The Freedom Road Socialist Organization presents our Main Political Report, voted on at the recent 8th Congress, May 2018. The three sections–economic, domestic political, and international–describe the societal conditions in which we organize and struggle for a new society. The FRSO originally started discussing, debating and revising the resolutions in September 2017. The documents provide a basis for understanding basic conditions, the forces in motion in society, as well as the strengths and weaknesses of the movements for social change and revolution. We ask you to read, comment, discuss and share them. Improving our understanding of how society works will strengthen the leadership of mass groups and positively impact the people’s movements.
Also available as PDF.
The Current Economic Expansion
In June of 2009 the worst economic downturn in the United States since the Great Depression of the 1930s officially ended. For the last nine years the U.S. economy grew, albeit at a slow pace. This makes the current expansion the fourth longest in U.S. history. [1]
But the current economic expansion is a recovery for the capitalists, not for the majority of the working class. Stock prices, as measured by the S&P 500, are more than 60% higher than the previous peak in 2007. Corporate profits are up 30% from their pre-crisis high. These gains have been enough to raise the income of a typical U.S. household to a new high in 2016, for the first time since 1999. [2]
On the other hand, most working class households still earn less than in 1999. Most of the jobs added in the current expansion are in the most well-to-do neighborhoods, while the poorest neighborhoods have seen no net job growth at all. Millions of long-term unemployed have given up looking for work. This has caused a drop in the “labor force participation rate” from its peak of 66.4% in 2007 to a low of 62.4% in 2015. This means that there are about 6 million people who would have been working or looking for work in 2007 that are no longer. This represents a big expansion of what Marx referred to as the “reserve army of unemployed” and a factor in the slow rate of wage growth in this last period of economic growth. [3]
Other factors holding down workers’ wages include the capitalists’ restructuring of the labor market to increase the number of part-time, temporary, and contract workers. This is taken to the extreme with the rise of the so-called “sharing” economy with on-demand workers such as those in Uber. With wages rising 2.2% after inflation, while workers’ productivity (value of their output) rising at an 11% annual rate, capitalists’ profits have swelled. [4]
At the state and local level, attacks on government workers have intensified, led by Republicans who want to break the power of public-sector workers’ unions, but also joined by Democrats who are intent on cutting the pensions for government workers. These attacks and cuts are part of ongoing national oppression and gender inequality, as they fall the hardest on women and oppressed nationalities, who are much more likely to be public sector workers, especially those with lower and middle incomes (excluding police, fire, and professional workers).
One important gain for the working class and oppressed nationalities has been the implementation of the Affordable Care Act. The number of workers and lower-stratum of the petty-bourgeoisie without health insurance has fallen by almost one-half. Millions of people were able to join the Federal Medicaid program for lower-income Americans. Millions more were able to get health insurance from their jobs because of the employer mandate in the ACA. This represents the biggest expansion of health insurance in the United States since the 1960s. While a step in the right direction, the ACA does not guarantee healthcare for all, as it is NOT single-payer health insurance. President Trump has already launched attacks on the program, showing the unstable nature of healthcare reform under a capitalist system. [5]
The Most Recent Crisis of Monopoly Capitalism
One of the features of capitalism noted by Marx was that each resolution of a crisis laid the groundwork for an even greater crisis. After the dot-com bust in 2000-2001, speculative capital flowed into the mortgage market, fed by historically low interest rates set by the Federal Reserve. The boom and then bust in the housing market led to both a recession, and then a financial crisis, the scale of which had not been seen since the Great Depression of the 1930s.
The main features of the last economic crisis were first, the increased exploitation of the working class, cuts in government services, and schools, and generally lower standards of living as the capitalists try to shift the burden of the crisis on to the working class and oppressed nationalities. A vicious cycle developed where jobless workers fall behind on their debt payments, and then are denied jobs because of their bad credit! More and more people were losing health insurance as businesses cut benefits and individual plans become too expensive. Homelessness grew and mothers and children were thrown off of TANF and into the streets due to 5-year limits.
One of the functions of economic crisis is that it is an opportunity for the capitalists to restructure the economy to increase their profits over the long term. The most recent crisis sped up the loss of unionized, middle-strata working-class jobs. At the same time there are more and more part-time and temporary jobs. More and more businesses do not even give their workers regular schedules, but change them week to week and even day to day, to reduce their labor costs and increase profits, and at the same time playing havoc with their workers’ lives.
The crisis accelerated a fundamental tendency of capitalism to eliminate jobs and increase the reserve army of labor by substituting machinery and equipment for labor. This tendency, which is what Marx called increasing the organic composition of capital, is responsible for most of the losses of well-paying auto and steel jobs, not imports. For example, the United States is producing about the same number of cars as it did 20 years ago, but with 25% fewer workers. [6]
The crisis also increased economic inequality along national lines. The income of a typical Black household was only 59% of white households in 2011. While the income gap is large, the wealth gap is huge. In 2009 the typical white household’s wealth was TWENTY times as large as the typical Black household and EIGHTEEN times larger than the typical Latino household. During the crisis the wealth gap between whites and oppressed nationalities, which was very wide to start with, became even greater, as the typical white household lost 16% of their wealth, the typical Black household 53%, the typical Asian household 54%, and the typical Latino household lost 66% of their wealth! [7]
Secondly, the crisis destroyed means of production. Plants closed down, never to reopen. Stores and even entire shopping malls were boarded up. Some banks went as far as tearing down foreclosed homes to try to prop up prices for remaining houses. The Obama administration’s “rescue” of U.S. auto makers actually led to more and faster closings of plants and dealers than GM and Chrysler had been doing on their own. The crisis of unemployment worsened, with the official unemployment rate rising to more than 25% in the hardest hit city of Detroit. [8]
Third, the concentration and centralization of capital accelerated as smaller and weaker firms folded and the bigger and strong ones snapped them up or even preyed on each other. This can be seen in the U.S. banking industry, where four giant banks (Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo) have emerged with over half the bank assets in the United States. [9]
The U.S. Economy and the World
The recent crisis also sped up the relative economic decline of the United States. There is growing criticism of the free-market economics pushed by the United States to further its own economic interests. Other countries are beginning to questioning the large debt of the United States to the rest of the world, and the role of the U.S. dollar as the international reserve currency. [10]
In our judgement, the high tide of imperialist globalization has passed. From the end of World War II to the last recession of 2007 to 2009, the U.S. monopoly capitalist class held a bipartisan consensus in favor of “free trade” which favored the export of capital. However, the tide began to shift with the most recent economic crisis, with some reports showing the United States to have enacted more protectionist measures than any other country. The election of Donald Trump to President 2016 marked a major break in the free trade consensus among the U.S. elite. [11]
One of Trump’s first acts was to cancel the U.S. participation in the Trans-Pacific Partnership, effectively killing the agreement. His administration is also carrying out more protectionist policies by putting tariffs on Chinese solar panels. However, Trump and other Republicans have had to walk back a number of their campaign promises and proposals. Trump has gone from cancelling NAFTA, the North American Free Trade Agreement, to “renegotiating” the treaty. Republicans in Congress have dropped their proposal for a “Border Adjustment Tax” that would have acted as a tariff, or tax on imports, under pressure from many big businesses.
The relative stability of the world capitalist economy over the last few years in no way has overcome the law of uneven development under monopoly capitalism or imperialism. While there is a high degree of globalization in manufacturing (witness the ubiquitous iPhone), there are increasing barriers and competition to U.S. corporate domination. China and Brazil led a revolt of developing countries in the World Trade Organization that has effectively blocked U.S. plans to dominate intellectual property and undermine even more state sovereignty through the WTO. The growing size of the Chinese economy has moved it into more and more of a leading role in industries such as solar panels and electric cars. [12]
Contradictions among the capitalist countries continue to break out into conflict. The Trump administration has slapped tariffs on Canadian lumber and is trying to put tariffs on Canadian jet planes made in Europe. The Brexit is major blow to the capitalist unity project known as the European Union and also to U.S. influence in the E.U. which was largely channeled through Great Britain.
National Oppression and the Economics of Racism in the Era of Trump
The foundations of the U.S. economy were built on Native American lands and the genocide of native peoples as well as the chattel slavery of Africans. In periods of economic crisis, Black Americans, Chicanos and Latinos, Asian Americans and other oppressed nationalities and indigenous peoples are the first to suffer and the last to recover. For example, the increase in wages in 2016 finally lifted the average household income in the U.S. back to the level they were in 1999. However, this wasn’t true for Black households whose income has not recovered.
Since the election of a bare-faced racist to the White House, there is an increasing awareness about white supremacy, police crimes, as well as acts of hate and other examples of virulent racism in the country. These are features of the superstructure of monopoly capitalism in the U.S. which are based on underlying profits that result from seizure of land, underpaid labor, inflated living costs, and the denial of government services. One of Trump’s first actions was to sign an executive order to clear the way for the Keystone XL and Dakota Access Pipeline (DAPL).
National oppression has always been driven by super-profits gained from lower-paid labor, or unpaid labor as in the chattel slavery of the U.S. South for 250 years. Latino households make $18,000 a year less than white households, and Black households make $25,000 a year less. This wage differential is an important source of super-profits. While the unemployment rates for all nationalities have dropped from the double-digits during the last economic crisis, the gap between Blacks and whites continues, with African American rates still twice that of whites.
The thirst for profits is also driving the free market policies that look for private profits from what used to be government services, such as the public schools. If a capitalist can’t make profit from them, then they are shuttered, or replaced by charter schools. Black and Latino communities are disproportionately hit by these attacks. The closing of factories is followed by closing of schools, and then real estate plans to flip and gentrify poor neighborhoods.
This is one of the fundamental contradictions of monopoly capitalism: that the economic boom in certain areas actually makes many oppressed nationalities worse off. The gentrification of poor and inner-city neighborhoods has a disproportionate impact on oppressed nationalities, who are driven out of their homes. Homelessness is on the rise.
Government Economic Policy Under Trump
Despite his pledge to support Social Security and Medicare, Trump has joined with Republicans in Congress to undermine these programs and slash spending on Medicaid. Already millions of people have been left out of getting health insurance through the ACA as Republican state governments have blocked the Medicaid expansion in almost half of all states. Trump and Republican in the House also voted to undo the ACA, that would have taken health insurance from more than 20 million people.
After a burst of Keynesian tax cuts and spending increases in the 2009 American Recovery and Reinvestment Act, the U.S. government swung to austerity, with $900 billion in spending cuts in the 2011 Budget Control Act and $600 billion in tax increases in the 2012 Taxpayer Relief Act. The most recent Trump budget proposal slashes domestic spending to pay for tax cuts for the rich and an even faster military build-up.
Trump and the Republican Congress also have plans for tax “reform” that would cut taxes on the rich and large corporations (this was one of the main reasons that they tried to repeal the Affordable Care Act). Right after being elected, Trump proposed to slash the top corporate tax rate from 35% to 15%. He wants to end the estate tax and AMT (Alternative Minimum Tax which forces some high income individuals, like Trump, to pay taxes by disallowing some tax breaks), and reduce the tax rate on the highest incomes. In fact, a quarter of the tax breaks would go to the top ONE-TENTH of 1%, and another quarter to the other 9/10 of the top 1%. Trump’s tax plan would have raised taxes on single-parent working families and those with larger numbers of children. [13]
Trump’s announcement that the United States would withdraw from the Paris Climate Agreement was part of his campaign to blame regulation for loss of jobs in coal mining areas. But the decline of Eastern and unionized coal mining jobs is mainly due to the low price of natural gas (because of increased use of hydraulic fracturing, or fracking, which Trump supports), and greater coal production in non-union, more mechanized Western coal sites. [14]
Trump and the Republicans plan to “reshore” manufacturing jobs mainly consists of keeping wages low and spending billions of dollars to subsidize big corporations to set up shop in the United States. With the federal minimum wage at the same level as 2009, and at the lowest level, adjusted for inflation since 1950, it is barely above the minimum wage in South Korea. Republican Governor Walker is proposing $3 billion dollars in subsidies to bring Foxconn, a Taiwanese electronics manufacturer, to Wisconsin. But like many other new manufacturing plants, it will be highly automated with relatively few workers. [15]
The Peoples’ Struggle and Socialism
As of the time of this draft (October 2017), it is clear that the world economy is in a temporary period of relative stability. The U.S. economy has been growing for more than eight years while the economic crisis in the Eurozone in Europe has calmed down for now. Even the Japanese economy, which has been stagnant for more than twenty-five years, is growing again.
But it is only a matter of time before another economic crisis overtakes the United States. This crisis could emerge within the U.S. economy, where there are some early signs of weakness in the expansion. The Federal Reserve is raising interest rates, even though inflation is well below their target. Or it could emerge in Europe or even Asia, and spread to the United States through an increasingly globalized capitalist economy. There is also a small, but not insignificant chance that a misstep by the Trump administration and/or Republican Congress, could trigger a crisis. [16]
But no matter what the monopoly capitalists do and say, the last economic crisis shook confidence in the capitalist system. Opportunities for educating people about the true nature of monopoly capitalism are growing. However, the right-wing, reactionary section of the monopoly capitalists have been promoting white chauvinism to claim that oppressed nationalities at home and other countries abroad are at the root of economic problems of the (white) working class. It is important at this time to point to the need for socialism, a system based not on the profit of privately owned corporations, but one based on serving the needs of the working people through government and collective ownership and control of businesses and natural resources.
Endnotes:
[1] Business Cycle: National Bureau for Economic Research, U.S. Business Cycle Expansions and Contractions. Note that in January, 2018, the current expansion will become the third longest, following only the 1991-2001 and 1981-1990 expansions.
[2] S&P 500 data from <www.bigcharts.marketwatch.com>. Corporate profits from Bureau of Economic Analysis, GDP and National Income and Product Accounts (NIPA) database at <https://www.bea.gov/iTable/index_nipa.cfm>. Median income: Ben Leubsdorf, “New Record for Household Income,” Wall Street Journal, September 13, 2017, page A2.
[3] Excluding the top 20% of households, which is most likely to include members of the middle and upper stratum petty bourgeoisie and capitalist classes, households in the lower 40% of the income distribution are still below their income in 1999, adjusted for inflation. Job distribution from Jordan Yadoo, “The Rich are Getting Richer in the U.S. Recovery,” Bloomberg News, September 25, 2017. Labor Force Participation Rates from the Bureau of Labor Statistics. The official U.S. unemployment rate only counts those who are not working for pay AND are looking for work. Mainstream bourgeois economists use the employment number (number of jobs), not the unemployment rate, to define turns in the business cycle such as the start of a recession. (National Bureau for Economic Research, http://www.nber.org/cycles/jan08bcdc_memo.html)
[4] see Fightback! News: http://www.fightbacknews.org/2015/8/18/businesses-restructuring-job-market-keep-wages-down-profits
[5] Census Bureau, “Health Insurance Coverage in the United States: 2016”, September 2017.
[6] Bureau of Labor Statistics, “All Employees, Motor Vehicles and Parts, Seasonally Adjusted” database.
[7] “Wealth Gaps Rise to Record Highs between Whites, Blacks, Hispanics,” by Rakesh Kochnhar, Richard Fry, and Paul Taylor, Pew Research Center: July 26, 2011. http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/
[8] The official unemployment rate for Detroit in January 2010 was 25.3%, more than twice times the national unemployment rate of 10.6% (both rates are NOT seasonally adjusted). The official unemployment rate understates the economic pain to workers by not counting people without jobs who want to work but did not look in the previous month (discouraged and marginally attached workers), and those who are working part-time but cannot find full-time work due to the economy. In January 2010 the alternative unemployment rate including these other workers was 18% (not seasonally adjusted). Bureau of Labor Statistics.
[9] “Breaking up the Financial Industrial Complex,” by David Weidner, Wall Street Journal, April 1, 2010.
[10] The United States is net debtor nation, that is, foreign-owned U.S. assets are greater than U.S.-owned foreign assets by $4.9 trillion. One advantage that the U.S. has in borrowing from abroad is that the U.S. dollar is the reserve currency used to do international trade in, so that other countries need to hold dollars to finance trade. Federal Reserve: Flow of Funds Accounts of the United States, Flows and Outstandings, First Quarter, 2017, Table L.106, page 70.
[11] Business Insider, “The country that imposes the most restrictions on trade might surprise you” by Linda Shen, September 30, 2015. The shift towards protectionism is also a characteristic of empires in decline. For example the British empire shifted from a free trade policy to a more protectionist one after World War I.
[12] “China’s Leap in Electric Cars,” by Trefor Moss, Wall Street Journal, Oct. 3, 2017, page 1.
[13] see Fightback! News: http://www.fightbacknews.org/2016/11/28/trump-s-tax-plan-just-another-republican-tax-cut-rich-and-big-business
[14] see US Energy Information Administration (EIA), June 16, 2017: https://www.eia.gov/todayinenergy/detail.php?id=31672
[15] As of January 1, 2018, the minimum wage in South Korea will rise to 7,530 Won per hour. With an exchange rate of 1,225 won per dollar at the time of writing, this is about 6.70 U.S. dollars as compared to the Federal minimum of $7.25. Also see editorial in Bloomberg business news, <https://www.bloomberg.com/view/articles/2017-08-03/foxconn-s-dubious-deal>
[16] As of August, 2017, there are signs of weakness in household income, consumer spending, car sales, and rising credit card repayment problems. New housing construction never recovered from the last boom and bust. But so far, business spending on capital goods has maintained. Usually the first sign of a definite crisis ahead are declines in business investment in structures and equipment.
