Despite increased profits, the capitalist class is still on a strike of capital. There is too much stuff in society and the productive forces need further destruction; they will not hire under these conditions. The unemployment rate increased in June which has caused further concern. The US working class is still heavily indebted and cannot find a way out by pulling cash out of their homes. This increases debt but the rise in house prices countered that---until the collapse of the credit bubble in 2007. The overcapacity in housing is a huge drag on the US economy that has not been overcome by a massive decline in home construction. According to one real estate analyst for the huge bond-trading firm Pimco, the credit bubble “allowed 5 million renters to become homeowners” and explains, with language that would not be the words of choice for the mass consumption media that “the market is in the protracted process of evicting this group.” *
Despite home sales rising in six of the past nine months after four years of a huge decline in prices, “The supply of total housing stock is beyond what is necessary” says Jonathan Smoke, a housing data analyst. “We’ve gone through a period when we should have been tearing down houses”. Smoke calculates that the US has 1.6 million more homes than it needs. This should be music to the ears of the homeless perhaps. It's a staggering statement when you think about it and reveals the complete barbarity of capitalism.
This has created a favorable situation for buyers but thee out of ten homes sold now are sold at a loss. But buyers in the main want homes as shelter, they are a place to live. For the moneylender though, the conditions for lending have to be stable and profitable. With debt so high, capitalists won’t hire which increases unemployment which means that capitalists won’t hire etc. It’s a vicious cycle. “Houses aren’t cheap if you can’t get the loan,” says the Pimco analyst. As Michael Robert’s pointed out, “To ‘cleanse’ the economy of this debt is going to take a long time because it rose so much. McKinsey reckons that deleveraging has hardly begun. I would say it cannot be cleared without another significant slump in capitalism in order to get rid of the dead and imaginary capital.”
He is correct. The illusory prosperity was built on illusory capital, fictitious, speculative capital. Credit allowed capitalism to go beyond its limits for a period but, like that elastic band, the system eventually snapped back to the confines of its real parameters. It is still in the process of doing that.
The bond trader described how the “market” was in the process of evicting 5 million people from their homes. He predicts 2 million more than that are needed to return to profitability, what capitalists understand as “normal” life. These conditions are an inherent consequence of the system of production we call capitalism. Capitalism has not always existed. It is not written in stone that this system of production is the only possible form of social organization, of organizing human life.
What one coupon clipper describes as “illusory prosperity” is the natural order of things in an economy in which the necessities of human existence, food, shelter for example, and the means of producing them are in the hands of private individual(s) for their personal gain. After the next recession or slump we will hear the same story from them. It’s greed, it “illusionary prosperity”. It is indeed but the cause of it is not illusionary, it is real, concrete, and can be remedied.
Karl Marx wrote of events like the present crisis a long time ago:
“It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.” **
“beyond what is necessary.” Necessary for profit taking, not the needs of people, we have to drum that in to our heads.
As we read that another 7 million people need to be “evicted” from their homes by the market to return to normality it becomes obvious that Marx was correct about the system that produces what he called this “momentary barbarism”. It’s an ongoing and each time more destructive and violent momentary barbarism. For most people in the world it is a condition of permanent barbarism.
What’s so great about capitalism? Between 1972 and 2007 US productivity grew 90% yet wages during the same period declined 11%. It’s not that the market must “evict” us; we must “evict” the market.
* The Housing Horror Show is Worse Than You Think: Business Week 7-11-11
** Karl Marx: Communist Manifesto
1 comment:
Richard, an excellent article. I wish thousands could read it. I want to direct you to an article I just read, What Is Public Capital? by Peter Dorman at Econospeak.blogspot.com -- posted July 16 I think. I left a comment which will be posted by Monday. This relates to your essay. In Germany about half the money in banks belongs to public banks, landesbanks. They are a collection of small municipal banks. In contrast the U.S. has virtually no public money in banks. The insanity of our system is exemplified by the young man you write about. Easily we could afford good schools, homes and jobs for everyone, but the "profit imperative" shuts that out. It is a matter of managing resources, some of which are financial resources. Providing hope, and opportunity and reasonable expectations for all is the goal, and how far we have failed. I look at that statement about over-leveraged and the need to purge bad debt. The banks own 62% of the nation's housing equity, they are bankrupt. They can't sell at the book value they report. The top 5% of households own 60% of all assets and about 75% of everything financial. They, the top 5%, call the shots on allocating resources for the young fellow you talked to in your article. That top 5% is doing one hell of a job.
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