The current economic upswing is now in its seventh year, and economists have been falling all over themelves to declare this the start of a new economic era of unending prosperity. Joel Geier and Ahmed Shawki debunk the myths of the "miracle" economy and show how this one-sided boom for the rich is built on shaky foundations.
The U.S. economy is in its seventy-eighth month of expansion, and according to economic "experts" and media pundits, it could continue to grow indefinitely. The economy has become a kind of "Energizer Bunny"it just keeps on going and going and going.
"The mystery continues," begins the lead story in the Chicago Tribune on August 14, 1997.
The U.S. economy has entered a strange and beautiful place, but nobody knows precisely where it is, nor can they map it or prove its existence...1
The Clinton administration takes credit for this "strange and beautiful" situation, proclaiming the end of the business cycle and the beginning of a new era of prosperity. The opening line of the Economic Report of the President 1997 declares triumphantly: "The American economy today is the healthiest it has been in three decades." The report paints an idyllic picture of "strong and sustainable" economic growth, underpinned by low unemployment and low inflation, and a rapidly declining government deficit. The report further claims that profits, wages, and living standards are all great and getting better.2
We are all expected to accept as revealed wisdom that we live in a Goldilocks economy not too hot, not too cold, just right. "Could it possibly get any better than this?" asks Business Week in May. "For two years, the U.S. economy has soared ever higher, reaching starry strata last explored in the 1960s."3
One after the other, economic pundits are paraded to confirm that we are living in a "miracle economy" whose steady, moderate growth precludes another recession. From there, it is only a short leap to the fantasy that there will be no more business cycles. "A new consensus is emerging," says the Wall Street Journal, "from boardrooms, trading floors, government offices, and even living rooms: The big, bad business cycle has been tamed."4
American capitalisms self-congratulation extends to the long-hoped-for news that the boom has restored the prosperity of the long post-World-War-II expansion, and reversed the long-term crisis of capitalism that began in 1973. Long-term prosperity is now ours, we are told, due to the success of a new paradigm, the American model. The chief economist of Merrill Lynch ascribes American superiority to the fact that "[W]e are the most flexible, adaptable economy on earth"with extra points given for the admirably flexible U.S. labor market.5 Mort Zuckerman, publisher of U.S. News and World Report, brags that America has found the right formula for generating wealth and prosperity. In an editorial he gushes, "Let us celebrate an American triumph. The mantra is privatize, deregulate, and do not interfere with the market."6
This "triumph" was on full display at the June G-7 (plus Russia) meeting. Bill Clinton used the opportunity to swagger in front of the media and share his wisdom on economic matters. The Chicago Tribune reported: "Sounding like Ronald Reagan a decade earlier, President Clinton delivered a free-market economic lecture... to other world leaders skittish about voter protests to budget cuts and freer trade."7 The other G-7 members were encouraged to emulate the strategy employed by the U.S. ruling class in cutting wages and social benefits, raising rates of exploitation, maximizing profit, and developing an edge in global markets.
"Throughout the weekend the echoing U.S. themebarely suppressed triumphalism about its economic performance in the last few yearsclearly irritated the other heads of government and finance ministers," reported the Wall Street Journal.8 One irritated participant told the Financial Times: "They keep telling us how successful their system is, then they remind us not to stray too far from our hotel at night."9
Clintons guests were not so rude as to remind him of the speed with which things can changeas recently ousted conservative governments in Britain and France discovered earlier this year.
Leaving aside Clintons posturing, the wild delusions of the economic experts, and their devotion to the market, the U.S. economy has outperformed the other G-7 countries in a number of respects. Twenty years agoand even ten years agodiscussions of the U.S. economy centered on its relative decline in relation to the other main industrial economies. From the late 1970s through the 1980s, Japanand to a lesser extent Germanywere held up as the models to follow. This is no longer true. The debate today among bosses, politicians, and policy makers is whether to adopt selective aspects of the "American model" or to adopt its main elements.
The aim of this article is to show that the celebration of a new era of capitalism is a complete fantasy, and that it will be a short-lived fantasy at that. The "American model" will go the way of the models of the 1980s. Moreover, we aim to show that this period of recovery and expansion is quite limited, both in relation to previous recoveries and in relation to what is needed to overcome the long-term crisis in which U.S. and world capitalism are mired.
The recovery is also limited in terms of whom it has benefited. Workers have watched the meteoric transformation of the super-rich into the unbelievably rich ("filthy" is no longer strong enough), while the boom times seem to have passed them by. Bill Gates of Microsoft is now worth more than $40 billion as measured by his stock holdings, and an unknown called Lawrence Coss, the chief executive officer of Green Tree Financial Corporation, took home $102.4 million last yeara 56 percent raise over the $65.6 million he earned in 1995.
How much of a miracle?
This much-celebrated economic expansion, though long, is weak both in terms of growth and productivity as compared to previous post-World War II booms.
According to the National Bureau of Economic Research (NBER), there have been nine postwar expansions in the U.S. economy. The NBER defines a recession as two consecutive quarters (six months) of declining growth rates. Measured from trough to peak, they have averaged 50 months. The two longest lasted 106 months (in the 1960s) and 92 months (in the 1980s).10
This cycle still has life in ita year or two, possibly even slightly more; but growth rates compare unfavorably to previous cycles. From the early nineteenth century to the 1970s, the U.S. economy has grown by an average of 3.8 percent a year. That means that real economic output was doubled roughly every nineteen years. Then after the 1970s growth went into decline. During the 1980s, growth fell to just 2.7 percentthen after 1989 to only 2 percent. At that rate it would take nearly thirty-six years to double total output again.11
This is a sub-par expansion whether measured by the standards of the long boom or of the upturns of the post-1973 crisis years. After six years of expansion the economy had grown by 31.5 percent in the 1960s (5.25 percent a year), by 24.2 percent in the 1980s (4.0 percent a year), and in the 1990s by 15.5 percent (2.6 percent a year). The expansion of the 1970s only lasted for four-and-one-half years so comparisons are more difficult. In that expansion there was growth of 15.5 percent in the first three years, while it has taken six years for the expansion of the 1990s to produce similar results.12
In previous booms, growth rates of 5 and 6 percent or more were common. In the 1990s, there has been only one year of more than 3 percent annual growth. In the last twelve months, growth has approximated 4 percentenough to lauch the "miracle economy" propaganda blitz, but only a mediocre rate if compared to the postwar boom years.13 The growth characteristic of the 1990s was typically called a "growth recession." This is why for so long it was difficult to tell whether we were in recovery or lingering in recessionand why this was first called a jobless recovery, and then a joyless recovery. Only a short year ago this was still considered to be the weakest recovery of the century.
The 1991 recovery got off to such a whimpering start that experts had trouble measuring when it actually began. The Business Cycle Dating Committee of the U.S. government failed to meet until November 1992that is, after the recovery had already begun. Though they concluded that the recession had "officially" ended in March of 1991, they admitted that pinpointing the precise moment was difficult. That was because one of the usual indicators of an economic revival, unemployment, remained high at 7.8 percent in June 1992 and only began to fall toward the end of that year.14
The model for continued New Era prosperity is growth of only 2.3 percent a year. If the economy begins to grow faster than this for any period of time, the Federal Reserve Board has made clear that it will intervene and raise interest rates in order to slow the economy down before it hits capacity and inflationary constraints. This 2.3 percent "ideal growth, is lower than any period since the 1930s. It is indicative of a declining system, not of a modern-day miracle.15
Not only has growth slowed, but critically, productivity is barely inching along. From 1870 through to 1973, productivity increased at an average rate of 2.4 percent per year. During the postwar boom era productivity grew at 2.9 percent a year. After 1973, it declined sharply to 1.1 percent a year, a pace even worse than during the Great Depression. In the last decade the decline has accelerated, with only one year of greater than 1 percent productivity growth.
In 1993 productivity grew at a rate of .2 percent, in 1994 .5 percent, in 1995 .3 percent, and in 1996 .7 percent. Thus, productivity growth over the last four years has comes to a grand total of 1.7 percent. In the "miraculous" 1990s, productivity is worse than the miserable crisis of the 1970s and 1980s.16
The contradiction between high capital investments in this expansion and low productivity is so staggering that many financial analysts have chosen to resolve this contradiction by throwing out the figures. They refer to "invisible productivity" gains and repeatedly make the bold claim that the boom is healthy because productivity is growing strongly! For them the growth of profits is itself sufficient proof of productivity growth. In this they have the support of Alan Greenspan, chairman of the Federal Reserve Bank. In July, he testified to Congress that a new era of prosperity may exist because the enormous investment in computers and other new technology means that productivity must be rising. He told Congress that we may be "part of a once-or twice-in-a-century phenomenon."17
Never have theory and reality been so divergent. In New Age style, reality must give way. New figures are in the works, to revise current anemic rates of growth and productivity, and to raise them to the more robust levels of capitalist theory. Greenspan is even known to discard all figures for industries that show declining productivity from the economic models he uses in setting policy.
The bright spot for capital is the manufacturing sector, where both growth and productivity have been much better than in the economy as a whole. Manufacturing grew by 24 percent in the last five years. Manufacturing productivity has risen by 3 percent a year for the last fifteen years, ever since the 1980s restructuring of American industry began in a serious way. Between 1982 and 1992, productivity in manufacturing rose by 32 percent and compensation costs fell by nearly 1 percent; in durable goods, productivity rose by 42 percent and real labor costs fell by nearly 3 percent.18
In the last four years manufacturing productivity has grown by an average of 3.8 percent annually. Since these numbers are good, there is no demand to revise or doctor them. The increase in manufacturing production and productivity has not been accompanied by an increase in manufacturing jobsdespite the job growth in the economy overall.
The bosses boom
The economy is in boomfor the ruling class. For workers it is not. There is no return to the days of the "American Dream" where workers were promised and (with all kinds of limitations and variations) received a share of cake. Gone are the days when a boom for capital also meant a boom for labor.
This is not part of some mysterious economic force at work, but the result of a concerted effort by employers and the state to squeeze as much from the working class for as little as possible. The result is that inequality has been increasing in the U.S. since the 1970s. Lester Thurow concludes:
The rapid and widespread increase in inequality in income in the United States over the past two decades has traditionally been the province of countries experiencing a revolution or a military defeat followed by occupation. Indeed, this is the first time since the collection of income data began that the median real wages of American males have consistently fallen over a twenty-year period. And never before have a majority of American workers suffered real wage reductions while the real per capita gross domestic product (GDP) was increasing.19
Since 1991, profits have soared while the condition of the working class continues to deteriorate. Corporate profits totaled $330 billion in 1989, the last business cycle peak, and were $631 billion in 1996.20 This is a 90 percent increase in the mass of profit in a seven-year period, or a rise of 11 percent a year compounded.
Chief executives of large corporations have reaped a bonanza in skyrocketing personal rewards, their salaries rising last year on average by 53 percent. This trend makes class inequality in the U.S. greater than in any other advanced industrial country. In 1973 corporate CEOs made 35 times the average workers wage; last year it was up to 209 times.21 To this must be added the enormous wealth that the stock market has brought to the rich, and the new bipartisan capital gains tax which will tax their stock market gains at about one-half the rate that many workers pay in income tax. These tax cuts are simply welfare handouts to the rich. A 1993 study by the Government Accounting Office found that more than 40 percent of corporations doing business in the U.S. with assets of $250 million or more either paid no income taxes or paid income taxes of less than $100,000.22
These two phenomenahigh profits and the misery of millionsare really part of the same process.
In his 1961 inaugural address, John F. Kennedy captured the promise of the "American Dream" when he spoke of a "rising tide raising all boats." Inequality of income would exist but everyone got a slice of the pie. This was, of course, a myth, but American workers did have the highest standard of living in the world. Today rising tides sink most boatsif you can even afford to have one. By May 1993, even Newsweek noticed the change and ran a story on income inequality under the heading: "A Rising Tide Lifts the Yachts."
Workers are producing more and earning less, as the rate of exploitation has been raised. Using constant 1990 dollars, GDP per hour worked was $23.60 in 1973, and $29.10 in 1992, a gain of 24 percent. Had real wages kept up with this gain instead of declining they would be 43 percent higher than they are today.23
For young workers, the decline was even more dramatic. For year-round full-time male workers eighteen to twenty-four years of age, the percentage earning less that $12,195 (in 1990 dollars) rose from 18 percent to 40 percent in 1989. For young women the same percentages rose from 29 percent to 48 percent.24
Wages have continued the steady downward drift of the last twenty-five years. Real (non-inflationary) hourly wages peaked in 1973 (after having risen 79 percent since 1947) and have declined 13 percent since then. For high school graduates real hourly wages fell from $12.12 in 1973 to $10.46 in 1996, a 16 percent decline.25 They have dropped in eight of the last ten years.26 In every year of the 1990s major wage settlements were less than they were in the preceding year.27 At the height of the 1990s boom, median wages are still 5 percent lower than they were before the last recession.
Average real weekly wages have fallen even more. They are 19 percent lower than they were in 1973, back to the level they were 40 years agoin 1958.28 As real wages have fallen, poverty has increased. The poverty ratewhich decreased from 22.4 percent of the population in 1959 to 11.1 percent in the mid-1970srose to 14.5 percent in the mid-1990s. The poverty rate for children in 1973 was 14 percent; in this cycle it has climbed to 23 percent.29
No longer does the press talk of the overworked Japanese. In 1995, manufacturing workers worked an average of 2,000 hours in the U.S. and Japan, versus 1,500 to 1,600 in Germany and France.
From 1967 to 1982, the average annual hours worked by prime-age workers (ages 25-54) declined from about 1,975 to about 1,840. This was primarily the result of women entering the work force in part-time positions. Since 1982, however, the trend has reversed, so that by 1995, the average work week was back above the 1967 level. Just since 1991 . . .average hours would per employee have increased by nearly 3 percent.30
Overtime is the highest ever since this was first measured in 1956, and the largest proportion ever of the nations population is now employed (63.8 percent).31
The main way workers have coped with falling wages is to have more members of the family work. In the 1980s, median household income held up much better than real wages, but in the 1990s it also is falling. In constant 1994 dollars household incomes peaked in the last boom of 1989 at $34,547. The last statistics for household income are from 1994, when they had fallen to $32,244, down $2,303, or minus 6.7 percent. Household income was still some hundreds of dollars, or 2.5 percent more than in 1973, despite the 19 percent drop in weekly earnings.32 The answer to the mystery of household income not declining as much or as fast as real wages is working wives. In 1973, 45 percent of wives with children under eighteen worked; in 1995, 70 percent were working.33 This rise of two income working class families coming out almost flat with what previously was one wage has been the buffer that has held up family income.
Consumer debt has skyrocketed. A recent Washington Post article detailed the scale of the problem:
Increases in household indebtedness are creating enormous problems of declining credit-worthiness, personal bankruptcies and loan write-off by lenders. As of late 1996, household debt totaled 89 percent of annual disposable income, compared with 83 percent in 1990 and only 67 percent in 1980.34
Many conditions associated with a slump now exist at the height of boom: downsizing, job insecurity, wage cuts, cutbacks in social spending. In this "new economic era" the enrichment of a tiny minority not only depends on the labor of many, but requires their immiseration. Though he writes in 1934, Lewis Coreys comments apply equally to today:
Not only does the distribution of wealth become more unequal, it also becomes more parasitic, for in the form of debt is a first claim upon the diminishing fruits of labor. Wealth now tends to increase in the hands of the few only by an absolute lowering of the standards of living among the many.35
The American modelnot a new "American Century"
Some proponents of the Goldilocks or Energizer Bunny economy argue that the "American Model" represents the U.S.s return to the role it played after World War II, the birth of a new "American Century." This is pure fantasy, and a reactionary fantasy at that. But before discussing why there cannot be a return to the 1950s, it is important to review what makes up the "new" American model.
What is now called the "American Model" is not newit had its beginnings in the mid-1970s in what can only be termed an "employers offensive."
At the time, the ruling class was shaken by its defeat in Vietnam, a decade or more of social protest, the end of the long boom, the U.S. economys relative decline in relation to its main competitors and, not least of all, a renewed combativity on the part of U.S. workers. "This was the period," write Alexander Cockburn and Ken Silverstein,
when Samuel Huntington of Harvard University and Nelson Rockefellers Trilateral Commission wrote of the need to curb the "excess of democracy" in the US, Japan and Western Europe. Comments at the Conference Board meetings indicate that CEOs believed a popular uprising could be imminent: "Can we still afford one man, one vote? We are trembling on the brink" . . . "One man, one vote has undermined the power of business in all capitalist countries since World War II"36
The bosses initiated an all-out ideological, political and economic offensive to regain the upper handwith the backing of both Democrats and Republicans, launching what one union official would later call "a one-sided class war." As Business Week put it in the mid-1970s:
It will be a hard pill for many Americans to swallowthe idea of doing with less so that business can have more... Nothing that this nation, or any other nation, has done in modern economic history compares in difficulty with the selling job that must be done to make people accept the new reality.37
The process of making workers "accept the new reality" began under Democratic President Jimmy Carter and was taken to new heights by Republican President Ronald Reagan. The unanimity of the ruling class was evident. The May 1982 issue of World Financial Markets, a newsletter published by Morgan Guaranty Trust, argued bluntly that a
necessary condition for a return to non-inflationary growth is the curbing of excessive real wage growth. To restore adequate profit marginsto provide an incentive for investment and the resources to finance it... real wage increases [must] be kept below productivity gains for several years.
As if Ronald Reagan hadnt already fired twelve thousand PATCO air traffic controllers, the newsletter urged the government to "set the tone for wage settlements by adopting a tough posture in public sector negotiations."38
This model is a very old model repackagedhaving been so discredited in the 1930s, when unregulated capitalist competition led to market collapse, bank failures, the imploding of world trade, mass unemployment, and a long depression only overcome through war and mass destruction, and an eruption of class struggle.
The model was revived by Reagan and British Prime Minister Margaret Thatcher in the 1980s as a way out of the postwar crisis. It is leading to a new mood of resistance among workers throughout Europe who are rejecting austerity and the conservative politicians associated with it. But it is being championed by American capitalismboth its conservative and liberal wingsas the way out of the economic stagnation of the 1990s. Clinton has continued the bipartisan assault on the working class that began in the 1970sonly he has accelerated the attack on social spending and has opened the states coffers even further for the wealthiest, offering various corporations government handouts and, in his latest budget, generous tax breaks.
The key features of the "American Model"restructuring, downsizing, and "flexible labor markets;" slashing the social wage; privatization; deregulation; and competitive advantageare briefly elaborated below.
Restructuring, downsizing and flexible labor markets: All of these terms are synonyms for cutting labor costs and increasing output by reducing the workforce, paying lower wages and fewer or no benefits, and forcing workers into either part-time jobs or into full-time jobs with lots of overtime. Unemployment and job insecurity are the whips used to discipline workers into working harder for less.
The "American Model" involves laying off workerswhether in boom or slump. "Companies are using downsizing to control wage pressures," says John A. Challenger, executive vice president of Challenger Gray.39
This is not to say that there hasnt been job growththere has, alongside the downsizing and "reengineering." But many of these new jobs are overwhelmingly not the good jobs promised by the Clinton Administration. For example, of the 4.5 million new jobs created between the start of this recovery and 1994, one in five was a temporary job. And of the 3 million new jobs created in 1994 alone, a staggering 2.9 million were part time, according to the Labor Research Association.40
In the early 1990s, two waves of corporate downswing spread throughout the economy. Three-hundred thousand jobs were axed in 1990; 500,000 in 1991, 400,000 in 1992. In the second wave, 600,000 jobs were cut in 1993, reaching a record 104,000 in January of 1994 alone.41
Mass layoffsthose involving fifty or more workers at a single work siterose by 4 percent in the last quarter of 1996. Statistics for early 1997 show the same trend. Job cuts last February were 20 percent higher than job cuts in February 1996.42 Not surprisingly, a May, 1997 survey by the Wall Street Journal reported that 46 percent of U.S. workers say they are "frequently concerned" about losing their jobs, compared with 31 percent in 1992.43
The effect of restructuring on those losing jobs has been devastating. Of those workers in the first wave, 12 percent dropped out of the work force altogether. Seventeen percent were still unemployed two years later. Of the 71 percent reemployed, 31 percent had to take wage reductions of 25 percent or more, and 32 percent had wage cuts of 1 to 25 percent. Only 37 percent found employment at no loss of wages.43
What began as a corporate response to declining competitiveness and recession has turned into a permanent way of doing business. "An essential force behind Americas comparative dynamism is its flexibilityin labor markets, capital markets and corporate culture," says the Wall Street Journal.45
A key feature of "flexible labor" has been the large increase in the 1980s and 1990s of temporary and contract workers, who now comprise 13 million, or 10 percent of the labor force.46 They are the so-called "disposable workers," who have no benefits, and can be let go on a days notice. Many of these temporary workers are formerly full-time employees who were laid off in company "downsizing" and then offered the same jobs through temporary agencies at lower pay and with no benefits. They have made Manpower the largest employer in the U.S.
Over the last fifteen years, the Fortune 500 companies reduced their full-time labor force by more than 30 percent. The number of temps in the U.S. has grown nearly 19 percent in the last three years.47
This temporary market is a new variant on the floating labor force segment of the reserve army of labor. When the next recession occurs there will be an horrific jump in the number of unemployed as these temporary workers are laid off wholesale. The consequences will be even more devastating, and the recession more severe, as only 40 percent of the labor force is now covered by unemployment benefits. This is the real meaning of "flexible labor"low paid, overworked workers who can be fired at will.
The U.S. labor force of 136 million people officially has just under 5 percent unemployment, or 6.5 million. This does not count a half million discouraged workers who have given up looking for work, or 4.5 million part-time workers who want full-time jobs but cant find them. If these figures are added together to calculate unemployment as they are in some countries, then we get a much more realistic rate of 9-10 percent.48
Slashing the social wage: Clintons promise to "end welfare as we know it"that is, to dismantle the social welfare gains of the 1930s and 1960sis really part of reducing the social wage, that is, the public cost of the reproduction of labor.
Though welfare was only a fraction of the budget, the attacks on it were carried out first, because it was an easier target, and also to drive home the pointthe U.S. government has renounced any obligation to the poor. This has set the stage for further, even bigger cuts in Medicare and Social Security. Last year the Republicans proposed a $125 billion cut in Medicare over five years. Clinton proposed instead a cut of $100 billion. With the boom of the last year the government has recalculated its revenues and anticipates at least an additional $225 billion in the next five years. This is more than enough to eradicate the need for any Medicare cuts. However, since this New Age of prosperity for the few is based on the misery of the many, Clinton agreed to cut Medicare even moreby $115 billion.
Privatization: The American economy never had the degree of state nationalization that existed elsewhere. American capitals passion for privatization demands small government that costs less. What it was willing to tolerate as a burden during the Cold War now seems an unnecessary extravagance. As Clinton put it, "The era of big government is over." Under Clinton, federal government spending as a share of GDP has been cut from 23 percent to 21 percent. It is this drop that contains much of the decline in the deficit. The "reinventing government" program cut the government work force by 250,000 to the smallest it has been since the 1970s. As a percentage of the labor force it is the smallest since the 1930s.49
Various social programs that have been slashed are now being privatized, at lower, nonunion wages. Welfare contracts in various states have been contracted out to Lockheed and other giant corporations whose profits depend on squeezing recipients. In New York State and elsewhere, welfare recipients are contracted out to work at various jobs at substandard wagesa strategy deliberately designed to exert a downward pressure on the wages of other workers. Other programs that have been privatized for profit include jails and orphanages.
Deregulation: Deregulation has been part of a ruling-class strategy to boost competition for years. Ostensibly, its purpose is to encourage greater competition, and therefore efficiency. In practice it leads, in fairly short order, to greater concentrations of capital, monopolization, monopoly prices, and in new ways, greater state involvement. State "deregulation has encouraged the monopolization process through the mergers of such giants as Boeing with McDonnell, and Lockheed with Grumman (both aided and abetted by sizable government handouts). These are only some of the more dramatic moments in what is the largest concentration of capital in American history.
Deregulation of the savings and loan (thrift) industry led to a remarkable transfer of income to a few wealthy owners. This was the heyday for the likes of Charles Keating, who in five years as head of Lincoln Savings & Loan in California, rewarded himself and his family with $41.5 million in salary, perks and benefits. (Incidentally, Keating employed one Alan Greenspan at the time as a consultant.) The collapse of the S&L industry will cost taxpayers anywhere from $300 to $500 billion. The attack on "big government" doesnt apply when it comes to bailing out big business.
Another aspect of deregulation has been the weakening of environmental standards for industry polluters. Though Clinton and Gore have tried to portray themselves as environmentalists, their practice shows otherwisedespite profiling cases in which the government has slapped large fines on polluters. The current administration has also cut funding for government agencies like OSHA to the bone. There are currently 2,000 OSHA inspectors who oversee the countrys 6 million private sector workplaces; thats one inspector per 3000 workplaces.50 All of this is done in the name of encouraging efficiency by eliminating government red tape.
Competitive advantage: "Flexibility" is at bottom about lowering labor costsit is this that gives American capitalists a competitive edge over Europe and Japan. U.S. employers costs per employee hour of compensation in 1995 was $17.10 an hour of which $12.25 was wages and $4.85 benefits. These costs have been kept down through the use of part-time, temporary, and contract workers. Part-time workers make hourly half of what full-time workers do ($19.44 for wages and benefits for full-time workers, versus $8.98 for part-timers).51
Against the $17 an hour that U.S. employers pay, Japanese compensation costs are $24, and the comparable German figure is $32. While these costs constantly shift with fluctuating exchange rates, real unit labor costs in the U.S. have been flat since 1985, while they have grown strongly in other countries. The U.S. has had for years an underlying advantage of 25 percent against Japanese labor costs and 60 percent against German ones.52 This has led to a capital boom. Industrial capacity in the U.S. grew at 3.7 percent in 1995 and 4.4 percent in 1996; these are the largest growths in manufacturing capability since 1969.53 The result has been export led growth particularly in high tech manufactured goods. All exports have grown by 42 percent in the last four years, and account for one third of GDP growth. Without export growth it is estimated that the average growth in this cycle would have been 1.7 percent a year, similar to what it has been in Europe and Japan.54
The falling rate of profit and the permanent arms economy
In the twenty-five years following World War II, the U.S. led world capitalism in what was the longest sustained economic expansion in the systems history. According to the Federal Reserve Boards Index, manufacturing production doubled between 1945 and 1965, and tripled between 1945 and 1976. The gross national product of the U.S. was three times as great in 1970 as it was in 1940. German industrial output grew five-fold from its depressed level of 1949, French output fourfold.55
This sustained period of growth was remarkable for its relatively steady rate of economic growth, profitability, rising real incomes, and full employment as was the previous period, the inter-war years, for its crises and mass unemployment.
Today, the mass of profit produced in the system has increased enormously, but the rate of profit still does not match those of previous expansions.
Capitalists have always measured success by how much they get for their invesmentthe rate of profit. The source of surplus value is the difference between the value of what workers produce and what they are paidprofit is upaid labor. All other inputs other than labormachinery and materialsmerely pass value on to the final product, whereas living labor adds value above its own cost.
Capitalism forces different capitals to compete with each other in the market. Each capital, therefore, must seek ways to cheapen its commodities so as to undersell its rivals. This forces each capitalist to invest in new machinery to boost productivity. The first firm to introduce the more productive methods gains an initial advantage over competitors.
But once the other rivals make the same changes, the initial competitive adavantage is lost, and the process starts anew. Over time, this process of accumulationof continually plowing profits back into means of productioncreates an increase in what Marx called the organic composition of capital. This is the ratio of constant capital (cost of machinery and materials) to variable capital (wages), or in physical terms, the ratio of machines per worker. Labor is an increasingly shrinking portion of the production process in relation to total capital invested. But unpaid labor is the source of surplus value. The result is that the rate of profitthe amount of return compared to total investmentgoes down, even if the mass of profits increases. Ironically, the very process by which individual capitalists seek to raise their own profit rates exerts a downward pressure on profit rates in the system as a whole.
The tendency for the rate of profit to fall, Marx argued, could be offset, for a time, by countervailing tendenciessuch as the cheapening of constant capital (as in the invention of cheaper and cheaper computers) and the increase in the rate of exploitation (the ratio between paid and unpaid labor time). But there were limits to these tendencies. While there is no theoretical limit to the growth of constant capital (machines), there is a limit to which the rate of exploitation can be raised.56
In the postwar period there was a countervailing tendency that helped the long boom for many yearsmassive military spending. But as we shall see, the permanent arms economy no longer plays the same role today as it did then.
Writing in the 1930s, economist John Maynard Keynes ironically suggested a way to solve capitalisms tendency to crisis:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on the well-tried principles of laissez-faire to dig the notes up again...there would be no more unemployment and, with the help of the repercussions, the real income of the community and its capital wealth also, would probably become a good deal greater than it is.57
Effectively, this is exactly what happened after World War II. Military spending, from the economic point of view, for all practical purposes is the same as burying banknotes in a coal mine. The permanent arms economy was an application of Keynsianism (though Keynes didnt foresee it happening). "It is, it seems," he remarked in 1940, "politically impossible for a capitalist democracy to organize expenditure on the scale necessary to make the grand experiment that would prove my caseexcept in war conditions."58
Prior to World War II, peacetime military spending never rose above 1 percent of GDP. In the 1950s, it averaged 7 to 10 percent. For the entire period since the 1940s, military spending ranged from 4 to 14 percent of GDP. A staggering $4.5 trillion was spent on defense in the 47 years after the end of World War II. Thats $95.7 billion a year, $262.2 million a day, $10.9 million an hour, $181,666 a minute or $3,028 a second.59
The effect of the permanent arms economy was twofold. On the one hand, it acted as an enormous stimulus on spending in the rest of the economy. On the other hand, the siphoning off of billions of dollars to create weaponry acted as a drain on money that otherwise would have been reinvested in the productive economy. The effect was to slow down the rate of accumulation, and thereby ease the downward pressure on the rate of profit, thus prolonging the boom.
This of course is not why the U.S. ruling class embarked on military expansion. Arms competition is a permanent feature of a system characterized by rival ruling classes. Once the U.S. embarked on a strategy to make its military might unassailable vis-a-vis Russia, it set off a process of arms competition that could not be stopped.
A government report issued in 1965 summarized the effect of arms spending on the U.S. economy:
[T]he greatly enlarged public sector since World War Two, resulting from defense expenditures, has provided additional protection against depressions, since this sector is not responsive to contraction in the private sector and provides a sort of buffer or balance wheel in the economy.60
Arms spending could prolong the boom but not indefinitely. Over time, the process of accumulation began to push up the organic composition of capital and reasserted a downward pressure on profit rates. At that point, the expenditure on arms began to act not as a boon but a liablity.
The pressure on U.S. capitalism became even more acute as Japan and Germany, whose economies were not burdened by military expenditures, began to outpace the U.S. economically in the 1970s. They were able to devote a much larger share of their outpout to expanding industry because they bore only a fraction of the costs of the arms economy.
The permanent arms economy helped stabilize the system and postponed the onset of crisisit did not end them. The end of the permanent arms economy did not mean, however, that arms spending couldnt still play a vital role in stimulating the economy; but it could not produce another sustained boom. Indeed, the cost of arms spending now brought a new host of problemsas the 1980s "Reagan boom" would show.
"Military Keynesianism" was instrumental in fueling the Reagan boom of the mid-1980s, despite all the rhetoric about markets and smaller government. During the 1980s, the U.S. experienced the most rapid expansion of military spending in its peacetime history. In the three decades from the late 1940s to the late 1970s, the military spent $2 trillion to create a worldwide military establishment; in the seven years from 1980 to 1986, almost $1.5 trillion was spent to maintain and expand the conventional and nuclear forces of the U.S.61
The stimulus to the corporate and industrial sector from increased weapons spending was the most important single contributing factor to the growth of GNP during the 1980s. From 1981 to 1984 industrial production in the defense and space industries increased by 9.5 percent per year while total industrial production rose only 3 percent annually. According to Nariman Behravesh, chief economist for U.S. studies at Wharton Econometrics:
Because defense increases have been focused on hardware, manufacturing has had a modest recovery. Defense spending increases probably provided the greatest momentum to growth in recent years.62
The 1980s boom wasnt comparable to that of the 1950s. Not only was nonmilitary GDP growth weak; the military spending stimulus was purchased at the cost of weak growth in nonmilitary public capital growth:
Between 1947 and 1973, nonmilitary public capital per employed worker grew at an average rate of 1.7 percent. The dollar amount in 1973 (measured in constant 1987 dollars) was $29,295. After 1973, however, the rate only grew by .09 percent annually. Thus by 1990, the dollar amount of nonmilitary public capital per employed worker was only $29,726, a mere 1.5 percent greater than the 1973 figure.63
The figures for private investment were also low.64
Moreover, unlike the period prior to 1973, the Reagan boom was fueled through a massive increase in deficit spending, leaving a tremendous debt hangover. Prior to Reagan large deficits of $70 to $100 billion only occured in wars, or during recessions, and then receded dramatically during recovery years. Reagan ran deficits of $150 to $250 billion during the expansion, which then topped out at $290 billion during the last recession. The federal debt ballooned to $4 trillion in 1992.
In the recovery of the 1990s the deficit has shrunk from $290 billion (5 percent of GDP) in 1992 to $107 billion (l.4 percent of GDP) in l996, and to a projected $50 billion deficit or less than 1 percent of GDP in 1997. Deficit would be the lowest as a per cent of GDP for any year since the crisis began in 1973, and lower than in any other major advanced industrial country.65 Moreover the budget is projected to be in balance by the year 2002, ending the buildup of debt. This accomplishment comes, as we have seen, through gutting the social welfare gains of the 1930s and 1960s.
The disappearance of the deficit in 2002, never to reappear, is predicated on there being no more business cyclesthat growth will remain strong and there will not be another recession. However, the next recession will produce the same ballooning of the deficit that the last three recessions did. It was only in the 1980s that we got bloated deficits in good years as well as bad. Declining deficits were part of every other previous recoveryand without cuts in food stamps, Medicare, and AFDC.
Moreover, while the deficit has shrunk under Clinton, the debt has continued to flourish. Under Reagan the federal debt grew from $1 trillion to $2.6 trillion. The four years of Bush added $1.4 trillion for a total of $4 trillion. Clintons first four years put on an additional $1.2 trillion, for the grand sum of $5.2 trillion. Under Clintons watch the debt has risen from 62 percent of GDP to 70 percent, well above the Maastricht criterianot a harbinger of unending prosperity.66
Interest payments alone on the debt amounted to $241 billion in 1996 (half of Social Security payments) and rising. Without debt interest payments there would be no deficit. The federal budget had a primary surplus of $137 billion, the largest since the 1950s.67 The interest payment on the debt last year was 3.2 percent of GDP. Together with the arms budget, which constitutes 3.6 percent of GDP, this adds up to 6.8a percentage not much different from many of the years of the permanent arms economy.
The state is now a permanent pump not to stimulate the economy, but to restrain consumption. It drains huge sums out of the productive economy for debt payment. It redistributes incomes from working class taxes to the holders of government debtthe banks, financial institutions, funds, and traders. Instead of stabilizing prosperity it constrains working class living standards, further restricts the market for consumer goods, holds down growth, and eventually profit.
This current boom, despite the rise in profits, has not reversed the long-term crisis or its cause. As Alan Greenspan, Chairman of the Fed summarized, profit "margins are the highest in a generation. They are still below those that prevailed in the 1960s."68
A study prepared by the Department of Commerces Bureau of Economic Analysis, though using non-Marxist measurements, reinforces Greenspans admission.69 One set of figures measures corporate profits as a percentage of corporate GDP. The other measures corporate profit as a rate against net stock (plant, equipment, machinery, net of depreciation).
Both measurements reveal that though profits are the highest they have been in years, they do not match the postwar period prior to 1973. During the postwar boom years from 1945-1968, using the measure of corporate profits as a percentage of corporate GDP, profits averaged around 18 percent a year, ranging from 15.5 percent to 21 percent. In the period running up to the crisis from 1969-1973 they dropped to between 12 and 14.7 percentlower than any year from 1940-1968. In the recession of 1974-1975 profits fell to 10.6 and 12 percent, only to rise to 13 percent in the recovery of 1976-78. They then plunged further in the second recession, 1980-1982, to 8 and 9 percent. In both the boom of the1980s and the recession of the 1990s, profits were in a narrow range of 9.7-11 percent. In the expansion of the 1990s they were at 11 and 12 percent, peaking in 1996 at 12.8 percent.
The Economic Report of the President brags, "Profits as a share of GDP in the first three quarters of 1996 were higher than for any three-quarter period since the 1960s."70 Sounds impressive. Perhaps the President was using different measures, but on corporate profits and corporate GDP, its not quite true. Profit rates are less than any year during the long boom from 1940-73, except for one recession yearthat of 1970 (12 percent). They were less than in the first of the three booms since the long-term crisis beganthe recovery years of 1976-78 (13-14 percent), and only two-thirds the average for pre-crisis years.
The figures measuring profit against net stock show similiar trends. In the postwar boom years, 1946-68, corporate profits on corporate net stock ranged from 11-15 percent , except for two recession years. In the run up to crisis from 1969-73, the rate of profit fell from 13 percent to between 8.8 and 11 percent. Since 1973, the rate of profit averaged 7.3 percent and ranged from 4.7 to 9 percent. In 1996 it rose to 9.4 percent, higher than any year since 1973. Although better than the recovery years of the 1980s, it is very similar to the profit rates of the first crisis recovery in 1976-78. These rates cannot be compared to the postwar boom; they are not even as good as the recession years of the 1940s, 1950s or 1960s.
There is scant evidence that the current boom is sufficient to reverse the long term crisis. Profit rates would have to climb dramatically, and at an even sharper momentum that they have in the 1990s. The boom would need to go on for considerably more years just to approach the average rate of profit of the postwar expansion, let alone the boom years of that period.
Meanwhile capital accumulation has risen sharply since the last recession. Corporate net stock has risen in the last five years from $4.97 trillion to $6.27 trilliona jump of $1.3 trillion, or 25 percent. This puts further downward pressure on the rate of profit.71
The inevitability of crisis and the problem of short-term memory
Capitalism is a system which has been marked by cycles of boom and bust since its inception. Todays expansion will inevitably give way to contraction and slump. As Leon Trotsky once explained:
[C]apitalism does live by crises and booms, just as a human being lives by inhaling and exhaling. First there is a boom in industry, then a stoppage, next a crisis, followed by a stoppage in the crisis, then an improvement, another boom, another stoppage and so on.
Crisis and boom blend with all the transitional phases to constitute a cycle or one of the great circles of industrial development. Each cycle lasts from 8 to 9 or 10 to 11 years. By force of its internal contradictions capitalism thus develops not along a straight line but in a zigzag manner, through ups and downs... The fact that capitalism continues to oscillate cyclically...merely signifies that capitalism is not yet dead, that we are not dealing with a corpse. So long as capitalism is not overthrown by proletarian revolution, it will continue to live in cycles, swinging up and down. Crisis and booms were inherent in capitalism at its very birth; they will accompany it to its grave.72
Todays heady talk of a "new capitalism" is also not new. Quite the opposite. The boom-slump cycle built into the system of capitalism ensures that it is a recurring phenomenon.
In the mid 1960s, Arthur Okun, Lyndon Johnsons economic advisor, proclaimed the "obsolescence of the business cycle." The Council of Economic Advisors agreed, stating in 1965 that
both our increased understanding of the effectiveness of fiscal policy and the continued improvement of our economic information, strengthen the conviction that recessions can be increasingly avoided and ultimately wiped out.73
A recession before the end of the decade, followed by an even sharper decline in the mid-1970s, forced them to reconsider. Paul Samuelson, adviser to the Kennedy government and author of a best-selling textbook, claimed that economists understanding of the economy was nearly complete, making economic crises a thing of the past. "The National Bureau of Economic Research," he told a conference of economists in 1970, "has worked itself out of one of its first jobs, namely business cycles."74
Not only are crises built into the system, but so too is class struggleeconomic, political, and ideological. As Lewis Corey wrote of the wild optimism that prevailed before the Great Depression, this was part of
an ideology in the making by means of which the decline of capitalism is masked and the way is prepared for the ideological subjugation of the masses. At its basis is the conception of a "new capitalism." This conception is recurrent. Any new stage or twist in the development of capitalism is seized upon by apologists who proclaim that the economic order is being transformed. The conception of the "new capitalism" is a form of struggle against the workers and farmers, the clerical and professional workers.75
This is just as true today. The inability of bourgeois economics to understand the laws and perspectives of capitalism was explained by Leon Trotsky in his introduction to The Living Thoughts of Karl Marx:
The struggle of workers against capitalists forced the theoreticians of the bourgeoisie to turn their backs upon a scientific analysis of the system of exploitation and to busy themselves with a bare description of economic facts, a study of the economic past and, what is immeasurably worse, a downright falsification of things as they are for the purpose of justifying the capitalist regime. The economic doctrine which is nowadays taught in official institutions of learning and preached in the bourgeois press offers no dearth of important factual material, yet it is utterly incapable of encompassing the economic process as a whole and discovering its laws and perspectives, nor has it any desire to do so.76
In the 1920s, another period of growthand speculationalso produced widespread predictions of a "new capitalism." The economic guru of the time, Thomas Nixon Carver, declared that "[T]o be alive today, in this country, and to remember the years from 1870 to 1920 is to awake from a nightmare . . .[no more] slums and socialist agitators, blatant demagogues and social legislation."77
Such notions were taken for granted. One day before the stock market crashed in 1929, Prof. Irving Fisher said: "Current predictions of heavy reaction affecting the general level of securities find little if any foundation in fact." The market will "return eventually to further steady increases," and "gains are continuing into the future"sentiments he repeated five weeks after the market crash, when he said there would be no "permanent ill effects" from the "false fear" created by the fall in stock prices.78
The academic Charles Beard concluded his study of The Rise of American Civilization by saying . . . "[I]t is the dawn, not the dusk, of the gods." Todays celebration of the "Goldilocks" economy, of ballyhoo capitalism, is identical. And just like before, it will give way to recession and crisis. Lewis Coreys assessment of the 1920s is particularly apt for today:
The pre-1929 myth makers of prosperity did their job well. The ideology they created lingered, as a cultural hangover, after the breakdown of prosperity and helped to prevent any considerable revolt. As the ideology began to crumble under the impact of prolonged recession, it was revived and reinforced by the ballyhoo of the National Industrial Recovery Act. But when the ideology begins to crumble again, as it must, and the hopeless reality it disguises is revealed, the economic crisis of American capitalism will become a class and political crisis. We are witnessing not a dawn of the gods but the dawn of an era of momentous social struggle and change.79
There is nothing that theoretically precludes capitalism from restoring profit rates sufficiently to embark on a new period of long-term expansion. Unless it is overthrown by the working class, capitalism will solve its crisis through some solution, no matter how reactionarywar, depression, the further decline of working-class living standards. Neither is there anything that precludes this crisis from going on for a long period, given the aged character of this declining system. On the contrary, the size and integration of capitals means that the bosses fear a 1930s-style crisis which the system would need in order to massively devalue capital and create the conditions for a new round of expansion. The result is that slumps will occurbut they will likely be less cataclysmic than the 1930s crash, but more drawn out. And given the practical elimination of the social safety net for millions of workers and the poor, any onset of crisis will feel to many like the 1930s.
Already, the contradictions of the economy are making themselves felt. Comparing the economy to a runner it its last stages of a marathon, Fortune 500 wrote recently that profits for the Fortune 500 companies shot up an impressive 23.3 percent:
Not only did earning sprint ahead in 1996 they also grew faster than revenues, which increased 8.3 percent. This uncommonand utlimately unsustainablephenomenon has been occurring for four straight years. That means corporate America, hell-bent on controlling costs, is still finding new ways of squeezing more profits from each dollar of sales.80
The "magic" of this so-called economic miracle has been built on the backs of workers. The "American model"squeezing the working classis the ruling class response to crisis. Unlike the "American Century" which saw economic growth and rising living standards for workers, this period is characterized by the relentless onslaught on working-class living standards. This has led to much gloating in corporate boardrooms and on Wall Street, but it has its limits. First, it doesnt solve any of the underlying problems in the economy. Second, the jump in profits and productivity produced out of downsizing and restructuring are one-off gains which cannot be sustained.
As the UPS strike shows, there is only so far the ruling class can push before workers begin pushing back. As workers, devastated by years of attacks, begin to organize and resist the employers twenty-year offensive, the focus of the "American model" will become, as it did in the 1930s, a symbol not of corporate greed, but of unprecedented working-class militancy.
1 "The Unlikely Economy," Chicago Tribune, August 14, 1997.
2 Economic Report of the President 1997 (Washington D.C.: Government Printing Office, 1997), pp. 17 and 22 (hereafter cited as EROP).
3 Business Week, "How Long Can This Last?" May 19, 1997.
4 Wall Street Journal, December 3, 1996.
5 L. Uchitelle, "Puffed Up by Prosperity, U.S. Struts Its Stuff," New York Times, April 27, 1997.
7 Chicago Tribune, June 20, 1997.
8 Jacob M. Schlesinger, "U.S. Economy Shows Foreign Nations Way to Grow Much Faster," Wall Street Journal, June 19, 1997.
9 Financial Times, June 23, 1997.
10 R. Stevenson, "Those Vicious Business Cycles: Tamed But Not Quite Slain," New York Times, January 2 1997, and Economic Survey of the United States 1995 (Paris: OECD Publications, 1995), p. 22.
11 Barry Bluestone and Bennet Harrison, "Why We Can Grow Faster," The American Prospect, No. 34, September/October 1997, p. 63.
12 Calculations made from EROP.
13 Ibid, p. 303.
14 Wallace C. Peterson, Silent Depression: Twenty-Five Years of Wage Squeeze and Middle-Class Decline (New York: Norton, 1994), p. 31.
15 Ibid, p. 248.
16 The American Prospect, op. cit., p. 63, and EROP, p. 355.
17 Quoted in the Chicago Tribune, August 27, 1997.
18 Labor Research Association, Economic Notes, May, 1993, p. 6.
19 Lester Thurow, "Almost Everywhere: Surging Inequality and Falling Real Wages," in The American Corporation Today (New York: Oxford University Press, 1996), p. 383.
20 Survey of Current Business, June 1997, and EROP, p. 401.
21 Sharon Smith, "On A Roll," Socialist Review, No. 210 (London), July-August 1997.
22 Kevin Danaher, Corporations Are Gonna Get Your Mama (Monroe, Maine: Common Courage Press, 1996), p. 40.
23 A. Madison, Monitoring the World Economy, 1820-1992 (Paris: OECD Publications, 1995), p. 255.
24 Thurow, op. cit., pp. 383-384.
25 Ibid., p. 385.
26 B. Bluestone and S. Rose, "Overworked and Underemployed: Unravelling an Economic Enigma," The American Prospect, No. 31 (March-April 1997), p. 59, and Wall Street Journal, May 5, 1997.
27 EROP, p. 352.
28 Economic Survey, op. cit., p. 34.
29 Calculated from EROP, p. 352.
29 EROP, p.179.
30 Bluestone and Harrison, op. cit., p. 67.
31 New York Times, April 5, 1997.
32 U.S. Dept. of Commerce, Statistical Abstract of the United States 1996 (Washington D.C., 1996), p. 46.
33 Ibid., p. 400.
34 The Washington Post National Weekly Edition, August 25, 1997.
35 Lewis Corey, The Decline of American Capitalism (New York: Covici-Friede, 1934), p. 366.
36 Alexander Cockburn and Ken Silverstein, Washington Babylon (London: Verso, 1996), p. 8.
37 Quoted in Ibid, p. 8.
38 Allan Engler, Apostles of Greed: Capitalism and the Myth of the Individual in the Market (London: Pluto Press, 1995), p. 112.
39 Business Week, March 31, 1997.
40 Cited in Sharon Smith, "Recovery for the Rich," Socialist Review, No. 180 (London), November 1994.
41 Thurow, op. cit., p. 386.
42 Business Week, March 31, 1997.
43 Thurow, op. cit., p. 386.
44 Thurow, op. cit., p. 388.
45 Wall Street Journal, June 9, 1997.
46 L. Uchitelle, "6 Years in the Plus Column for the U.S. Economy," New York Times, March 12, 1997.
47 Steven Weber, "The End of the Business Cycle," in Foreign Affairs, July/August 1997, p. 72.
48 Bluestone and Rose, op. cit., p. 60.
49 Ibid., pp. 37 and 82.
50 "Whistleblowing Woes," In These Times, October 5, 1997, p. 7.
51 Statistical Abstract, op. cit., p. 430.
52 Ibid., p. 846 and Handbook of International Economic Statistics, op.cit., pp. 49-50.
53 "Industrial Output Surges, Rise is Biggest in 9 Months," New York Times, December 17, 1996.
54 EROP, p. 86-87
55 Chris Harman, "Arms, State Capitalism, and the Current Crisis," International Socialism 16, Spring 1982, p. 37.
56 See Karl Marx, Capital, Volume Three (London: Penguin, 1991), Chapters 13-15.
57 Quoted in Duncan Hallas, The Meaning of Marxism (London: Pluto Press, 1971), p. 21.
58 Quoted in Tom Ridell, "The Political Economy of Military Spending," in The Imperiled Economy: Through the Safety Net (New York: Union of Radical Political Economics, 1988), p. 228.
59 Peterson, op. cit., p. 175.
60 Quoted in Hallas, op. cit., p. 21.
61 Ridell, op. cit., p. 227.
62 Ibid, p. 228.
63 Peterson, op. cit. p. 182.
64 Ibid, pp. 194 ff.
65 Historical Tables, op. cit., pp. 21-24.
66 Statistical Abstract, op. cit., p. 330.
67 EROP, p. 81.
68 D. Wessel and J. Schlesinger, "U.S. Economys Report Card, Not all As," Wall Street Journal, May 5, 1997.
69 I want to thank the analysts at the Bureau of Economic Analysis who prepared this study. They took Department of Commerce corporate profit data for the last seventy years and calculated its relationship to GDP and to plant and equipment (a rough stand-in for means of production), net of depreciation.
70 EROP, p. 89.
70 F. Forsyth, "Current Yield," Barrons, February 17, 1997.
72 Leon Trotsky, "World Economic Crisis and the New Tasks of the Communist International," from The First Five Years of the Communist International, Vol. 1 (London: New Park, 1973), p. 252.
73 Quoted in Perleman, op. cit., p. 15.
74 Quoted in Chris Harman, "The Crisis in Bourgeois Economics," International Socialism 71 (Summer, 1996), p. 3.
75 Corey, op. cit., p. 15.
76 Leon Trotsky, The Living Thoughts of Karl Marx (Philadelphia: David McKay Co., 1939), p. 5.
77 Corey, op. cit., pp. 18-19.
78 Ibid, p. 21.
79 Ibid., p. 23.
80 Ronald Henkoff, "A Year of Extraordinary Gains," Fortune 500, September 13, 1997 (Fortune web site).