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Marx's prophesy haunts world capitalist economy
BY JEFF MACKLER
"Improvement in Bottom Lines Is Raising All Economic Hopes," reads an
optimistic Oct. 21 New York Times front-page headline. The exuberant
writer,
Jonathan Fuerbringer, reporting on a portion of the just-released
third-quarter "bottom line" earnings figures, proclaims, "After a long
nightmare on Wall Street, the latest profit figures from corporate
America
have been the stuff of investors’ dreams."
But Fuerbringer's nightmare-turned-sweet-dream scenario failed to
materialize as the pumped-up stock market plummeted almost 250 points
in the
next three days, after big picture earnings reports pointed to profit
stagnation and decline.
As it turns out, several corporations—including former fiber optic
cable
giant Lucent Technologies, which hasn't reported a profit in years—had
manipulated their accounting practices to again hype their "bottom
line."
Lucent decided to change its accounting procedures from last year's
"pro-forma basis" to its current "generally accepted" procedure. The
result
was that Lucent's hyped figures last year, when it falsely reported
losses
of only $2 billion as opposed to its actual loss of $3 billion, made
its
third quarter loss of $150 million look better by comparison.
Lucent's "bottom line" was "improved" on paper by a statistical
manipulation
as opposed to by actual earnings. The Lucent manipulation alone
accounts for
a significant part of the so-called dream-like 21 percent earnings
improvement. Any analysis of the data must therefore begin by knocking
off 4
percent from these already inflated figures. But there's more.
Another chunk of the "improvement," according to The Times and all
other
sources, is directly attributable to massive government giveaways to
corporations in the form of tax cuts, like the near trillion-dollar
boost
orchestrated by the Bush administration. Free money from its government
servants never fails to boost corporate bottom lines.
Finally, says The Times, a full two-thirds of the "improvement" comes
from
the financial services and energy industries, where low interest rate
refinancing temporarily boosted earnings, as did increased fuel costs
imposed by the corporate energy gougers through a complex series of
manipulations of U.S. and world market prices.
Real bottom line? Overall profits continue to stagnate and decline as
massive worldwide competition, saturated world markets, and historic
overproduction make it increasingly difficult for the boss class to
keep its
factory doors open and make a buck at the same time.
Smoke and mirror statistical maneuvering has failed to hide the
reality.
Lucent's fiber optic cable competitor, JDS Uniphase, for example,
reported
$40 billion in third-quarter losses three years ago, the largest single
quarterly loss in world history, at least to that point.
The broad crash since then has demonstrated that Lucent and JDSU were
not
alone in registering historic lows. JDSU's stock declined from $153.42
per
share to its current price of $3.79. Lucent fell from $64.47 to $2.82
during
the same period.
But when Lucent lost only $150 million in the past three months (since
it
didn't have much more to lose) as compared to $2-3 billion the same
time
last year, it was able to register an "impressive" improvement! One
more
such "improvement" may well put Lucent out of business completely. For
now
its great progress in losing only $150 million this past quarter serves
to
tweak the already fudged quarterly "earnings" figures.
“A glut of factories”
"U.S. Overcapacity Stalls New Jobs" is another recent front-page Times
headline that reveals capitalism's deepening crisis. "On average," the
Oct.
19 story reports, "[U.S.] manufacturers are using less than 73 percent
of
their capacity."
"Struggling to get rid of this costly glut," the article continues,
"many
companies shut plants and lay off workers, as the Goodyear Tire and
Rubber
Company is doing in Huntsville, Ala., where it is closing a tire plant
that
employs 1100 people. Other companies have consolidated operations in
one or
two sites instead of a dozen as Proctor and Gamble has done in the
production of detergents, eliminating workers in the process."
Overall, the U.S. economy has lost 2.8 million jobs (the official
figure) in
the past two and a half years, with more to come. Some analysts put the
figure at three million.
The "glut of factories" has made industry "loath to hire," the article
continues. Proctor aimed to solve its problems, a decline in sales from
$50
billion to this year's figure of $43.4 billion, by a combination of
plant
closures, consolidations, and contracting out a portion of its unused
space
to non-union outfits that are not in competition with Proctor. The
result
has been a continued loss of jobs and reduced wages. The pattern is
repeated
throughout the economy.
Levi Strauss Company, formerly the world's top blue jeans manufacturer,
just
announced that its last U.S. plant, in Texas, will be closed. Over the
years
Strauss, to remain competitive, has outsourced its production to some
50
low-wage nations. With 200 competitors now challenging its "market
share,"
Strauss's self-proclaimed “progressive” officials claim that they have
no
option. Its final unionized plant will be closed, with the remaining
1000
workers losing everything, including their decades of seniority and
health-care plans.
The major U.S. auto manufacturers, some of the most powerful in the
world,
similarly find themselves hard pressed to compete in a world glutted
with
modern plants that become obsolete almost before completion. The Big
Three
automakers project selling 17 million cars and trucks this year. They
also
expect to register zero rates of profit—and often losses.
Ford's third-quarter loses were $25 million. They would have been
greater
had it not been for an admittedly temporary gain registered in its
credit
unit. The most significant of losses came in the U.S. market itself,
where
both foreign and U.S. competitors offered large rebates and zero
financing,
reducing profits to negative figures.
"Cost cutting," Ford's euphemism for layoffs, plant consolidations, and
wage
and fringe benefit reductions, according to Ford's chairman, William
Clay
Ford Jr., continue to show "significant progress."
Heightened competition for retail giants
The supermarket industry is owned by some of the world's richest
corporations, which have for decades dominated the relatively weak, if
not
corrupt, unions that have organized the basic workforce. Today,
however,
these once mighty enterprises are being challenged by even greater
giants,
like Wal-Mart, whose 1397 national supercenters account for 19 percent
of
the nation's grocery sales. By 2008 the addition of 1000 new Wal-Mart
stores
is expected to boost the figure to 35 percent.
Wal-Mart is the world’s largest retailer. Its 1.4 million low-paid
no-union
workers and its $245 billion in revenues account for close to three
percent
of the nation's gross domestic product.
In Southern California, some 70,000 supermarket workers have been on
strike
since Oct. 12, as several of the state's top multi-billion-dollar
grocery
chains—Ralph’s, Von’s, and Albertson’s (all owned by
larger conglomerates)—seek to extract additional profits from their
workers
in anticipation of losing some $3.2 billion in sales when Wal-Mart
begins
opening the first of some 40 planned "supercenters" in California.
Wal-Mart
touts a study indicating that its prices will undercut the grocery
industry
by an estimated 13 percent.
The three grocery chains provoked the strike by insisting on a two-year
wage
freeze, a lower wage scale for new hires and increased worker
contributions
for health coverage.
Wal-Mart, as with virtually all low-wage, high-tech outfits, has
already
driven several major national grocery chains to bankruptcy. It's
non-union
workforce averages $8.50 an hour, as compared to the unionized grocery
industry wage/fringe benefit package of $17.
Corporations face falling profit rates
The Wal-Mart phenomenon is repeated in every major industry in the U.S.
and
worldwide. Even the largest corporations are not safe from the iron law
of
capitalist rule-or-ruin competition. As the new behemoths and their
predecessors battle to the end in search of life-sustaining profit,
they
leave in their wake a broad swath of devastation, at the expense of
everything human—as well as the environment itself.
There are no exceptions to this brutal rule, as even the largest
competitors find themselves engaged in international battles where the
financial, if not military, resources of governments are put at their
disposal.
General Electric, among the world's largest corporations, announced a
third-quarter earnings decline of 11 percent in the face of frantic
competition that has reduced profit rates to zero levels in some
components
of the G.E. operation. Where G.E. receives fantastic billions for
government
military contracts for which competition is minimal, profit levels are
somewhat higher.
But G.E. suffers from the same contradictions inherent in the world
capitalist system as a whole—constant pressure on profit rates arising
from
the never-ending need to introduce the next level of technology into
the
productive process.
The very mechanism that enables one monster industrial corporation to
temporarily outdistance another—the substitution of machines for human
labor
power—in the end reduces average profit rates for all industries. This
was
explained by Marx long ago when he revealed in his labor theory of
value
that the source of profit itself is the exploitation of human labor
power.
Simply put, no capitalist hires workers unless they can profit from the
transaction.
In modern capitalist production the drive to stay ahead of one's
competitors
forces all who want to remain in the game to introduce ever more
revolutionary techniques into the productive process. But as
sophisticated
machines replace workers, the very source of a capitalist's profit
declines.
This tendency, now an obvious reality, of the average rate of profit to
decline is at the heart of the present worldwide crisis.
G.E.'s announcement of massive losses is a case in point. It came at
the
same time that it revealed its list of new acquisitions. The latter are
designed to make G.E., according to its spokespersons, "less dependent
on
old-line businesses [where profit rates are close to zero] and far more
tied
to fast growing ones like health care and communications."
"Some potentially bad news for smaller competitors," was the
subheadline on
an Oct. 11 New York Times article announcing G.E.'s $9.5 billion
acquisition
of Amerisham, a British medical corporation. G.E. plans to combine its
state-of-the-art medical-imaging devices with Amerisham's
pharmaceutical
agents that are injected into the body to improve the quality of the
pictures taken.
The end result will be a new industry with fewer competitors and higher
profits—that is, until another behemoth enters the fray. In short
order,
this "new" industry will experience the same competition-driven
pressure on
profits.
To stay in the race, all will be compelled to introduce the next level
of
new and superior technology as they participate in the cyclical dance
to
their own downfall. In the meantime, G.E.’s obsolete plants, where
profits
cannot be made, will be closed to the detriment of its workers.
Obsolescence is the fate staring at another major corporate leader, Sun
Microsystems, which reported its 10th consecutive quarterly loss. "We
face
an economic environment that has not improved and a difficult
competitive
landscape," said Steve McGowan, Sun's chief financial officer.
Sun drew criticism from industry analysts because "its current strategy
and
reluctance to drastically reduce its work force even more appears to be
failing" [emphasis added]. Last month, Sun fired 1000 workers. In 2002
it
fired 11 percent of its workforce. The problems facing this Santa
Clara,
Calif.-based company differ little from every major corporation in the
U.S.
and worldwide.
Carrier Corporation closed down its Syracuse, N.Y., plant and laid off
its
1200 workers. "Simple business realities," said its company spokesman,
forced the decision. Carrier manufactures refrigeration units for
shipping
containers, but 80 percent of these containers are now manufactured in
Asia.
Carrier plans to locate its plant in Singapore rather than pay the cost
of
shipping its product 6000 miles away.
Syracuse has similarly lost 10,000 jobs, or 20 percent of its factory
workers, over the past three years. Ruthless U.S. and international
competition have produced similar results everywhere.
Marx on capitalism’s contradictions
Karl Marx, the founder of scientific socialism, was the first to
systematically expose the inner workings of the capitalist system. He
explained that capitalism's very strength, its capacity to constantly
revolutionize the productive process, was also its fundamental
weakness. The
very technology that gives human society the potential to produce the
basic
necessities of life for all, at a higher level than has ever existed,
in the
hands of the capitalist class leads to the ruin of the vast majority.
The private ownership of the means of production—that is, the basic
industrial infrastructure of society—breeds a competition that
inevitably
results in misery for billions, depression, and war.
Competition compels every capitalist to use every means to survive,
from
fundamental attacks on wages and working conditions, to speed-up and
plant-closures or relocations, to "legally" looting government
treasuries
through tax policies that boost profit rates.
Technological advances, in the context of a collectively owned and
democratically organized society—that is, socialism—means the
efficient,
safe, clean, and environmentally sound use of science for the benefit
of
all. It means a reduced work day for everyone and a simultaneous rise
in the
standard of living. It means a society of abundance and the
prioritization
of human needs at every level from free quality education and health
care
for all to an advance in culture never before seen in history.
The introduction of technology in the framework of capitalist
production,
Marx explained, means ruin for the vast majority, including mass
unemployment, poverty, environmental destruction, and war. Competition
drives the flailing capitalists to every corner of the globe in search
of
cheap labor and raw materials. U.S. plants move from the unionized
North to
the low-wage South, to Mexico, to Guatemala, and then to China—where
workers
can be had for six cents an hour.
The process is repeated until all the world's markets are saturated
with
plants whose products can't be sold at a profit and are closed down.
Each
capitalist country places the wealth and resources of its state at the
disposal of its own ruling class. European nations are compelled to
unite
against the top dog United States—just as smaller corporations are
compelled
to unite against larger corporate entities.
The last time such a phenomenon came to its climax, the solution was
world
war, as the major competitors fought to redivide the planet to insure
their
own interests and survival. At the end of the conflagration in 1945, 44
million lay dead and whole cities were incinerated.
On the ashes of this imperialist barbarism the U.S. emerged victorious
with
its major "enemies" and "allies" destroyed, temporarily driven out of
the
deadly race for profits.
The world has now been rebuilt with even more advanced technology
producing
commodities that can easily meet all human needs and provide for a
stellar
standard of living never achieved before. Instead, the imperialist
nations
are once again preparing for war to protect the interests of their
respective ruling classes and their system of exploitation and minority
rule. Three such wars in almost as many years have already recorded the
system's death agony.
But Marx's prediction has once again come to the fore. "Capitalism
produces
its own gravediggers," he said, with confidence and certainty. And
indeed
this has been the case.
Working people across the globe have come to understand that they have
nothing in common with those whose very being depends on their
exploitation
and oppression. Whole continents, like Latin America, have come alive
with
massive mobilizations aimed at driving the exploiting few from power
and
establishing egalitarian societies. The fightback has begun.
The very working classes created by the capitalist system are beginning
to
challenge the status quo once again, as they search for solutions that
can
only be found outside the bounds of the system itself. The building of
a
mass socialist movement, deeply integrated into the struggles of the
working
masses and all their allies among the oppressed, is the precondition to
capitalism's abolition. Socialism or barbarism are the alternatives
facing
humanity today.
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