Working Families Shouldn’t Pay for Big Business’ Crisis

September 22, 2001

Opening to National Board

In discussing
the economic situation we should remember what Karl Marx said in the third
volume of Capital:

last cause of all real crisis always remains the poverty and restricted
consumption of the masses as compared to the tendency of capitalist
production to develop the productive forces as if only the absolute
power of consumption of the entire society would be their limit.

This important
observation is timely in many ways for today. As we discuss the crisis
at home we have to remember that in today’s world, even more than in Marx’s
day, "poverty and restricted consumption," is a worldwide capitalist
system of global proportions. Truly, global capital does now develop "as
if only the absolute power of consumption of the entire society (or planet)
would be their limit."

With that
in mind, welcome to what some are beginning to call the first New Economy

to the outplacement firm, Challenger’s, Christmas and Grey, who in the
last ten years have become the authority on job loss in America, the US
economy lost roughly 142,000 jobs in January, a record loss since they
have been keeping figures. Indeed, the previous record was December 2000’s
record of 133,000 jobs lost to the economy in a single month. This was
the first time since these records have been kept that announced job cuts
totaled more than 100,000 for two months in a row.

a lagging indicator of crisis, rose from 4.0% to 4.2% in January. By official
figures unemployment now stands at about 6 million. This, of course, does
not include underemployed and discouraged workers.

to BLS statistics, Black workers were hardest hit. African American unemployment
jumped by 0.8 of a percentage point, to 8.4 percent. Latino workers also
were hard hit jumping 0.3 of a percent to 6%. Teenagers were also hard

or goods producing industries, are the hardest hit. As Business Week put
it, "goods led the boom and they lead the slowdown."

Auto and
steel are among those hit the hardest. Eleven steel companies are in bankruptcy
and four more are teetering. Steel is in trouble in large part because
most of American steel capacity is aimed at the auto and appliance consumer
industry, not structural steel shapes needed for construction and infrastructure.

While the
economy has continued to create new jobs, most in the low end of the service
sector, manufacturing lost 65,000 jobs in January, mostly in auto, on
top of 56,000 jobs in December. Most estimates are that manufacturing
has lost 250,000 jobs permanently since June of 2000.

announcement that it plans to eliminate 26,000 jobs, or 20 percent of
its North American work force, was the biggest in a wave of layoffs announced
in recent weeks. Here are the biggest layoff plans announced so far in


Auto manufacturing



Telecom equipment


Sara Lee
Food processing

< J.C. Penney


Telecom equipment

Sears, Roebuck and Co

AOL-Time Warner
Internet services

Intrenet Inc.

So California Edison

Ann & Hope Inc.
Internet retailing

Norfolk Southern Corp

LTV Corp.


Auto led
all industries with 34,959 in cuts in January; telecommunications had
22,060; retail announced 15,244; and computer and other high tech announced
roughly 23,000.

Another early
indication of slowdown is the falling demand for temporary workers. From
April to December of 2000 employment at temp agencies fell by 184,000
workers. 39,000 last month alone. This is the biggest drop since the bottom
of the last recession in 1990-91.

At the same
time the service sector has added 871,000 new jobs since June according
to the Labor Department. The fastest growing service sector jobs are healthcare,
retailing, amusement and recreation, engineering, finance, insurance and
real estate.

As Marxists,
we have to ask, can these jobs be sustained in an economy where the manufacturing
sector is in sharp decline? And there are many indications that we are
right to ask. For example, the National Association of Purchasing Management,
which created an index to measure service employment and prospects, reported
that in January their non-farm business index plunged 11%, to the lowest
level since they began calculations in 1997.There are other classic indications
that a crisis is in the making.

are mushrooming. Factory inventories rose 0.2% to almost a half a trillion
dollars in January, the ninth monthly increase. Yet factory shipments
fell by 0.2% to $372 billion, the forth decrease in a row. Orders for
primary metals fell 3.9% and fabricated metal orders dropped 0.3%. Much
imbalance is also concentrated in the auto industry. By December, dealer
inventories had grown 15% above the level of the previous year while sales
were nearly flat. This pattern increased in January.

In fact,
Alan Greenspan called the current situation a "major inventory correction,"
in his Congressional testimony on January 25th. He also said that economic
growth is "very close to zero." Others now dispute him and think
that revised figures will show an actual contraction in the economy for

the news is grim in another classical indicator: capital investment. Business
investment dropped in January for the first time since the first quarter
of 1992. Especially hard hit were investments in equipment and software,
which declined by 4.7% in the fourth quarter, marking the first decline
of this kind in 10 years. Industrial machinery and equipment orders fell
3.6 percent, including a 9.5 percent drop in computers.

Another wild
card indicator is the public and private debt. Consumer debt is skyrocketing.
Borrowers are more leveraged and vulnerable than any time since the 1990-91
recession. The savings rate is in decline. And more lower-income people,
who were never offered credit before, are piling up debt. The most telling
increase in leverage is in the home. Second mortgages and equity credit
schemes are more prevalent than ever. In 1990, mortgages amounted to about
35% of the value of houses. That percentage is now nearly 50%.

Just a couple
more indicators. The Conference Board says consumer confidence is in the
tank big time. The National Association of Home Builders housing market
index for January fell for the second straight month to the lowest point
in 4 years.

Of course
job loss and unemployment only describe one aspect of what is happening
to working people in this period. There are high energy costs, high gasoline
costs, rising food costs and rising rents — big parts of the creeping
inflation that strikes hardest at working families. The energy crisis
clearly aggravates the overall economic situation as well as putting the
hurt on working people.

to the National Association of Manufacturers rising energy and gas prices
have cost the US economy $115 billion in the past two years. In Chicago,
natural gas heating bills have soared close to 50%. We know comrades and
friends whose bills have jumped from the $100 range last year to the $400
range this year.

And as we
all know this gloomy economic news lands on the backs of those who have
not really participated in the long economic expansion of the last ten
years. For example, those who have been the victims of so-called welfare
reform are now faced with new and deeper economic crisis and poverty,
without any entitlements or economic rights. For millions the safety net
is all but gone.

I should
add that the conditions in the US are of concern for capitalists everywhere.
At the recent International Monetary Funds meeting in Davos, Switzerland
it was a large topic of discussion. The IMF’s deputy director, Stanley
Fischer, said the slowdown was causing the fund to predict that growth
in the global economy would be considerably lower, "possibly in the
range of 3.5 percent." That was scaled back from the IMF’s prediction
of 4.2 percent made last September.

There are
some interesting, and I think, new features of this economic situation.
Most notable is how fast it has developed. It appears now that the economy
began to slam on the breaks in the late summer of 2000 with large layoffs
beginning in November. Business Week, The New York Times and The Wall
Street Journal have all noted the speed of the reaction to rising inventories.
Just-in-time methods and computerization of inventory control and sales
information has meant that big business reacts more quickly to the slightest
negative indicator. Big corporations, auto is a good example, react quickly
with job cuts and other cost cutting measures including the stopping of
capital expenditures and expansions.

There is
plenty of evidence that the computer industry has been a driving force
in this expansion. Vic Perlo maintained that computers played a similar
role in this economy to that played by electricity at the last turn of
the century, and that auto played in the 1920’s. Businesses of all sizes
computerized their operations including those in the manufacturing sectors.
Much of this computerization may have been of questionable value and easily
shed by corporations, thus feeding the expansion but also making downsizing
more rapid and intense as unneeded systems are shed.

Another interesting
and damaging effect of the current economy for working families is the
lack of funds for local governments. This too came on quickly. Of course
most working class small towns have been strapped right along. But increasingly,
as reported in The Times, even wealthier
townships are facing budget shortfalls. Many local governments have gone
from surpluses to deficits in a period of months in the last period.

We all understand
that the global capitalist economy is a very complex jumble. There are
no simple indicators or factors that determine its health. At the same
time, its very complexity makes it that much more susceptible to small
factors setting off crisis. Several economists in the past few weeks have
speculated that the very suddenness of job cuts and cut backs in capital
expenditure could spark an unintended deeper crisis.

Cynics accuse
our Party of always predicting economic crisis and collapse. Of course,
the point of Marxist analysis of capitalist crisis is not predictions,
but fightback and the class struggle. Debates on crisis are endlessly
fascinating, but to paraphrase, "The point however is to change it."
We don’t have to know with the utmost precision the depth and length of
the crisis to know we have to act.

Enough has
happened on the economic front for us to know that the working class is
going to catch it in the next year. We can also predict with certainty
that there will be a dangerous racist edge. This would be so even without
George Bush and the ultra-right in the White House. But given the Bush
presidency we can safely predict fresh and accelerated bouts of attack,
racist discrimination and jingoism to try and divide and confuse the working
class and people.

Many are
now coming to believe that the reason the ultra-right section of the ruling
class was willing to steal this election for George Bush, and thereby
cast wide doubts about legitimacy, was precisely because of their need
to guarantee that the impending crisis would be resolved on the backs
of the working class and oppressed people. And it is probable that many
other sectors of big business didn’t put up too much of a fight for the
same reasons.

Just look
at Bush’s talk about the economic slowdown and the need for his tax give-away
to the rich and the corporations. Profits are falling. The ruling class
is more than willing to hog the public trough when they feel the bite
of economic slowdown and profit shortfalls.

Vic Perlo
made two reports on the economy in 1999, and they are very interesting
reading in light of today’s reality. Vic emphasized imperialism, globalization
and the dangers of war in this new situation. He was convinced that these
last couple of years of expansion were based, in part, on militarism.
He cited US imperialism’s role in Iraq and in the Balkans. He cited rapidly
expanding military spending as a stimulus to the expansion. Bush has clearly
signaled that he sees military spending as key to the economy. The ridiculous
Star Wars missile defense is their number one priority. Military spending
is inflationary and it is dangerous and destabilizing on the world scene.

Further we
must consider that a global economic downturn will further aggravate trade
tensions. Already in the last two months US exports have dropped precipitously
causing another big imbalance in the world economy. It is clear that inter-imperialist
rivalries are not a thing of the past.

Europe is
moving ahead with a military force independent of NATO that in the words
of a German general will serve our own "independent interests."
I think the crisis calls for new urgency and action on international and
peace issues.

Number one
on the agenda of the capitalist class in a crisis, or when they fear a
crisis, is how to deal with labor. Wage cuts, union busting, and a general
attack on labor rapidly become their number one priority. Today’s situation
bears that out. No doubt many in the Bush administration think it’s payback
time for labor because of the AFL-CIO’s mighty efforts to defeat the right.
But more importantly from their class point of view, profits are declining
and they are determined to preserve them.

Their attack
on labor will be multi-sided. It will include the political side like
the executive orders Bush made in mid February that attack and undermine
labor’s most basic rights to organize and to participate in the electoral
process. It will also include naked force. Case in point is the situation
in the airlines industry.

Labor and
the progressive movements need to gear up now to help defend the workers
at Northwestern, Delta, United and American. Bush has taken the unprecedented
step of declaring the government on the side of union busting before the
bargaining is really in full swing. Using the economic situation as his
shield he has already enacted emergency powers against the airline unions.

What is even
more important is the union response. The Machinist union basically told
Bush to stuff his threats. In a letter they protested his unwarranted
interference in the collective bargaining process and in so many words
told him they were prepared to ignore his strike breaking tactics if it
comes to that. This is a significant line in the sand drawn by labor.
It illustrates one of the most important points about how this period
will be different from the Reagan/Bush attacks of the 1980’s.

It’s a whole
new ball game with today’s labor movement much more inclined to fightback.
In this regard John Sweeney’s recent speech to the National Press club
was of great importance. While couched in civil and mild tones, Sweeney
signaled clearly labor’s determination to resist the Bush administration
and to challenge their every move in defense of working families. It is
also important that for the first time he mentioned the need to enforce
the core labor agreements of the ILO. This opens the door to resolving
differences in world labor on how to enforce labor standards.

While we
talk about the new fightback spirit in labor it is important also to note
that there are signs of resistance down in the ranks as well as in the
leadership. Just before coming to New York we heard that the steel local
at Bethlehem’s Burns Harbor Works is challenging the right of the company
to layoff workers. It is hard to overstate the significance of such a
challenge to a big corporation’s inalienable right to run the show as
they see fit. This is almost on the level of challenging their right to
own the mill in the first place. Not quite, but it shows serious fightback

There is
a good deal of sentiment growing for a legislative offensive around saving
our manufacturing industries, steel in particular. There is exciting talk
about the need to fight for an infrastructure bill to rebuild America
with union labor for the needs of the people.

We have to
note that the sentiment for government action, which includes public ownership
to stave off disaster, as the energy crisis in California has shown, is
different. A recent poll in California said that 83% of the people believed
that the state should build and operate power plants. Mass thought patterns
are definitely shifting in a more mass struggle direction. From Seattle
and the fight against globalization, to the anger over Bush’s theft of
the election, to anger about the economic situation, people are thinking
differently. So, too, the development of broad mass coalitions and unity.
In all of these struggles there is a new understanding of the need to
unite all against the monopolies and big business and there is a growing
understanding of the need for Black, Brown and white unity in struggle.
Our Party’s thinking on coalitions and unity is proving to be right in
the mainstream of mass struggles.

Where does
all this leave us as a Party? What is to be done? We don’t have all the
answers, but we do have the beginnings of some.

We are a
little ahead of the curve on this one. Because we are tuned into the need
for economic fightback in a Marxist and class struggle way we see the
possibilities and the potential. We also see the critical interrelations
of the political crisis of a Bush presidency with the economic crisis,
including the particular features of the energy crisis to boot. This gives
us awesome responsibilities to help unite and help build broad economic
fightback organizations and alliances.

We expect
the system to hick up, throw up or worse most of the time. We know that
ultimately capitalism doesn’t work. We may be a little less stunned by
bad economic news. In any case we need to move into action quickly and
the Party is of a mind to do just that.

To illustrate
that point I want to tell you about my club’s, our South Chicago club’s,
response to the genuine economic crisis in South Chicago.

Angry Utility
Consumers. That is the name of the protest meeting our little club called
against the horrendous gas heating bills in our neighborhood. What a pleasure
our last two club meetings have been. This all started at our annual Club
Conference just three short weeks ago. Club members have been talking
about their latest heating bills. Our members are in real trouble and
some are worried about their gas being shut off in the spring. (It is
illegal to shut off gas in the winter by state law.) Well, we concluded,
maybe this is just the issue we should tackle to get our club in motion.

We started
the meeting with a survey of our members. What groups do we work with?
How do we use the PWW? What issues are
we working on? Etc. And low and behold we have a lot of mass and coalition
ties. We discovered that if we wanted to call a meeting to protest the
gas prices we could actually gather quite a coalition centered in our
clubs area of responsibility. This comrade could get us the union hall
for the meeting, that comrade could contact the churches and get leaflets
out, this one could contact CLUW and Jobs with Justice. This one could
contact folks we know from the Bush protests, etc. You can see how it

What a meeting.
Everyone, and I mean everyone, took responsibility for something in building
the meeting. Everyone left with a job to do and everyone left excited.
And it grew from there — a sign of the times. Our next club meeting was
just days before the event. We had distributed at least 2000 leaflets
in the community. I say at least because stories began to come in. A Mexican
American community center, folks we hadn’t known before, took the leaflet
and reprinted it themselves and handed it out to everyone who came into
their food pantry. We found out a bus driver had gotten one, copied it,
and was giving it to passengers. Some unions had picked it up and were
passing it around.

In this meeting
we had a great discussion of strategy and tactics of what we wanted to
see happen. It was real and live and connected to what we were doing.
It was passionate and it was fun even before we saw the fruits of our

Then came
Tuesday night, just two days ago. We had asked the union for their smaller
conference room because we didn’t know what to expect. It’s a damn good
thing they have a large meeting hall — over a hundred neighborhood folks
turned out. They were Black, Brown and white. There were at least five
local union presidents (Bruce did great work). There were ministers and
community activists. And we were beside ourselves. What a meeting.

Bobby chaired
it. And it jumped off with a militant tone. Joe Davis, the African American
USWA president who hosted the meeting, kicked off with fire at the companies.
I won’t go into all of the speakers; they were all very good. But then
we opened it up to the crowd, and what a response. These folks were mad
and ready for action. Bush, his oil company owning buddies, the gas company,
they all caught hell from white 80 year old seniors on fixed incomes,
from African American church ladies, from ministers, from landlords who
didn’t want to pass on the costs in rent, from union members who make
good money but still are in deep with their bills and facing layoffs,
from Latino activists who want to make a documentary about our struggle,
and from a Mexican American lady with four grandchildren, a laid-off son
and a $1200 gas bill. When Bobbie asked those who had gas bills over $400
to stand, well, over half the crowd jumped right up.

We set a
protest picket at a local People’s Gas office for this Saturday; we set
up a coordinating committee and a labor sub group, and a Friday night
sign-making party at a club member’s house. We took up a collection of
over $200 dollars for new leaflets and picket signs for Saturday. We got
folks working on the press and media. Many of the folks signed up for
leaflet distributions.

And club
members glowed in the meeting. Joyce did the sign-up sheets; Frank, Bea,
and Bill made great speeches to move things along from the floor; Loraine
is organizing the picket sign party at her house with some of her block
club; Al and I made sure everyone there got a copy of the PWW.

It was the
greatest. Afterwards, Frank walked up to Benny, a club member who got
a lot of leaflets out, and said with a big grin, "See what you started."
Truer words.

Of course
we have to work at all different levels. And I am confident that we will
get his kind of response in the leadership levels of the trade unions,
among progressive elected officials, in national, regional, state and
local coalitions, and at this kind of grassroots club level. I think these
kinds of club level initiatives are key for two important reasons.

This kind
of experience will help us break even more into full blown coalition and
mass party building. Encouraging and developing these kind of club initiatives
is key to shifting our focus to the clubs and rebuilding the Party at
the grassroots, an important objective for us at this moment.

I haven’t
had so much fun since the plant closing fight at Pullman and the "Jobs
or Income Now" unemployed fights of the early 80’s. The possibilities
are fantastic. We can help build economic fightback coalitions and organizations
like none we’ve seen before. I really think this is key to our Convention
and key to making the kind of progress we have to have in defeating the
ultra right agenda and defending working families.


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