Capitalism's shell game

We are inundated almost daily with word that the economy remains sluggish, that we may be in for a double dip recession, that there is a worry about a deflation, that the economy is barely limping along, that unemployment rates will remain high, that unemployed workers over 55 may never find a job that pays a living wage, that the days of secure and long term employment are behind us, and many more prognoses for a society in the economic doldrums with no immediate relief in sight. This is a dire scenario indeed! But wait. Bank profits in the first quarter of 2010 soared to an amazing $18bn, with ‘big’ banks (defined as those with over $10bn in assets) booking almost $16bn in profits, over 85 percent of total bank profits. And yet, in the same FDIC Quarterly Banking Profile, First Quarter 2010 (http:// www2.fdic.gov/qbp/2010mar/qbp.pdf), it is reported that about 775 banks are in danger of failing. The banking industry is shaking out, with all signs pointing to consolidation – apparently worries over banks being ‘too big to fail’ translates into ‘let’s get bigger’. Furthermore, one of the main reasons for this large upsurge in profits is that big banks have drastically reduced the amount set aside to cover potential losses. These are the big banks that received major infusions of taxpayer dollars to sustain them during the 2008–9 financial crises as a result of under-estimating risk and taking big financial losses (many have returned these TARP funds to relieve themselves of the limited TARP-related obligations and controls; see http://bailout.propublica.org/list/index for an accounting). And now these are the same banks which are holding on to capital and making it near impossible for small businesses to borrow in order to expand and hire (it is a well rehearsed tale that most job growth occurs with the expansion of small businesses). The profit picture is rosy for manufacturing as well. After all, as the US Census Bureau News reported (http://www2.census. gov/econ/qfr/current/qfr_mg.pdf), in the first quarter of 2010 manufacturing firms earned $107.8bn in profits, up about $4.5bn from the previous quarter. These are not numbers one expects to see in a society whose economy seems to be tanking or in a tailspin (or so it would seem when you are on the bottom). How can one explain these two sets of numbers? In the end it is easy. First, as has always been the case, productivity gains have enabled many manufacturers to maintain or increase output (and after all, whether you adhere to basic Marxism or capitalism, both teach you that you have to produce to generate profits), all with fewer and fewer employees. As noted in a report to Congress (Platzer and Harrison, 2009: 8) there were almost four million manufacturing jobs lost between 2000 and 2008, yet manufacturing output between 1997 and 2005 increased by 60%, a clear indication of the productivity gains that require fewer workers in this sector. Since 2008 the forecast for employment in manufacturing continues to worsen even as production and (as we note above) profits continue to climb. Clearly, as Rick Wolff (2010) points out, this truly is a recovery for a very few while most of us suffer. And what is the way forward, how are we to hasten this economic recovery for the rest of society, and where can we lay the blame for this failed recovery? The answer seems clear to most Article