The human recession

July 13, 2010
Part 2

David McNally is an activist with the New Socialist Group in Canada, a political science professor at York University and author of several books, including the forthcoming Global Slump: The Economics and Politics of Crisis and Resistance. At the Socialism 2010 conference in Chicago, he described the outlines of the crisis and the road ahead for the developing resistance. This is the second part of his presentation--click here for part one.

THE OTHER thing we need to ask is: If the world economy is in even the early stages of a sustained recovery, where is the engine? Where is the economy being driven forward? You can look historically and see that certain geographic areas drove the world economy during certain phases.

So let's look for the engine. Europe? Ha! Good luck. Greece will contract about by 4 percent this year, Spain is contracting, so is Ireland and Portugal. Even with Germany exporting like crazy, there will be Europe-wide growth of maybe 1.2 percent, and much of Europe will remain in recession.

Japan? There's even a bigger laugh. Japan hasn't been able to get out of the grip of deflation, and deflation is a huge problem, because once prices start to fall regularly, that's disastrous news for manufacturers, but it also means postponed buying. If I'm going to buy a car, and I know that if I wait five months, it's going to be 8 percent cheaper, I keep postponing the purchase. That's what deflation does. It drives down the overall economy, and Japan is still there.

The New York Stock Exchange

China, of course, has been the chief scenario for economists, because its growth rates are very, very high. In some regards, these growth rates will stay high, although I believe they've peaked for the time being.

But there are huge structural problems. About 30 percent of China's industrial capacity is unused right now. That's another way of saying that capitalism confronts an overaccumulation crisis. China has built so much productive capacity it can't profitably use that the incentive to keep investing in the means of production drops, and drops dramatically.

Now it is true that China had a huge stimulus program--relative to the size of its economy, it was much, much bigger than the size of the Obama stimulus program for the U.S. It was used to build a huge amount of new capacity.

Let me give you some examples. Fixed investment in factories and railways accounted for 95 percent of China's growth last year. This is unprecedented--nothing like this ever happened in the history of capitalism, where everything is being driven by the building of new factories and railway lines. And by the way, these are classic signs of an overaccumulation mania. You build housing developments that sit empty, you build rail lines where one train runs every day.

But if you want a really good picture of it, look at the steel industry. Going into this crisis, China had, according to all the commentators, an excess capacity in the industry to produce between 100 and 150 million tons of steel per year. Last year, China built capacity to produce 58 million tons of steel more each year. That means it now has an excess capacity of around 200 million tons. Put differently, China has surplus capacity to produce steel greater than all the steel-producing capacity of all the countries of Europe combined.

That can't continue. You can't keep doing that. And the Chinese ruling class knows it. They are trying to squeeze off the bubble that started to explode in housing. They're trying to reign in credit markets right now, but they're trying to do it without producing a crash.

Moreover, consider the pattern of China's growth--it's export-driven. If you're driving into other people's markets, you're not creating any basis for anybody else to boom. So structurally, China's growth is based on overaccumulation that's not sustainable, and the export-driven pattern means it can't bring the world economy forward.

Finally, the United States. The best description I have heard comes from an economist who I won't name for the moment because he's a real shithead. But he did nail this one when he said, "What the United States is experiencing is a statistical recovery and a human recession." That's precisely what's happened. A few statistical indicators have moved up, but for the vast majority of working class people, the recession continues.

If you add in the nearly 10 million who are involuntarily underemployed--they're taking part-time work because they can't find full-time work--you've got about 27 million people unemployed or underemployed in the U.S. economy right now. That translates into an unemployment rate of over 17 percent, and for Black and Latino workers, it's an unemployment rate of around 25 percent.

According to the Economist, one out of every six U.S. workers has taken a wage cut in this recession, and amazingly, four out of every 10 African Americans has experienced unemployment during this crisis. Looking at food stamps, an additional 37 million people went onto food stamps in the U.S. in 2009, and 40 percent of those recipients are working for a wage. They're not unemployed--they're simply the working poor that can't make ends meet.

As for the next statistic I'm going to give you, this one was so overwhelming that I did check it to be sure. Half of all U.S. children will now depend on food stamps at some point during their childhood, and the figure runs at 90 percent for African American kids. Imagine that--in the heartland of global capitalism.


THIS HUMAN recession shows no signs of abating, and it can't possibly be the basis for any expansion. What we're dealing with, in other words, is, as I said, a protracted global slump that is changing forms--the front of the crisis shifts--but in which all of the classic neoliberal tactics of attacking the working class are being intensified.

But they have much greater difficulty selling this in terms of a free-market ideology when they're going through such massive state interventions. We've got a kind of hybrid neoliberalism, with elements of Keynesian stimulus when they think things are really falling apart, and with massive attacks on the working class and all of the class and racial dynamics of neoliberalism coming to the fore once again at other times.

You've got huge waves of accumulation by dispossession happening in the Global South--just massive land grabs, whether it's for the land itself for agribusiness, or for water resources, or for the mineral and fossil fuel deposits below these lands, and so on. If you look across Africa, China, India, Mexico, Central America and the whole of South America, there's just a wave of primitive accumulation by dispossession happening. I believe we'll see this accelerate over the crisis.

So there's that big wave in the Global South, and we've got structural adjustment big time in the North. Greece is being structurally adjusted right now. The kinds of things that happened across the neoliberal period to Mexico, Argentina, Poland and weaker countries are now the new normal in the Global North.

And the logic becomes: Either get structurally adjusted because of the level of government debt, or do your own pre-emptive structural adjustment before the IMF arises. That's what Germany is doing, and that's what Britain is trying to do. They're trying to jump ahead of the IMF and slash massively.

Let me just give you a few examples. Latvia has fired one-third of all teachers and over 20 percent of all public employees, slashed wages for the remaining public-sector workers by 25 percent, and chopped pensions by 70 percent. That's their structural adjustment, aided and abetted by the IMF.

Ireland has slashed public-sector workers' wages by 22 percent. Germany has just drawn up a program of $100 billion dollar in cuts. Something along the same scale--probably larger--is being planned for Britain. Russia is planning to cut 20 percent of all state employees. And in Greece 22 percent cuts in public-sector wages, a 55 percent slash in pensions and so on.

This is what's meant by the age of austerity. This is the way in which the working class the world over is going to be forced to pay for the huge bailout of the global banking system.

The Institute for Fiscal Studies in Britain put out a report saying that by 2017, the average British family will be $4,500 poorer by way of wage cuts and cuts to the social services on which they've historically arrived.

At the same time that report came out, the Sunday Times did their list of richest people in Britain, which said: "The rich have come through the recession with flying colors. The rest of the country is going to have to face spending cuts. But it has little effect on the rich, because they don't use public services." The class dynamics could not be clearer.

I'm not going to tell you the details about the cuts that are happening in places like California, Ohio, Minnesota and Arizona, because you know these stories much better than me.

But I do want to say that one of the things you see system-wide in this crisis is attacks on migrant workers moving to the forefront. The sessions at this conference on Arizona speak to that, but you're seeing it around the world--attempts to criminalize and deport migrant workers, and moves to expand so-called "guest worker" programs.

Can we strike that term from the list? These workers aren't guests when you super-exploit them, house them in barracks, overwork them, arrest them and deport them at whim, especially if they're starting to organize unions. They're not guest workers. These are temporary contracts--basically, a bonded labor system--and they're moving toward the most temporary and most precarious forms of employment for migrant workers across the board.

In the Canadian state, where I come from, four times as many people came in last year under the temporary foreign worker program than came in as permanent residents. This is the trend--to push the precariousness and vulnerability of migrant workers. That's why I believe the defense of migrant workers has become the cutting edge of truly anti-racist working class politics in this period.


I'VE ONLY got a brief time to speak to the questions of resistance, but I want to really emphasize two things.

First, the working class has fought back heroically throughout this crisis, but the scale of its resistance and organization have nowhere been equal to the scale of the assaults. That's our contradiction.

Remember, in the very early days of the crisis, mass protests in the street brought down a government in Iceland. There was the December 2008 uprising in Athens. Think about the wave of factory occupations, whether it was here in Chicago at Republic Windows & Doors, or the auto plants in southern Ontario where I come from, or the factory occupations in Ireland and Britain. In France, it was the boss-nappings--occupations aren't good enough? Fine, we seize the bosses!

We've had a wave of resistance that's inspiring and important, but it has not generally been equal to the task. We need, though, to point to some of the examples that frankly haven't received sufficient attention, including even in the left. I'm thinking particularly of the general strikes in Guadalupe and Martinique. These were really massive and hugely important struggles--interconnected with the resistance in France by the way, feeding the struggles in the streets. France served as the launching pad for the struggles in these protectorates--that's essentially what they are, neo-colonies of France.

To give you a sense of it, in Guadalupe, the general strike went on for 44 days, and the coalition which lead it, named Stand Up Against Exploitation, brought together 49 social movement organizations, trade unions, feminist groups, student activist organizations and so on into a mass movement that at one point had 15 percent of the population in the streets, building barricades, fighting the police and so on.

The demands were scaled to the lowest-paid. The strike won 40 percent increases for the lowest-paid workers, and the strikers were happy to settle for 6 percent for the best paid. To win a 200 Euro a month increase for those making minimum wages--that was an absolutely glorious example of working-class insurgency. In Martinique, the working class got into the act at the same time, held out for 38 days and got a fairly similar settlement.

We also have a really important resistance happening in Greece at the moment that could serve as a point of departure for much wider waves of resistance across Europe. We don't know whether or when this will happen, because we also know that the organized forces of anti-capitalist working class politics are much feebler and less organized than we would like.

But we do see the seeds of resistance. For example, in the absolutely beautiful movements of migrant workers--think of the strikes and building occupations in France last winter, for example, by migrant workers or the May Day demonstrations that you in the U.S. have recently been through.

It's not yet a transformative moment for the Left. That's the complexity--the seeds of resistance are there, but we haven't moved into a sustained rising wave of resistance and struggle. So we need also to remind ourselves of what I said at the outset--this is a long-term crisis. As the two bourgeois commentators I quoted said, it's going to shape politics for a generation.

So we need to be trying to combine both the sense of urgency and the need to act and build resistance now, but not with a sense of panic. We have to have that degree of durable patience to our work--knowing that we're in a struggle we have to keep moving forward, but a struggle for a period of years. We have to be building with that perspective. We need to be building larger, non-sectarian, anti-capitalist working class movements if that's going to be sustainable.


I'M GOING to finish with two quotes from some of the more exciting examples of resistance that we've seen.

We shouldn't underestimate the significance of the wave of strikes happening in China right now. One of the activists, a 20-year-old young woman who came out publicly as a representative of the workers at one of these Honda plants, and dared to say in an interview: "Our strike is just one step. It is all about all of the workers of China standing up against capital, and moving to build an independent labor movement."

That's the attitude that is percolating through these strikes in China right now. One phrase that encapsulated it beautifully came from the striking workers at KOK International, which is based in Taiwan. The workers wrote a petition with this closing sentence: "Power lies in unity, and hope lies in defiance." That's the spirit that we see running across this resistance.

I'm going to finish with one of the leaders of the mass strikes in Guadalupe, who said, "When a people arises, when it develops awareness, when it is convinced of the rightness of its actions, there is nothing that can stop it. The people sweep aside all obstacles placed in their path like a whirlwind cleaning out all the dirt in a country."

Now, we have a lot of work to do before we can go around making claims like that. But this idea that we need to be building resistance on the ground today with the idea of generating a transformative moment for the anti-capitalist left is, I think, the only perspective that fits when you understand that we're looking at a war against the working class that is being launched from above, and when you understand the scale of resistance which is necessary.

People are resisting, but they're doing so in a context in which the socialist and revolutionary left is very weak and needs to rebuild. But this is the task of a generation, and I think these kinds of meetings like we're having right now are all about the process of trying to rebuild that fighting anti-capitalist left.

Transcription by Matt Korn and Andrea Hektor

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