Does it matter who wins the US presidential election tomorrow? Is it Tweedledum and Tweedledee?
It is often claimed by non-Marxists that the Marxist materialist conception of history leaves no room for the role of the individual. Individuals are just swept along by historical forces, both economic and social. So whoever is a leader of a major hegemonic state like the US will make no difference. And it’s true that the materialist conception of history does explain why stone age hunter gatherers of Australia or the Americas could not resist the invasion and destruction of their modes of production and civilisations by small groups of European plunderers and settlers relying on the military power and technology of capitalism. In the end, it did not matter who the ruler of the Inca or Aztecs was or how clever the hunters in the middle of Australia were in surviving the desert. Even the most able and clever of them was eventually defeated by even the most inept of European invaders.
But that does not mean individuals cannot make a difference. History makes man, but man makes history (Marx). The role of the individual in history is very much part of Marxism, as any reading of Marx’s 18th Brumaire masterpiece on the rise of Louis Bonaparte shows. But the actions of individuals have to be placed in context. And the context of this election suggests that whoever wins will not alter the US economy much or the livelihoods of American citizens.
Certainly that is what the majority of eligible voters have concluded, because the biggest vote in the election will go to the Non-Voting party. As in previous elections, anywhere between 40-50% will not vote. These are mostly the working poor, the unemployed, the disabled and the unorganised, unskilled working class. They feel that they have no stake in the elections and the system it represents – and they are right. Those who will provide the vast bulk of votes will be the so-called ‘middle class’ (professionals, business people, state employees and organised union workers). The next US president will be voted in by a decision of ‘ middle’ and upper classes – on the whole.
What is ironic about this election is that it is supposed to be about the economy, stupid! (as most elections are, except before wars). Yet there has been little debate between Obama and Romney about the future of the US economy and the policies to adopt. The debate has been mainly about Obama’s record, ‘Obama healthcare’, inequality and tax, government competence and of course,the social issues of gender, abortion and religion. It has not really been about where the economy is going; why did the great crisis happen; or has it been solved, and can it be avoided in the future? On these issues, neither Obama nor Romney has much to say.
Let’s put it this way. Would things have been any different in the US economy if Al Gore had beaten George Bush Jnr in 2000 after the great chad dispute? Would a Democratic president or administration have avoided the recession of 2001, the credit boom and housing bubble of 2002-7, the huge sub-prime and ‘financial weapons of mass destruction’ scandal, the banking crash and the ensuing Great Recession? When you ask the question, you know the answer. No.
Would foreign policy have been different? Well, perhaps. The invasion of Iraq and the lying about ‘the weapons of mass destruction’ was perhaps a strategy and invention of Bush and the neo-cons. Maybe Gore would not have formed ‘a coalition of the willing’ to overthrow Saddam. But after 911, the invasion of Afghanistan would still have been promulgated by a Democratic presidency. And this is now a continuing running sore on American hegemony and its taxpayers. The real change in the Middle East has come through the Arab spring, not by the actions of American imperialism. Moreover, it’s most likely that the US will support an Israeli air attack on Iran in 2013 whoever is in the presidency, Obama or Romney, although the latter might be more enthusiastic.
The truth is that things would have been little different in the economy over the last 12 years whether there had been a Democrat or Republican. And it is likely that they will be little changed in four years time whoever wins on Tuesday. Over the past ten years, the US economy has performed more poorly on every key output, employment, wage and salary, and household/family income measure than at any time since the Great Depression of the 1930s.
Employment levels have collapsed.
There are still 4.2m fewer jobs than there were in December 2007 and employment remains 3.1% lower than it was before the recession began 58 months ago. Indeed, this is the first recession in the post-war era when employment hasn’t recovered within four years of the recession’s onset. Employment was up by 2% at the same stage after the 2001 recession, four years and 10 months after its start; it had bounced back 6.7% at the same stage after the recession of 1990-91; 8.3% after that of 1981-82; 9% after that of 1960-61; and 10.4% after that of 1970. It exploded by an astonishing 12.5% at the same stage after the end of the first post-war global recession of 1974-5.
The US economy needs to create 125,000 jobs per month to keep up with a growing labour force; the 170,000 monthly rise achieved over the past three months would mean unemployment would not return to ‘normal levels’ for another four and a half years. The unemployment rate among African-Americans jumped from a horrific 13.4% to 14.3% in October. America’s jobs market has diverged: educated university graduates are doing much better than those with limited qualifications. The incomes of recent graduates and of people in their early 20s has collapsed, however.
The Great Recession saw 8.75m jobs disappear. Between 2007 and 2009, there were 15.43m U.S. workers who were displaced permanently from their jobs. This was by far the highest number of workers displaced over a three year period in the past 30 years for which we have such data. Nearly 11% of U.S. workers 20 and older were displaced from their jobs, the highest dislocation rate in our post-WWII history. Only 49 of every 100 dislocated workers had found some type of employment.
And there is the grotesque record of extreme inequality of income and wealth. The highest-earning Americans (4.3%) take 28.4% of all personal income, the lower-earning 66.9% take in just 31.2% (http://www.novoco.com/hottopics/resource_files/jcx-18-12.pdf). Between 1976 and 2007, the US real GDP per head grew 66%. But the average income for the top 1% increased by 280%, while the average income of the bottom 90% pretty much stagnated, growing just 8% over this 30-year period. From 1978–2011, compensation for corporate chief executives grew more than 725%, compared to the annual compensation of a typical private-sector worker, which grew a meagre 5.7%. The Congressional Budget Office reported that the top 1% of income earners gained 58% from 1993 to 2010 (implying a 2.7% annual growth rate), or more than half of the overall economic growth of real incomes. Professor Emmanuel Saez‘ report Striking It Richer found that the top 1% captured 93% of the income gains in the first year of recovery.
Poverty is rife. Half of all American workers (75 million out of 150 million) reported incomes below $26,363 in 2010. Those with incomes below $25,000, 48.2% of all workers, received collectively $743 billion in income. That’s only 6.34% of all income from wages! The combined wage income of 112 million American workers all earning less than $50,000 in 2010 was less than the total income of the top 1% of tax-filers! The 1% receive half their income in dividends and capital gains (taxed at a lower rate)and only about 25% from wages.
And if you look at wealth, the lowest-saving 50% (59 million households) own just 1.1% of U.S. household net worth, about $11,000 per family, while the average for the entire nation (118 million households) is $498,000 per family or household. The lower 50% of US households have just 1.1% of all household wealth.
This wealth distribution is repeated globally, of course. Credit Suisse’s World Wealth Report for 2011 finds that “the bottom half of the global population together possess barely 1% of global wealth. In sharp contrast, the richest 10% own 84% of the world’s wealth, with the top 1% alone accounting for 44% of global assets.”
It’s been a lost decade in all ways. And what do the candidates offer Americans for the next decade? – pretty much more of the same.
Romney says he plans to reduce taxes by 20% across the board; Obama wants to reduce taxes – but by not so much. Romney wants to cut government spending to get it under 20% of GDP (that is a cut equal to more than 4% of GDP) and keep it there; Obama wants to cut spending – but by not so much. Romney says he will cut all ‘discretionary government spending’ to below 2008’s level; Obama says he too will cut discretionary spending – but by not so much. Romney says he will cut the Federal government workforce by 10%; Obama will do so too – but by not so much. Romney wants to extend all Bush tax cuts; Obama says he will do so too – but not to the very rich. Romney wants to accept all the scheduled ‘automatic cuts’ in government spending (coming with the so-called “fiscal cliff”) except those for the military; Obama will accept some, but not others.
Government investment has already been cut by Obama in a big way.
In previous posts, I have described the collapse in US infrastructure that led to the New Orleans disaster with the levees after Hurricane Katrina and the antiquated New York subway system after Super Storm Sandy. America’s national highway system was originally a Federal government project, justified on the basis of national defence. Airports were built largely from public funds. But there are no plans from Obamna to boost such spending, while Romney wants to rely on private sector investment. Cutting taxes is not such a bad idea, especially hugely regressive taxes like those payrolls or VAT. Higher personal taxes and taxes on capital gains for the rich would be progressive. Instead, both candidates will opt for higher regressive taxes and lower progressive ones.
‘Obamacare’ has been condemned by Romney as hugely expensive. But he merely wants to return to the status quo with only those who can afford it getting medical treatment and leaving private hospitals, drug companies and doctors in control. On the other hand, all that Obama achieved was to put private health insurers in the driving seat with government funding. Both candidates are looking to reduce the role of direct aid to those in need by containing the costs of Medicare.
The immediate issue after the election for the political elite is to find a way of agreeing on more government cuts to solve the so-called ‘fiscal cliff’. If they cannot agree, Congress will implement automatic cuts that will savage the economy by up to 5% of GDP. Most likely there will be an agreement to make a smaller dent in public services, welfare and medicare. Great! What is clear is that there will be no new fiscal stimulus that left Keynesians are clamouring for. If Romney wins, he will sack Fed chief Ben Bernanke for being too lax with monetary policy and for proposing yet another round of money printing. If Obama wins, he will keep Bernanke. But either way, quantitative easing is not working, except to boost bond and stock prices for the elite that hold them as wealth.
Some mainstream economists are trying to paint an optimistic view of the next four years. “No matter who wins the election tomorrow, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009. “The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2% before doubling to around 4% in both 2014 and 2015 as consumption, construction and hiring all pick up.
Others are less confident, predicting average real GDP growth well under the previous 2.5% a year trend. And I remind you what Robert J Gordon recently argued (see my post, https://thenextrecession.wordpress.com/2012/09/12/crisis-or-breakdown/), that the US is in a terminal stage. US real GDP per capita will be slower that in any extended period since the Civil War, when US capitalism first sprung onto the world arena. Gordon concludes that US real economic growth could fall to just an average 0.2% a year for the foreseeable future compared 2-3% of the past.
For me, the bellwether for the health of US capitalism is the rate of profit. That shows little sign of returning to levels seen in the late 1990s, let alone back to the golden age of the 1960s. A low and probably falling rate of profit implies a low rate of new investment ahead, with unemployment staying well above ‘normal’ levels. And it implies the likelihood of another slump in production before the next four years are over along with the continuance of the Long Depression, now in its fifth year. And remember the Long Depression that started in 1873 lasted 20 years.