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Impact? What impact? Oh - the impact on them....

Amid the global economic crisis, the U.S. economy remains afloat ... for now

To read the mainstream press, you would think that this ever-so-big U.S. economy was immune to the impact of the Asian-turned-world financial crisis. Business Week opined (March 1, 1999) that the mass movement of American consumers to the malls at Christmastime kept the Asian, Latin American, Russian crisis from "washing ashore."

Despite spreading economic turmoil, as 1998 drew to a close, the U.S. private sector saw a three-per-cent increase in productivity: 5.2 per cent in manufacturing and 8.3 per cent in durable-goods production. Impact, what impact?

A recent issue of the New York Times (March 4,1999) offered headlines about more jobs, rising factory orders and fewer unemployment applications than at any time in human memory. There was some moaning about profits falling three per cent in the fourth quarter of 1998, but this, Business Week assures us, is due to the tight labour market. Anyway, if you take out coal, oil and gas, profits were actually up seven per cent. Impact, what impact?

The very next day, however, the first hint that all was not well came when the federal government announced that the unemployment rate had risen and that real weekly wages had gone down, both for the first time in years.

Right there in Business Week was another hint: the problems with energy profits stem in part from the flow of cheap oil into the U.S. from many of the stricken countries. So, the U.S. oil and coal industries are going through yet another big restructuring that is giving unions like the United Mine Workers and PACE (Paperworkers, Allied Industry, Chemical and Energy Workers) more headaches.

It doesn't stop there. As the Times also noted in another one of its optimistic articles, "Manufacturers have been hurting from loss of export sales to Asia and other economies in recession and factories shed more than 200,000 jobs last year." In fact, after two years of rising employment, they shed 280,000 jobs from January 1998 through January 1999, and another 50,000 in February. So, to be accurate, while business is still doing okay, it's the workers who have been hurting.

A different view from the bottom

The curbed exports and overcapacity associated with the current crisis have also cost jobs. In the January-to-January period, 34,000 jobs disappeared in electronic components and 32,000 in electrical instruments. In steel, about 10,000 jobs vanished, leading the United Steelworkers to join the companies in a frenzy of national pride in product.

The aircraft industry provides one example of the potential impact on U.S. unions. Boeing lost orders in Asia when the crisis broke out. The company restructured and announced that 10,000 people would lose their jobs. Along came almost $16 billion in orders for the industry in January, compared with $8 billion in December, but the lost 10,000 were still to report for their tour of duty in the reserve army of labour. The February slump guaranteed a long tour, with many never to return.

This is a big year for bargaining in aerospace. Lockheed workers were scheduled to strike in March, but the government intervened to stop it. Later this year, 30,000 Boeing workers face tough contract talks.

But what about the financial meltdown? Except for one hedge fund that will be salvaged anyway, Wall Street wallowed in it. Among the top takers in sales and profits for 1998, according to Business Week, we find: Citigroup, Merrill Lynch, Morgan Stanley, Chase Manhattan and BankAmerica.

For their heroic role in the financial markets of the world, the U.S. financial, insurance and real-estate industries got to hire 260,000 new employees in the past year. To be sure, many of these workers do not hold glamorous jobs and are more likely to take home something in the low five figures than the millions those on top gave themselves. For those at the top, however, things are still fine and the view rosy, if not clear.

There are a few voices from the penthouse that warn of dire things ahead. George Soros is making a second career of warning governments, multilateral institutions and his colleagues that the world is not set up to handle operators like himself. But the dimmer bulbs in U.S. business and punditry alike seem to think the U.S. really is a safe harbour in a turbulent sea.

Public opinion is beginning to catch up

Down below among the rest of us, whether you work for Wall Street or Wal-Mart, Boeing or Burger King, the world financial crisis is forming a new perception of how the world works.

There is more resistance to what Wall Streeter Stephen Roach called the "labor crunch recovery" that has left the landscape of work strewn with low-paying, often contingent and just-plain-harder jobs. More than in the past, this resistance strikes a chord with the public.

The first signs emerged with the 1997 UPS strike. Public opinion ran two to one in favour of the strikers. Why? Lots of folks saw themselves in this fight for steady, full-time jobs. The same sentiment surfaced during the GM strikes in Flint, Michigan last summer and again when telecom workers struck at U.S West, Bell Atlantic and Southern New England Bell. In all of these cases, job security and working conditions were central issues with which millions could identify.

The sudden collapse of the Asian model in 1997 was one more revelation to many U.S. union activists, already worried about the impact of all those trade and investment treaties, that the wonders of the market were not as good as advertised. This growing awareness probably helped the AFL-CIO defeat the "fast track" legislation that would have smoothed the way for all manner of new amendments to the global bill of business rights.

The same fear sent AFL-CIO president John Sweeney on his second trip to Davos, Switzerland in January to lecture the world's business elite on the need for labour rights and the regulation of capital flows. A Sweeney-Soros coalition, however, would be no match for the Clinton-Wall-Street-Industry juggernaut. Indeed, not even crisis, scandal and impeachment could slow this steamroller down. In the midst of it all, the Clinton administration has been pushing for a vote in Congress on the Republican-sponsored Africa Growth and Opportunity Act, a NAFTA for Africa dubbed by some the "Africa ReColonization Act."

Current mess: Made in USA

This brings me to the real cause-and-effect relationship between the world financial crisis and the U.S.: not the impact on the U.S., but the impact of the U.S. on the world's "emerging markets." For much of the current mess has "Made in USA" written all over it - in Bill Clinton's handwriting.

The New York Times (February 16, 1999) dates Bill Clinton's love affair with Wall Street, free trade and global capital flows to a steak dinner with top Wall Street Democrats at New York's swank "21" Club back in 1991. Clinton has unreluctantly followed in the footsteps of true believers Reagan and Bush. Opening "emerging markets," World Bank newspeak for a select group of Third World nations, to U.S. businesses of all kinds became the centrepiece of U.S. foreign policy.

Asia was the main target for the team of Clinton and Robert Rubin, the U.S. Treasury Secretary from Goldman Sachs. As the Times in-depth report stated:

"Clinton and Rubin, who became his Treasury Secretary in 1995, took the American passion for free trade and carried it further to press for freer movements of capital. Along the way, they pushed harder to win opportunities for American banks, brokerages and insurance companies."

While making the world safe for speculation, they contributed to the current crisis with the flood of U.S. money into Asia, which financed overcapacity, a buying spree of privatized enterprises, and many a shaky loan. They didn't invent the problem, but they accelerated and deepened it. In the words of a senior Commerce Department official, "We pushed full-steam ahead on all areas of liberalization, including financial."

In 1996, Western investors bought $50 billion worth of stocks and bonds in "emerging markets," while banks sank $76 billion in loans in the same select Third World countries. The same year, capital flight began, with $16 billion embarking for destinations like New York, London and Zurich. In 1997, $45 billion migrated in the same direction. The crisis was on.

So far, the impact of this crisis on the U.S. has been comparatively mild on the economy as a whole. But its impact has been focused on a working class that has only recently begun to hone its weapons of resistance after years of retreat. If, or more likely, when the world crisis submerges this major market, we can expect all the trends toward greater poverty and inequality of the last two decades to magnify and inundate an already-beleaguered U.S. working class. It is the job of the labour movement to make sure that this is not seen as an invasion from abroad, but a homemade disaster that calls for a good, old-fashioned, class-struggle home remedy.
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Title Annotation:the economy of the United States remains strong, although there are hints that it may be weakening
Author:Moody, Kim
Publication:Canadian Dimension
Geographic Code:1USA
Date:May 1, 1999
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