COVID-19 Triggers Long Anticipated Economic Crash

By Nicholas Wurst (TCU/IAM Local 1089, personal capacity)

For millions of us workers, April 1st 2020 meant filing for unemployment, losing our health insurance, and having rent due—all while companies everywhere laid off workers. For millions more, we have to work, without proper protection and safety precautions, in order to continue to produce and distribute products and services that, very soon, many won’t be able to afford.

As the capitalist economy hurls deeper into recession, the federal government and central banks are producing trillions of dollars that they conveniently couldn’t find for increasing the federal minimum wage or other needed social benefits. The trillions of dollars being released during the COVID-19 crisis are mostly being dumped into the pockets of the rich and corporations in a failed effort to prop up the stock market. For those of us who actually keep the economy going, and who produce and purchase over 70% of goods and services, we got an insulting $1,200 more than a month after this crisis began! The mass of exemptions and fine print excluded many of us while over 43,000 millionaires will get a “stimulus” averaging $1.6 million each!

COVID-19 Exposes Capitalism’s Economic Weakness

Weaknesses in the U.S. economy predate the pandemic and range from specific issues in the US to fundamental problems of the capitalist system which can’t be resolved.

Since the energy crisis of the 1970s, both main capitalist political parties, the Democrats and Republicans, have carried out a neoliberal assault on the standards of living of the majority of Americans in an attempt to massively increase corporate profit rates at the expense of workers’ living standards and the environment. These attacks have come, partially, in the form of deregulation of major sectors of the economy, attacking unions and allowing companies to keep wages and benefits low to increase their profit margins. Deregulation of the financial sector and massive tax cuts for the millionaires and billionaires have led to huge amounts of wealth hoarded in bank accounts: money that will never be reinvested or used to fund social programs. Free trade agreements have allowed corporations to suppress wages by threatening to ship jobs overseas if American workers don’t accept low wages. Even low and stagnating wages are not enough for many U.S. corporations who outsource manufacturing and services in a constant hunt around the globe for cheaper labor. The social programs won by labor struggles in the 20th century—though meager at best—have faced massive budget cuts and some have even been auctioned off to private companies who profit from those who need social programs. Pensions and other forms of compensation for retirees have been demolished. All of this has resulted in a GDP increase of 79% since 1980, yet the bottom 20% has only seen their income rise by 20%. The top 1% have seen their incomes explode by 420%. Since January 2011, a family in the bottom 90% has effectively given each member of the top 1% over $100,000!

The Republican and Democratic Parties, and the corporate forces they represent, have worked tirelessly against demands for some kind of uniform national healthcare program for decades, and have cut hospital systems around the country. They have resisted raising the minimum wage despite the massive growth of productivity and corporate profits. They have refused to expand affordable public housing or even use rent control measures. All of these policies, and more, have resulted in multiple generations of American workers who lack economic security including lack of access to basic healthcare. Before the Coronavirus hit, the majority of Americans did not have enough in savings to cover a $400 emergency expense, such as a medical procedure, car repair, home repair, etc. Now neoliberalism is coming home to roost as the capitalist class faces a deep recession, relying on a workforce and consumer base with tens of millions reduced to living paycheck to paycheck.

What is the nature of this new recession?

Over recent years, several weaknesses have pointed towards a coming recession, including massive amounts of corporate debt, consumer debt, trade wars, and the lack of a real recovery from the “great recession” of 2007-2008. This lack of recovery can be seen in the reduced purchasing power of the working class due to slow wage growth and ongoing inflation, especially in healthcare, housing, and education. The millions of jobs gained since the recession have been predominantly low-wage and part time, and growth in available jobs has now been wiped out through mass layoffs. The trigger for this recession lies in entire sections of the workforce losing their jobs or being unable to work because of business closures due directly to public health and safety or lack of demand from quarantine regulations. Corporations are also using the COVID-19 crisis to make cut-backs in staffing levels in anticipation of re-opening with fewer workers. The scale of this economic disruption, with some estimates predicting 49 million workers becoming unemployed, points towards a deeper and longer recession than the 2007/2008 crisis: one that will have far-reaching effects around the world.

Marxists have long argued that the labor performed by the working class creates all value, and this current crisis only reinforces that idea. Even the corporate media salutes “essential workers,” including warehouse, delivery, and supermarket workers who were normally derided in the corporate media for their supposed “lack of skills.” Widespread layoffs and unemployment are contributing to both a crisis of supply as well as demand. For example, on Monday oil prices fell below $0, as overproduction of oil has now become more extreme because the demand for gas and other oil products has dropped through the floor. Needless to say this will have an impact across the globe. The collapse in the stock market is ultimately traceable to the fact that whole sections of the economy are producing less than they were, if they are still producing at all. Corporate boards and management teams count for nothing if workers are not at work. With so many of those not working also not receiving paychecks, what is being produced cannot be purchased on the same scale as before.

This is an excellent illustration of one of the fundamental problems with capitalism. The entire value of the economy rests on workers producing goods and services, as demonstrated by the current situation. However, after goods are sold, the revenue is unevenly divided between the workers (as wages) and the bosses (as corporate salaries, bonuses, stock dividends, and other forms of profit). As wages increase, profit decreases, and as wages fall or stagnate, profit increases. As a class, workers will never be able to buy back the goods we produce because most of the value we create is siphoned off into profits. This means that consumption will always lag behind production, resulting in overproduction or overcapacity and unsold products, unused services. Ultimately, profit is a black hole that sucks value, including buying power, away from the working class. This arrangement leads to a trend of an ever more impoverished working class, less and less able to purchase the full amount or values of goods and services that workers produce as a class. At the same time, the capitalist class seeks to maintain its profits by encouraging consumption, all while hoarding the wealth that working class labor creates. Even though workers are trying to survive on unemployment and the government is only giving (some of) us $1,200, we are still expected to consume as we were consuming before. Basing an economy on consumption and profit leads to cyclical crashes and booms. These crashes, like the one we’re in, could be avoided entirely if we had a socialist economic system.

The pitiful relief checks are only a tiny fraction of the wages lost by workers out of work, and the supply chain is relying on fewer workers to provide products and services for all. As a result, Trump and the rest of the government, who once decried government social spending as “handouts,” and “free stuff,” have begun to cough up measly sums to try and keep enough of the working class afloat during the crisis. Various levels of government have acted to suspend evictions and have forced some hotels , vacant housing, and other private property to be used as medical facilities and housing for some of the homeless. The government has even resurrected wartime legislation that gives them more power to direct and coordinate the activity of sections of the economy, especially in regards to manufacturing personal protective equipment. Being forced to take baby steps towards some centrally planned production and distribution is hardly ideal for the capitalist political parties given that they have spent the last 10 years arguing against the growing popularity of “socialism.”

We should be clear that these measures are not enough, nor are they socialism. The capitalist parties and capitalist class want to minimize intrusions into the free-market system, and we can be sure that they will reverse these measures and make us pay the bill as soon as they can. They worry that if they go too far, they will reveal that there has always been the wealth necessary to solve poverty, homelessness, the environmental crisis, to provide healthcare, food, and a living wage to all, and that the cooperation, rather than competition, of the technical experts of our society can solve even massive pandemics.

The two capitalist parties and capitalism in general are in danger of having to face a long recession or depression from a position of economic and political weakness. Even before this crisis, the 2007/2008 recession and the “recovery” that left workers behind, the pro-big business Obama administration, the circus of the 2016 elections, and now the Trump administration and the 2020 elections have revealed how the system operates. Both parties were increasingly unpopular, and the popularity of socialist ideas was growing. This new recession, triggered by the COVID-19 crisis, makes it even more clear that capitalism will never be able to provide good standards of living during normal times, and will continue to result in crashes and inadequate preparation and responses to natural disasters and other challenges. Around the country, Trump and other capitalist forces are pushing for a return to work on May 1st, willing to sacrifice lives in an attempt to stave off the worst of the economic and political crisis.

For a workers plan for the crisis, and a democratically planned economy to prepare for the future!

We call for a conference of unions, left organizations, and other progressive groups in the US to develop a workers’ plan for the economic crisis and adopt fighting methods to win it. This should include price controls on essential goods, rent and mortgage freezes, and a living wage for those laid off from work, as well as guaranteed work and hazard pay for essential workers. It should also include legislation that nationalizes manufacturing, reorienting industry to produce PPE and other necessary goods. It should empower local governments to take control of vacant housing and hotel rooms to provide for those who are homeless or trapped in abusive situations due to quarantine. It should also work toward nationalization and centralization of hospitals and medical research facilities to allow for a cooperative and coordinated response to the outbreak.

Workers in many sectors of the economy have stepped up to continue the fight against the bosses during the crisis, and their strikes and other workplace actions have won numerous concessions. These militant actions are the way forward. We must strike for what we need.

These sorts of emergency measures need to be made permanent through the implementation of a planned economy, where major companies in the main sectors of the economy are nationalized and run by democratically elected bodies made up of working people for the purposes of adjusting production to the needs of all, ensuring that goods and services are delivered to everyone, not to the needs of profit. The current crisis has proven that the market economy cannot provide what we need. Human development and equality and should no longer be held back by a handful of billionaires and their push for profits above all else. Read “What We Stand For” for more on the need for a democratically planned economy and what it could accomplish. Forward to socialism!

Published by Nicholas Wurst

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