recession since the second world war and there is no end in sight. Unemployment figures for November showed that 6.5% of the labor force - more than six million workers - are officially out of jobs. This does not include workers who have given up looking for work nor does it include those who have part-time jobs because they cannot get full employment. If the latter two categories are included the actual unemployment would be closer to nine million. This is the highest unemployment rate since the 1960-61 recession under the administration of Democratic party President John F. Kennedy. But virtually all analysts predict much higher rates. Even the Republican administration of President Ford, which pretended until recently that there wasn't a recession, now concedes a likely unemployment rate of well over 7% next year. Some forecasters say the rate will exceed 8%. The potentially explosive character of such levels can be realized by the fact that in November the unemployment rate for Black workers was 11.7% and for Black teenagers, 37.5%. In industrial centers like Detroit, Michigan, the overall unemployment rate is already well over 9%. And it is, perhaps, Detroit that most symbolizes the character of the economic crisis in the United States. The great auto trusts have suffered a sales drop of 38% from last year's already depressed levels. Chrysler Corporation, hardest hit of the "Big Three" (the others are General Motors and Ford), closed five of its six assembly plants until early January, idling about 60,000 workers. In all, the
_by DICK ROBERTS number of U.S. autoworkers already laid off or on notice is 300,000 out of a total work force of 750,000. "We're in hell, " a worker with 32 years labor in Chrysler's Jefferson Avenue assembly plant told a Time magazine reporter December 2. "Right now there are people with 1950 seniority laid off. I was right here in 1958 (the year of the worst postwar slump in U.S. auto production - D.R.), but the feeling wasn't like this. There wasn't this feeling of depression. " Not only assembly-line workers are being hit. "The car companies are laying off white-collar workers in larger numbers than at any time since the severe slump of 1958, and the nervousness among clerical workers and middle-management employees leads to wild rumors and strained human relations, " Time reported from Detroit. And the claws of unemployment have suink into many other layers of the population as well. After auto, the housing industry is the most badly hit, with new starts of construction at 1.1 million during October compared to 1.7 million a year earlier. Retailing is beginning to be affected and the chain stores complain about a serious deterioration in Christmas sales upon which virtually the entire year's profits depend. In retailing alone there are already over 900,000 persons currently unemployed. As major industries like auto slash production the "reverse multiplier" will be felt throughout the economy. Car production consumes almost 20% of U.S. steel output, for example, and layoffs in steel are certain to come. Rubber companies also
45
U.S.A.
depend to a huge extent on auto purchases. And meanwhile, as workers in these and other industries hit the streets, their purchasing power will decline and consumer goods industries will be all the further affected. This will be even more severe, however, because this recession is inflationary. Not only do consumers reduce purchases because wages have declined (or ceased) but also because prices have risen. For the first time to a significant degree a U.S. recession is being accelerated by inflation. Again the auto industry, which accounts for more than 10% of the U.S. gross national product, is an example. According to Business Week magazine September 14, "For 1975, customers will be paying from $200 to $1,400 more per car, with the average increase more than 5450 above the 1974 models. That is on top of an aimost equal increase for the 1974 models. If is the combination of the inevitable overproduction crisis with seemingly uncontrollable inflation that uniquely characterizes the current recession. The next sentence in the just-quoted Business Week magazine states that "Ford Motor Co. President Lee lacocca laments, "Two years ago we warned people they might have to pay $3, 000 for a Pinto (one of the lowest-priced U.S. cars - D.R.), and now, by God, they will be paying $3,000 for a Pinto. * One might well wonder at lacocca's position. With Ford sales off more than 30%, the nation's second largest auto maker announced a third reduction of capital spending plans in December. But at the same time it continues to raise prices. This is because the source of inflation is not in the first place the pricing policies of monopoly but the massive extension of the money supply, through the extension of credit at all levels of the economy, and especially through the deficit spending of the federal government. As prices rise throughout the economy no corporation can resist the temptation to pass on its own higher costs (and then some) to consumers by raising its prices. After all, as Karl Marx explained, capitalist pricing policy is aimed at meeting an expected return on capital. Furthermore, the capitalists undoubtedly believe -and the auto industry is lobbying for this - that the Ford administration will soon be forced to turn toward heavier deficit financing. (As will be seen, there are strong suggestions that such a turn is already under way.) Once purchasing power is sufficiently raised by new rounds of inflationary government deficits, the auto makers will get their profits in the higher priced cars they believe they can sell. The contradictory combination of inflationary and 46 recessionary threats produces increasingly frequent swings at the governmental level in economic policy-making. Government economists focus their attention first on one and then on the other of the contradictory poles of the crisis, proposing in turn incompatible regulators to stem the slide. At one moment the fear is that further recession will produce unacceptably high unemployment levels - unacceptable, that is, in the costs of rising worker discontent and the slump in consumer purchasing -and possibly provoke a worldwide depression. At the next moment the concern is that antirecessionary spending will spur further inflation that will trigger bankruptcies, the closing of banks, and possibly the collapse of international credit. Meanwhile all the machinery for imposing wage controls is kept in the wings. Committees have already been formed and the necessary Congressional legislation passed in order to impose wage freezes whenever this course is chosen. At the same time the propaganda is incessant that prices can be controlled despite the clear lesson of President Richard Nixon's "New Economic Policy" that the capitalist government can never control prices. Business Week magazine released a special issue October 12 warning of the consequences of the gigantic U.S. debt: "The U.S. economy stands atop a mountain of debt $2. 5-trillion (thousand thousand million) high - a mountain built of all the cars and houses, all the factories and machines that have made this the biggest, richest economy in the history of the world. The next biggest capitalist economy is that of Japan, but it would take a sum more then one-third the gross national product of Japan to pay this year's interest on the U.S. debt. "The U.S. is the Debt Economy without peer. It has the biggest lenders, the biggest borrowers, the most sophisticated financial system. The numbers are so vast that they simply numb the mind: $1trillion in corporate debt, $600-billion (milliard) in mortgage debt, $200-billion in state and local government debt, $200-billion in consumer debt." Business Week believes that deeper recession could provoke a situation in which a number of corporations could not sell their goods and consequently not pay off their debts. At the same time further inflation can make interest rates so high that corporations could not afford to borrow and thus could not finance the inventories of goods they have been unable to sell. Both threaten to burst the credit balloon. And this is not to speak of their concern that one of the weaker imperialist nations including its government and industry - Italy, and perhaps even Britain - might default on its debts.
But when it gets down to actually doing something about inflation and ceasing to pour money into the ever expanding balloon, the capitalists are equally without recourse. For some months the Ford administration campaigned around the slogan that "inflafion is the number one enemy" and attempts were made to trim down the massive S315-billion U.S. budget. There was even talk about cutting the war expenditures, which stand at over $100-billion, and are by far the largest government expense. But the United States goverment is incapable of halting its manufacture of weapons. From one side the war industry is too central in the economy of a given state or metropolis for any representative in Congress to go along with cuts in the military program when it gets down to the specifics of a given locale. From the other side the necessity of the United States to police world imperialism leaves little room for maneuver. When budget cuts are mude, the programs for health, education, and social welfare, as minimal as they are, go first. Yet the very existence of a recession makes it difFicult for the government to collect the high levels of taxation that would be required to eliminate deficit spending and bring the inflation under control. On top of this, those who fear that the recession may go too far seem to be getting the upper hand in the administration. There is increasing talk about a substantial tax cut to prime the economy in 1975. On December 20, Washington announced that the budget deficit for the next fiscal year, beginning July 1, might reach the startling level of $35-billion, by far the biggest deficit since the second world war. So much for the "inflation fighters" at the White House! Skyrocketing prices Prices have risen at a rate abeve 12% for the whole year, above 13% for the last three months. The perspective is for even faster price increases in the near future. At a certain point, however, the recession will so undercut wages and purchasing power that a slowing down of the price rises is inevitable. This chaotic throwing of workers into the streets and robbing their dinner tables is the only way that inflation can be ultimately stemmed by any capitalist government. For the ruling class it is essentially a question of how much unemployment they can get away with. While Washington pretends that such pump priming as it is now being forced to undertake is partially a measure of "international cooperation" in response to requests from abroad (Ford has met with French, West German, and Japanese officials only recently), Congress has just passed trade legislation aimed above all at protecting the U. S. market against foreign imports. In as diplomatic a language as possible under the circumstances, Paul Lewis of the Financial Times of London wrote for the New York Times that "The Congressional mandate is both protectionist in approach and restrictive in detail and the difficulty with which if has been extracted from the Legislature points all too eloquently to the underlying mood of the people." Washington could, from a certain theoretical standpoint, help prevent the slide of international economies toward depression by opening up its markets and pegging the dollar at some "equitable" rate in comparison to foreign currencies. From the same standpoint it could have done this in the 1930s. But in the 1930s what it did was to pass the notorious Smoot-Hawley tariffs, which precipitated world trade warfare, and leave the gold standard. Today, with protectionist measures increasingly emanating from Congress and the dollar floating in world money markets there is little indication that it will do otherwise than before. This is because the interests of foreign capitalist rivals (not to mention all workers) are emphatically subordinate to the interests of the U.S. ruling class. Initial workers' responses For the most part the trade-union bureaucracy is acting as though it were shell-shocked by the massive layoffs and paralyzed from taking any action against them. Along with token pleas for a public works progran., the response of the AFL-CIO hierarchy has been to demand more protective barriers against imports and to escalate its racist, xenophobic campaign against the so-called "illegal aliens." Charging that these workers without proper documents, mostly Mexicans, are taking more than one million "American jobs, " the AFL-CIO brass is calling for harsher repression and more deportations of these superexploited workers. For its part, the hard hit United Auto Workers (not affiliated with the AFL-CIO) has launched an advertising campaign to encourage people to buy cars, while UAW President Leonard Woodcock echoes the auto magnates' insistance that prices cannot be lowered because profit margins are "slim." To the extent that any direct actions against the layoffs have been organized, it has been by Black community organizations. A potentially explosive situation is building up in the ghettos, where the jobless rate reaches 30, 40, or 50%. Demonstrations and rallies of up to several hundred workers have been held in Chicago and Detroit, and a national demonstration in Washington has been called for January. In addition, the recently formed Coalition of Labor Union Women has gone on record in favor of the shorter workweek as a measure to provide jobs for all.
47