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<p class=MsoNormal><strong><b><font size=2 face=Arial><span style='font-size:
10.0pt;font-family:Arial'>Published by SocialistAlternative.org</span></font></b></strong><o:p></o:p></p>
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<p class=MsoNormal align=right style='text-align:right'><strong><b><font
size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>Read
online at: www.SocialistAlternative.org/news/article12.php?id=1179</span></font></b></strong><o:p></o:p></p>
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<p class=MsoNormal><strong><b><font size=4 face=Verdana><span style='font-size:
13.5pt;font-family:Verdana'>Recession, Recovery, Banks, and Bubbles —
Workers Face Jobless Recovery</span></font></b></strong><o:p></o:p></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'> <img width=5 height=5 id="_x0000_i1026"
src="cid:image001.gif@01CA5884.BB7BCAA0"></span></font><font size=1
color="#666666" face=Arial><span style='font-size:7.5pt;font-family:Arial;
color:#666666'>Oct 28, 2009<br>
Alan Jones</span></font> <img width=10 height=10 id="_x0000_i1027"
src="cid:image002.gif@01CA5884.BB7BCAA0"><o:p></o:p></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>The stock market reached the 10,000 mark in the middle of
October. Wall Street investment banks like Goldman Sachs were preparing to dole
out a record $140 billion in pay to their traders. If you only watch the mass
media, it’s as if the shock of the economic collapse that was triggered
by the collapse of Lehman Brothers two years ago never happened. More and more
optimistic predictions of economic recovery are everywhere. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>But
while the happy talk continues on Wall Street, for regular folks the crisis is
getting worse and worse. One commentator called it “one nation-two
economies.” Unemployment is continuing its inexorable rise to double
digits, while even mainstream economists now recognize that if the
underemployed and those no longer looking for work were included this rate
could easily reach 20% of the workforce. Business Week warned that we may see
an absolute decline in wages in 2009 for the first time in 60 years. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>CNN
reported that third quarter foreclosures reached a record 940,000 – a 23%
increase over the third quarter of 2008 - a sign that the crisis is spreading
deeper and deeper in the real economy. World trade, one of the major engines of
world economic growth over the past period, is expected to contract by almost
10% this year for the first time since the early 1980s. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>In
the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>,
consumer credit has been falling fast for seven consecutive months. Bank
lending is off 14% since October 2008 despite interest rates remaining at very
low levels. This is starting to threaten the viability of the dollar as the
world reserve currency. </span></font><o:p></o:p></p>
<p><b><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial;
font-weight:bold'>A new speculative bubble</span></font></b><font size=2
face=Arial><span style='font-size:10.0pt;font-family:Arial'> <br>
The absence of any attempt to regulate the <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> financial sector has led to a
return to high-risk speculation. Behind the “green shoots” and talk
of “economic recovery” is in fact a return to a new speculative,
and probably short-lived, bubble. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>While
massive government spending - $11 trillion of taxpayer funds to support the
financial sector - has temporarily stabilized the economy and prevented a
collapse, the Financial Times warned that, once the effects of the temporary,
cushioning effects of these tax cuts, government liquidity, and stimulus
measures begin to wane, the deep problems of bad debts and toxic assets
threaten to burst to the surface. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>Major
economists like Nouriel Roubini and Nobel Prize Laureate Joseph Stiglitz warn
that we are going into an extended period of “economic malaise” and
a “double-dip recession” or at best an anemic recovery. These far
more sober forecasts confirm the general analysis of socialists that the world
is not facing a routine cyclical recession but a deep structural crisis which
will probably extend for years. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>There
is an enormous overhang of spare capacity in industry and construction.
Combined with the massive debt levels of government, business, banking, and
household debt, this creates an extremely difficult situation for a sustained
recovery. In every major capitalist economy, it is estimated that there is now
more than 30% overcapacity in virtually all sectors of industry and
construction. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>In
its special report on the world economy in October, <i><span style='font-style:
italic'>The Economist</span></i> warned that in the “new normal,”
25 million will have lost their jobs in the advanced capitalist countries and
“several million may never regain them,” demand in rich countries
will remain weak, and emerging economies will not be able to compensate. </span></font><o:p></o:p></p>
<p><b><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial;
font-weight:bold'>Protectionist pressures</span></font></b><font size=2
face=Arial><span style='font-size:10.0pt;font-family:Arial'> <br>
Since the onset of the crisis, we have seen an unprecedented degree of global
coordination among the major economies. This reflects the enormous
interdependence of the world economy today. However, on the basis of
capitalism, each capitalist government inevitably is forced to fight for
advantages for their own companies and markets. This can be seen in the sharp
trade conflict that has erupted between <st1:country-region w:st="on">China</st1:country-region>
and the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
over tires, which threatens to escalate after Obama increased tariffs 35% for
Chinese-made tires. Similar tensions exist between the U.S./Boeing and the
European Union’s Airbus over protection of their respective aircraft
production industries. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>Tariffs
and protectionist measures can easily begin to be used by other countries
against Chinese exports, leading to further retaliations. A similar process is
reflected in the secret discussions of a number of countries on replacing the
weakened dollar as the world reserve currency. An escalation of protectionist
measures and retaliations would have a devastating effect on world trade and
living standards and could easily open the door to new, sharp national and
regional conflicts as each country tries to solve its problems at the expense of
others. </span></font><o:p></o:p></p>
<p><b><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial;
font-weight:bold'>New banking crisis</span></font></b><font size=2 face=Arial><span
style='font-size:10.0pt;font-family:Arial'> <br>
The banking sector could face another serious crisis not too far into the
future. Toxic debts, credit card defaults, and the continued crisis in real
estate will continue to be a serious problem. More foreclosures because of
increasing unemployment and falling wages could lead to new, huge losses for
the banks. Nouriel Roubini of the Financial Times, one of the few economists
who predicted the crisis, believes that up to 1,000 banks and financial
institutions could go under. It should be remembered that in the 1930s
depression, the worst year for bank failures was in 1933, four years into the
crisis. </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>A
Financial Times editorial warned that “according to IMF calculations the
savage losses incurred by the banks since the beginning of 2007 – about
$1.3 million – are only the beginning. It expects them to write down
another $1.5 trillion by the end of 2010…All this means that the
financial sector remains on extremely shaky ground.” (10/1/09) </span></font><o:p></o:p></p>
<p><font size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>If
such a crisis develops again, it will be questionable if another bailout along
the lines of the past year will be possible. A number of economists make the
point that the banks today are "too big to fail" and the government
has no choice but to rescue them. Socialists argue that, in reality, there is a
strong case for nationalization of the banks under democratic workers' control
and management - i.e., genuine nationalization, not corporate welfare or
“socialism for the rich.” </span></font><o:p></o:p></p>
<p><b><font size=2 color=red face=Arial><span style='font-size:10.0pt;
font-family:Arial;color:red;font-weight:bold'>Workers pay the price</span></font></b><font
size=2 color=red face=Arial><span style='font-size:10.0pt;font-family:Arial;
color:red'> <br>
It is not the barons of Wall Street who are expected to pay the price for this
economic catastrophe. The plans of both major parties that support and are
supported by Wall Street and big business is to make the workers and the middle
class pay for the crisis of their sick system with massive job and wage losses
and cuts in public services such as health care and education. </span></font><font
color=red><span style='color:red'><o:p></o:p></span></font></p>
<p><font size=2 color=red face=Arial><span style='font-size:10.0pt;font-family:
Arial;color:red'>In reality, a whole new period of austerity and savage attacks
on the rights and living conditions of working people has opened up. The
important gains in living standards that workers made since World War II have
come to be seen as “normal” in the advanced capitalist countries.
Socialists always warned that this was not at all “normal,” but a
historical exception under capitalism during the postwar economic upswing. </span></font><font
color=red><span style='color:red'><o:p></o:p></span></font></p>
<p><font size=2 color=red face=Arial><span style='font-size:10.0pt;font-family:
Arial;color:red'>There will not be a return to “normality.” For the
working class, this will be a jobless recovery. There will be no return to easy
credit. Stiglitz forecasts that it may not be until 2012 that unemployment
levels will begin to decline. </span></font><font color=red><span
style='color:red'><o:p></o:p></span></font></p>
<p><font size=2 color=red face=Arial><span style='font-size:10.0pt;font-family:
Arial;color:red'>The OECD predicts another 25 million workers in the advanced
capitalist countries may lose their jobs by the end of next year. The stage is
increasingly set for a savage confrontation between the classes, with fierce
attacks on living standards, cuts in services, and increased taxation against
the working class and the middle class. This will inevitably lead to increased
class struggles in the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
and on a world scale.</span></font><font color=red><span style='color:red'><o:p></o:p></span></font></p>
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