Spanning the Globe
1. The years 2012 and 2013 were the years of the Epstein-Barr recession. They weren’t really years of recovery, but rather years when the general listlessness of the economy felt a little less like a mortal illness. The glands of capital were perhaps a trifle less swollen; the throat a little less sore; but the nausea capitalism created in others and itself went unabated. The wretched attack on pensions, education, healthcare, on women, on the young, on the elderly, continued.
In the UK, Osborne (remember him?) increased taxes on pensions by one billion pounds sterling, an amount twice the amount the Tories (remember them?) claimed would be raised from the wealthy by closing tax loopholes and lowering tax rates.
In Greece, the PASOK-New Democracy government expelled 43 deputies for not supporting the austerity program imposed by the Troika.
Meanwhile, back in North America, 2012 started with a bang……the bang of factory doors closing. Boeing announced the closure of its Wichita, Kansas plant, killing off 2100 jobs instead of adding the 750 positions promised after winning contracts from the US military.
Caterpillar locked out its workers in Ontario after unilaterally cutting wages, in some instances by half. Caterpillar’s goal was to close the plant, which it had purchased from the former Electro-Motive Division (EMD) of GM, manufacturing diesel-electric locomotives. Then, back in the good old USA, Caterpillar provoked a strike at its Joliet, Il. works, by seeking healthcare give-backs, freedom to employ more temporary workers, and an end to the defined benefit pension plan.
Caterpillar did all that as it sang a mash-up “Oh Canada, Say Can You See,” while both hands picked the pockets of those standing at attention.
2. Lots of things were “growing” because growth, after all, is what capitalism pretends to be about. The balance sheets of central banks were growing, brimming with “assets,” meaning debt instruments, meaning paper, representing loans that had been securitized. Between 2008 and 2012, “assets” of the US Federal Reserve’s books tripled; at the ECB, they doubled; and at the Bank of England the notional value of the assets quadrupled. Just as in the US, the Federal Housing Finance Agency became the market for home loans, rather than the facilitator, the guarantor of the market, the Fed and its correspondent central banks, sustained by the open-ended currency swap lines, became the markets for asset-back securitized loans.
In Europe, the ten largest EU banks, knowing that in hard times the cash is king, safety comes first, money talks and bullshit walks, had deposited €1.2 trillion with the ECB, an amount 66 percent greater than the 2010 amount. Where did that money come from? Why it came from the ECB itself which initiated long-term refinancing operation (LTRO) programs offering 3 year loans with minimal interest rates. The initial LTRO operation was introduced in December 2011, and was sized at €489 billion. The banks took the money, all of it, and redeposited €440 billion with the ECB. Mr. Credit meet Mr. Crunch.
The office vacancy rate in the US had grown from 12.3 percent in 2007 to 17.2 percent in 2012. The rate persisted at that level. For every square foot of office space rented, another square foot went vacant.
Natural gas production continued to expand, driving down prices by 50 percent in two years. US production was at 71.3 billion cubic feet a day, propelling the CEO of EOG Resources to explain Capital as very few Marxists have ever been able to explain, and, believe it or not, do that explaining without reading Hegel’s Science of Logic, or Lenin’s Philosophical Notebooks:
“America’s natural gas production is essentially useless at this particular point in time since you can’t make any profit….”
The obliteration of value is the secret to capital, but overproduction can’t keep a secret to save its life. Hic blabbermouth capitalismi, hic salta!
3. The plight of the natural gas industry did not, however, curtail exploration and exploitation of additional gas resources, or petroleum reservoirs. The United States was about to prove, once again, the Hubbert’s “peak” was nothing more than a molehill. Development of shale oil reservoirs in the Bakken fields of North Dakota and the Permian Basin in Texas and New Mexico drove US crude production to a fifteen year high. Crude production in 2012 was 16 percent above the previous year.
Production advanced so quickly that it overwhelmed pipeline capacity, where pipelines existed. Employment in oil and gas extraction between 2010 and 2012 increased 25 percent to almost two hundred thousand. That, even at $111 per barrel, much of this production was still unprofitable due to “start-up,” i.e. capital, costs, meant almost nothing at start-up. It would be several years later when the resulting, necessary, overproduction of crude caused prices to crash.
Meanwhile, producers in the Bakken shale fields were daily flaring off enough of the “useless” natural gas to power the cities of Chicago and Washington, DC.
4. Some things weren’t growing, of course, like median household wealth, the “prime indicator” of the capital’s success, or lack thereof, in surrounding, integrating, penetrating, transforming workers with and into small property holders, a feature of capitalism that made class struggle so problematic in the US. Between 2007 and 2010, median household wealth had declined 40 percent in the US, and then declined another 1 percent to 2013. At that level, the median household wealth was 20 percent below the 1983 mark, after the brutal Volcker double-dip recession, and 25 percent below its 1989 level, in the midst of the savings and loan crisis.
Some things weren’t growing of course, like wages. The median weekly wage for US workers employed full time 2012-2013 stood exactly where it stood in 2008, while the number of workers employed full time was less than 2008 number.
In keeping with the principles of entitlement which state that white people shall not be treated like people of color, there were a lot of angry white people out there in 2013, not that there haven’t always been a lot of angry white people out there. The decline in median household wealth made more angry white people more angry. That too would play itself out several years later.
Corporate profits in the US were growing. By 2013, total corporate profits had grown by two-thirds from their recession low point and were 30 percent above the 2007 mark. Manufacturing profits had nearly doubled from the low point and were 40 percent above the pre-recession level. And no, that increase in those profits was not due to the export of jobs to other countries. Profits from domestic operations accounted for 80 percent of profits in 2013, slightly above the 2007 ratio of 77 percent.
Federal tax receipts on corporate income were not, however, keeping pace with the increase profits. Federal tax receipts in 2013 were 12 percent below the 2007 pile. No wonder Obama was reelected.
5. Meanwhile……meanwhile, Europe fell back into recession. By May, 2012, the United Kingdom, Belgium, Czech Republic, Ireland, Italy, Netherlands, Portugal, Slovakia, Spain were all in recession. And Greece? Greece wasn’t experiencing a recession; it was in the grip of a catastrophe. Malaria, eradicated in Greece in 1954, returned in 2012.
In June, 2012, Greece’s Finance Minister resigned,saying “My present state of health does not allow me to carry out my duties effectively,” unaware that the the state of his personal health was a perfect reflection of the health of capitalism in Greece.
Germany’s Finance Minister Wolfgang Schäuble, whose state of health, namely the fact that he has any at all, should be of concern to most of the human species, bared a smile when he read the statement of Greece’s Finance Minister, but the smile quickly disappeared when Moody’s Investor Services identified German banks as being the least profitable and most poorly capitalized in the European Union. Schmeckt nicht so gut, Herr Minister? Wo ist dein Sinn für Humor?
Spreading good cheer everywhere it went, like a termite spreads sawdust, Moody’s proceeded to downgrade the ratings on debt instruments issued by Bank of America, Citibank, Royal Bank of Scotland, Morgan Stanley, Barclays, BNP, Credit Agricole, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Royal Bank of Canada, and more.
France and Belgium bailed out Dexia Banking for third time in four years, or maybe it was the fourth time in three years…who knew?
Monte dei Pasche di Siena, known as the oldest bank in Italy received its second state bailout.
Shortly thereafter, Draghi the kind of new same old head of the European Central Bank said the European Union’s financial fundamentals were the best they’d ever been.
Japan endured its fifth recession in fifteen years; Brazil’s growth rate fell by half.
France– technically France was not in a recession, but that didn’t mean much as Hollande, after election, dropped his socialist tough-guy demeanor and launched a program indistinguishable from that of a stereotypical French right-wing politician. He retreated from a proposed increase in the capital gains tax. He retreated from assessing the personal wealth tax on the ne plus ultra bourgeoisie. Nobody does ne plus ultra better than the French bourgeoisie, so meeting with the Hollande, those ne plus ultras told Francois to reduce employer welfare assessments by €30 billion, and cut public spending by €60 billion over the next five years. “Arbeit Macht Frei,” sang the ne plus ultras to the melody of the Horst Wessel song.
True social-democrat, Hollande couldn’t do anything more than fractionally, so he offered the ne plus ultras €20 billion in tax credits over three years, and only cut another €10 billion from public spending. Pas étonnant que Ségolène l’ait jeté dehors! spoke all of France.
6. Back to the future: Boeing Corporation experienced several in-flight ignitions of the lithium battery packs installed in its 787 “Dreamliner” airplanes. Back in 2007, an aircraft industry standards group had called for more testing on the lithium batteries in order to assess the risk of ignition and to reduce those risks while the aircraft was in-flight. Boeing and the Federal Aviation Agency (FAA) decided that since design and testing of the aircraft were so far along, mandating additional testing of the battery packs and more rigorous standards would disrupt years of joint safety work and unfairly delay production.
7.The future blows back: In 2013, big, nasty, ugly, orange skinned chickens were on their way home to roost. In Britain. In Italy. In the U.S.
US residents, already number 17 in life-expectancy, were dying at younger ages. Life expectancy declined, led by higher death rates for those under 50 years of age, rates fueled by fatal auto accidents and drug overdoses, particular overdoses of opioids, legal, illegal, and synthetic.
In Italy, where industrial production declined 25 percent between 2007 and 2013, those born in 1973 can expect to pay 50 percent more in taxes as a portion of income and receive less than half the pension benefits of those born in 1952.
In the UK, Osborne (remember him?) stood by his austerity program. The cuts in welfare programs were projected to have five times the impact on those living in the once-upon-a-time industrial north of the country than those living in the finance and real-estate driven south. The scheduled cuts in social security benefits in the north to 2015 will eliminate a sum equal to 6.5 years of disposable income from the residents of Blackpool.
You can’t understand Trump, the League, Brexit without grasping the diversion of resentment away from the mode of production that enforces poverty and onto the “outsider,” “the other,” the migrant, the refugee.
8. The good news that wasn’t…..in the second quarter of 2013, GDP in the US finally exceeded the 2008 peak. The good news that wasn’t… in 2013 the European Union’s GDP was at the mark recorded in 2005.
July 29, 2019