Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page:

From The Socialist newspaper, 16 March 2001

US Economy Heading for intensive care

AN ECONOMIC storm is brewing over the USA that threatens to sweep across the Atlantic bringing mayhem and destruction in its wake. But Alan Greenspan, chairman of the US Federal Reserve (US central bank) is predicting a sunny future so long as investors are not distracted by a few showers.

Jared Wood

Greenspan would be more convincing had he not been forced into recent interest rate cuts that were widely and correctly seen as panic measures in the face of mounting evidence of a crisis.

Meanwhile political and economic leaders in Britain declare that the storm will blow itself out before it reaches our shores. Their optimism is as misplaced as Greenspan's, for not only does Britain catch a cold when the US sneezes, but if the condition of the US economy should deteriorate further Britain could require a spell of intensive care.

Trade between Britain and the US accounts for many of British business's most profitable export markets. Also many thousands of British jobs depend on US investment like Ford and Vauxhall.

Recently, a warning not to take Greenspan's optimism at face value was issued in an editorial by the Financial Times. It is still fashionable to dismiss Marx as a hopelessly outdated product of the 19th century, but the FT refreshingly prefers the economic analysis of Marxism to the more 'modern' approach of the Federal Reserve.

In particular the FT warns of four fundamental problems facing the US economy.

First, the share of national wealth taken by company profits cannot rise indefinitely.

In Britain the share of economic output taken by wages has fallen by 5% since 1979. Big business's share of wealth shows a corresponding rise.

But this transfer of wealth slowed down significantly after 1990 suggesting business is finding it harder to further reduce the worker's share of output.

Falling unemployment and the fear of resurgent trade union militancy are presenting problems that capitalism hoped it had eradicated. Marx explained that the capitalist system of production constitutes a struggle between bosses and workers for the surplus (sales income after costs) produced by firms.

The decrease in the share taken by wages is costing an average British worker 1,000 per year. Industrial and social conflict is unavoidable unless this process is reversed.

Boardroom and stock market sentiment now believes that profits are at a peak and cannot rise forever. This is the start of a downward spiral for investment, sales and asset values.

Secondly, the private sector cannot go on spending more than it earns.

Massive private-sector debt has been taken on by businesses. A huge proportion of this has gone into the technology sector in pursuit of utterly unrealistic profit rates.

Much of what remains has poured into the stock market inflating shares way above any rational valuation and depriving real value-creating industries of investment. US consumer credit has played a crucial role in extending the last period of economic growth, especially in the US but also in Britain. Workers who received a reduced share of national wealth in their wage packets have used credit to buy goods beyond their means.

Marx explained also that the payment of wages at a level insufficient to buy up all the goods produced, creates the basis for cyclical economic crisis. Already, at the first indication of leaner times, new consumer credit has fallen dramatically.

Thirdly, foreign investors will not be willing to go on funding the deficit forever.

In order to go on expanding credit in the US, investment has been sought and obtained from around the world, the high dollar and massive stock market returns ensuring this. As these conditions are undermined the US's cheap credit lines will be cut off.

Fourth: investment returns will diminish as the capital stock (eg. machines, technological equipment etc.) accumulates.

Marx identified this process as the tendency for the rate of profit to fall.

This tendency cannot be applied simplistically; however it does identify an inherent contradiction between technological development and the profit motive of capitalist production.

A falling rate of profit as a result of accumulated investment will shatter the dreams of a new 'paradigm' or golden age of capitalism, and will contribute instead to stagnation and crisis.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.

In The Socialist 16 March 2001:

Brown's Breadline Britain

New Rail Safety Crisis: Renationalise now! Stop the tube sell-off

Mexico - when Zapatista resistance came to town

Hayes and Harlington: Great start to Socialist campaign

Coventry needs socialist MPs

Budget: After the drought, a few drops of rain

US Economy Heading for intensive care

Ukraine - caught between a rock and a hard place


Home   |   The Socialist 16 March 2001   |   Join the Socialist Party

Subscribe   |   Donate  

Related links:


triangleTrump's tax plan: Robin Hood in reverse

triangleMobilise to stop bigoted billionaire Donald Trump's state visit to Britain

triangleThem & us

triangleTrump's tax attacks

triangleUSA: Historic vote for Ginger Jentzen campaign in Minneapolis


triangleAmber warning lights flash on British economy

trianglePowerful picture of the Port Talbot steel workers' struggle

triangleYoung people being strangled by debts

triangleNationalise to save jobs at BAE Systems


triangleInterview: Refugee Rights Campaign

triangleEast London & Tower Hamlets Socialist Party: 2017 - From Trump to Paradise Papers; a year in review

triangleWestminster sexual harassment scandal: symptom of a rotten system


triangleCentral London: Walk along the steps of Karl Marx

triangleMarx's Capital at 150: an unequalled analysis and critique of capitalism





Trump's tax plan: Robin Hood in reverse



Irish capitalist state: rotten to the core



Fighting sexism, violence and capitalism - an international struggle



Trump's tax attacks



Australia: massive yes vote for marriage equality



Zimbabwe: Mugabe gone - but his regime remains in power



USA: Historic vote for Ginger Jentzen campaign in Minneapolis



US: Historic vote for Ginger Jentzen campaign in Minneapolis



Sweden: 'Revolution2017' success



Spain: Madrid rally celebrates October revolution



US: Minneapolis Socialist chimes with voters



Ireland: rail workers demand share of 'recovery'



Ireland: dangerous ideas for the ruling class



Catalonia: Rajoy's furious response to proclamation of Republic



Kurdish referendum declared illegal

triangleMore International articles...

Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle8 Dec Local government pay: fight for the full 5% claim

triangle6 Dec Strikers rally in Liverpool

triangle6 Dec Corbyn's Labour can defeat Tories with socialist programme

triangle5 Dec Victory at Glenfield shows people power can save our NHS

triangle5 Dec Labour council Blairites deselected

triangle30 Nov Victory: Glenfield Children's Heart Centre saved!

triangle30 Nov Dramatic retelling of Grunwick strike

More ...

triangle11 Dec Leeds Socialist Party: Campaigning workshop

triangle11 Dec Bristol North Socialist Party: Christmas Quiz

triangle12 Dec Birmingham South East Socialist Party: Can the Labour Party be changed?

triangle12 Dec Liverpool Socialist Party: Fighting council cuts

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube



December 2017

November 2017

October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017





















Platform setting: = No platform choice