Thursday, June 18, 2009

Neo-liberalism, the crisis and the catastrophic situation of the worker in the USA

Note: This is part 3, section 2 of our series on the situation of the worker.

The neo-liberal period that has gone into crisis is not simply characterized by the privatization of public assets. As we have mentioned before, privatization is a normal part of the expansion of capital in its need to penetrate every social relation in order to guarantee that the worker depends intensely on the market and thus remains in a condition to be exploited as much as possible. What defines neo-liberalism is the way in which this privatization occurs.

Transnational companies, the hegemonic US dollar, the international financial system and the worker’s indebtedness play fundamental roles in this privatization (for analyses emphasizing these aspects see here). All of these structures were expanded during the post-war period thanks to the pact between capitalists and workers, sponsored by reformers. While the weapons of the capitalists grew, those of the workers did not develop as to offer significant resistance, for they had unions that, for the most part, negotiated with the capitalists the means to obtain better working conditions and consumer goods without effectively developing alternative structures aimed at liberating themselves from capital's needs. When the pact became an obstacle for the capitalists, workers were in no position to oppose the assault of their adversaries.

One of the most characteristic and important elements of this period is the importance of credit for the appropriation of wealth by the capitalist. Besides the usual mechanism of appropriation of wealth (buying from the worker her capacity to work, which will produce a surplus, for just what she needs to reproduce herself) neo-liberal capitalism, especially in the USA, substitutes wage increases for loans. The worker’s debt has always existed, but this systematic indebtedness has new characteristics. People in the USA can buy more goods, which are produced on other parts of the world, because even though their salaries remain stagnant since the 70’s, they use their credit as a mean to satisfy their growing needs. Meanwhile, the interests paid by the workers finance more loans or production, as much in the USA as in the rest of the world. The capitalists also use the workers’ IOU’s to speculate.

The more the US workers get into debt in order to buy, the more the sweatshops owned by transnational companies on the other side of the world produce. The transnational companies generally employ workers on peripheral countries for standardized processes of manufacturing, and highly skilled workers on the USA and other wealthy countries for sophisticated processes, such as design and research. The workers debt, increasingly tied to complex financial derivatives, is sold to foreign investors who find in them a relatively sure investment. The wealth produced by workers on the other side of the world serves to finance research and development, buy advanced machinery and equipment, and finance the US worker’s debt, whose labor capacity is more expensive given the amount of value concentrated in her country, requiring her to have more expenses, such as costly trainings.

The expansion of capital in this system implies the expansion of the US worker’s credit and the super-exploitation of workers in the peripheral countries. Ensuring the credit increase and the US workers’ buying power becomes a must. This requires the assault on old institutions and organizations, in the USA as well as in the rest of the world, in order to re-privatize them to make them profitable, especially from the point of view of speculative capital. For instance, the structures of the welfare state were funded by the workers through their taxes and the minimal contributions made by companies out of the surplus they extracted from the workers, in order to keep them healthy, well educated, etc. We should note that they were already private in the sense that they only provided healthcare and education in as much as it was necessary for capitalism. Neo-liberal privatization in this case consists of canalizing the funds out of the state into banks or insurance companies, who are always happy to raise their interest or their insurance policies, and buying the services from private providers. The capitalist must provide credit and sell the worker the means to be healthy and trained in order to speculate and finance other entrepreneurships that create the conditions for her to be able to pay the expensive insurance policies and debts. The function of keeping workers healthy and trained continues with a more properly capitalist organization, with the peculiarity of supporting and being supported by the debt system.

The problem, however, is that the capitalist need for taking over old institutions leaves the worker in a precarious situation. This is a serious problem because the worker has to pay her debt so that the system works. The crisis explodes when one of the parties of this delicate financial framework becomes unable to pay.

This is what happened with the real estate system in the USA, the center of global capitalism. Many workers who were already indebted up to their noses, mortgaged their houses with variable interests (interests that raise with time). The lenders who now have been demonized for lending to workers with bad credit (the infamous subprime lending) followed the global logic by which the value of the houses would increase as the interests would be used to finance projects that would increase global wealth, therefore increasing the value of real estate. Their fantasy did not consider, among other things, that the worker’s wages were stagnant. When the higher interests set, with stagnant wages and indebted to their noses, these workers were unable to pay all their debts, even the house mortgage, which is the last thing one stops paying. The complexity of the financial framework, where subprime mortgages were packed with prime mortgages, insured against losses, bought and sold, etc., created a domino effect, which initially affected workers with good credit and then everybody else. The worker does not pay her debts because the financial system collapses and breaks her leverage, and the financial system collapse because the worker cannot pay her debts. Eventually this comes to the industrial sector, which starts taking the usual measures for a crisis (layoffs, reduction of wages, etc.) Not only the value of the houses disappears, but also the salary of the workers, and their possibilities of payment of debt along with it. The main global implication of this process is that commodities produced abroad are not selling in the USA, so that at the global level we see the corresponding processes of crisis at the national level.

To get an idea of the crisis, the estimate for evictions for this year is 3,000,000 (the media, looking at them from the point of view of capital calls them “foreclosures”) (Reuters, April 16, 2009). There are millions of people who have been forced out of their homes while the effort put to build the houses goes to waste. For March, the unemployment rate in the USA was 8.5%, while Latin Americans in this country had an unemployment rate of 11.4% (the participation rate in the USA for January was 65.5%, Bureau of Labor Statistics).

In other parts of the world, the situation worsens to the point where there has been food shortages. In Puerto Rico, where the Comonwealth (Estado Libre Asociado) has been incapable of creating jobs for the population, the unemployment rate stands currently at 13% with a participation rate of 44% (January, Junta de Planificación). In sum, there are millions of capable workers who remain unemployed, tools, machinery and finished products not being used, while there are immense needs for them.

People from the USA have always thought of themselves as the center of the universe; in the case of the post-war and neo-liberal periods with its crisis they were not far from the truth. Used to solve their problems through the neo-liberal institutions, which promote an extremely individualistic, partial life, in what appears as a wondrous, shifting and expanding world beyond their control, they find themselves ill equipped to phase the global crisis. It would be easy to fall for the reformist rehash of neo-liberalism, but the real challenge is to get rid of the very organization which causes the problem.

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