recession now as is the world's second largest economy, Japan's.

By some measures, the U.$. economy is beginning to resemble the Japanese economy. The two most striking resemblances are in deflation and interest rates. The U.$. "Federal Reserve" bank lowered interest rates on December 11th to 1.25% for loans to banks at the "discount rate."

For the first time in many years, it appears that there might be some dissension within the Federal Reserve. Some Federal Reserve officials actually believe that the low interest rates seen now will ignite inflation by speeding up economic activity. At length they are debating whether white-collar workers are becoming more productive thanks to computers. Those who think computers cannot really bring about a "new economy" believe interest rates should be higher to prevent inflation. (2) Should these economists within the Federal Reserve Bank prevail it is possible they will cause the central bank to raise interest rates and choke the economy in the interest of fighting inflation. Of course the true meaning of such a move is to benefit the "coupon-clippers," meaning people who live off of interest income. People who make their living off of savings account interest or interest on certificates of deposit are the typical parasite of late-stage capitalism.

The man on the street may wonder about these dissenters in the Federal Reserve Bank, since unemployment is going up and the retailer with the strongest sales growth is Walmart, which is known for value. Others may notice very low retail outlet prices in the post- Christmas environment and wonder what planet these Federal Reserve economists are from. In Japan, prices are actually going down and have been going down for 27 straight months now.

The recession there is the typical sort seen in the Great Depression of 1929. In such a business cycle, prices go down and business activity also slows down. Industrial output in Japan is actually at the lowest level of 14 years.(3)

As of November, 2001, a difficult situation to predict arose in the United $tates, with regard to prices. On the one hand, prices measured by the "consumer price index" actually fell in November. On the other hand, inflation (measured by the CPI-U) for the November 2000 to November 2001 year totaled 1.9%. That means that using the previous year as an indicator, the Federal Reserve Bank is giving away money to banks by loaning it to them at 1.25%. A number of other important interest rates amongst banks also hover under 1.9%.

Whether the situation is deflation or inflation, it is clear that the parasites living off interest-income have disproportionate influence on the economy, because there is nothing close to any serious inflation and yet some still find time to concern themselves about it and oppose Federal Reserve chair Alan Greenspan for his views favoring lower interest rates.

When the Federal Reserve Bank gives away money to banks through interest rates lower than the rate of inflation, the meaning is that taxpayers subsidize corporations. Such a situation has existed in Japan for a long time and for brief moments in U.$. history. If instead of inflation the united $tates experiences deflation like Japan's, the options open to the ruling class bankers will be fewer than normal. At 1.25%, the "discount rate" cannot go much lower. What the Federal Reserve banks call monetary policy may not have many tricks left if deflation and recession continue to deepen. In such a situation, we may see the ruling class turn to new ideas to save itself. Already it is carrying out the tried-and- true strategy of a big war to get out of an economic downturn.

Marxism predicts that capitalism suffers from a downward business cycle, thanks to overproduction including an overproduction of capital. In Japan, overproduction has reached the point where no business makes profit sufficient to spur growth despite low interest rates. Scientific socialism seeks instead to implement a system of planned economic growth. There is no reason for recession when there are unemployed people seeking work and unfilled economic needs to meet. It is not rational for the world's proletariat to have both unemployment and unmet needs. A system that does not put people to work internationally -- when there is plenty of work to be done just feeding people and keeping them healthy -- needs replacement.

The longer the recession goes on, the more we will hear from the spokespeople for the labor aristocracy on how "workers" should support Marxism and take up struggle to raise their living standards. We will hear from these phony Marxists about these "re-proletarianized" "workers" that they have been crying wolf over for decades. Many phony Marxists will rush into the imperialist "labor" unions that support the war in Afghanistan. In contrast, we believe that there are other social movements worthy of support. People who believe that the current recession will once again result in a rise in real proletarian class struggle in the united $tates are probably mistaken. Japan has suffered recession four times in 10 years and a big revolutionary "workers" movement there is not to be found. It is not a sharp decrease in labor aristocracy economic conditions that we see: Instead the imperialist economies muddle through while the brunt of all capitalist economic crisis falls on the Third World.

Notes: 1. Wall Street Journal 19December2001. 2. \"Did Greenspan Push His Optimism about the New Economy Too Far?\" Wall Street Journal 28Dec2001. 3. Wall Street Journal 28Dec2001.