The issue of unemployment and underemployment loomed above the hype of both the Republican and Democratic Party conventions with the cold stare of a harsh judge. Many promises and dubious claims were made from the respective party podiums, but no real solutions were put forward.
Despite the antagonistic posturing between Obama and Romney, both stand by the “free market” commandment that it is the business of the private sector to create jobs, not the government. That is, the effects of the Great Recession will not be reversed until the big business owners invest in job creating ventures that they can make a profit from. In order to encourage them to make these investments it is necessary to fatten their financial reserves with bail outs, low interest loans, minuscule tax rates, and so on.
In short, the policies emanating from the belief that the private sector will rescue workers from the jobs crisis are variations of the discredited trickle down theory where the wealth built up at the top through government funded corporate welfare will somehow find its way into the pockets of working Americans.
Romney is an unapologetic supporter of this discredited scheme. While candidate Obama criticizes such an approach in order to get votes, nevertheless, as President, this has been the guiding philosophy of his actions. He has provided trillions of dollars in bailouts and loans to Wall Street, declared himself open to cuts to Social Security, Medicare, and Medicaid, supported the privatization of public schools through the “Race to the Top” program of charter schools, extended the Bush tax cuts for the rich, and the list goes on.
What have been the results? Ninety three percent of the economic growth that has occurred since the economic crisis went into the pockets of the top 1%.[i] Big business is sitting on $2 trillion in profits without reinvesting them.[ii] Side by side with this enrichment, high unemployment and underemployment persist and 58 percent of new jobs pay under $13.83 per hour.[iii]
The private sector is not coming to the economy’s rescue. Rather, those in the private sector are taking advantage of the crisis to enrich themselves at the expense of workers. Neither Romney or Obama are proposing an alternative course, only variations of the same failed approach.
The private sector did eventually help to lead the nation out of the deep recessions of the 1970s and 1980s. However, the Great Recession is much more profoundly structural in its nature. Conditions are worse today, and policies that depend on the private sector to create good jobs will only exacerbate the fundamental problems that led to the Great Recession and allow its results to continue to devastate the lives of tens of millions.
One difference is that today wealth is vastly more concentrated into fewer hands. The top richest 400 individuals have more net worth than the bottom 60 percent of all Americans.[iv] Six members of the Walton family behind Walmart have, by themselves, as much wealth as the bottom 150 million.[v]
These few are the most powerful owners of the private sector. This elite’s outlook is far removed from that of the majority. Because they are so powerful, they own a good part of both political parties. And because they are sitting on such vast financial reserves, they are less inclined to risk it on investments that provide jobs.
Their top goal is to generate as much short-term profit as possible for themselves. The long-term effects of how they do this are of no concern to them. If they can make more through destructive trickery rather than putting people to work making commodities, all the better.
The opportunities for such trickery have grown in parallel with the rapid expansion of the financial sector over the last thirty years. This is indicated by the fact that trade in U.S. equity (stock) markets grew from $1.671 trillion, or 13.1 percent of the US GDP in 1970, to $14.222 trillion, or 144.9 percent of the US GDP in 2000.[vi]
Profit has increasingly been made through financial schemes rather than production and trade. The problem developing out of this is not only a minimalization of job creating investment, it turns the economic system into a giant casino for the mega rich at the cost to society as a whole.
It was the growth of financial speculation that led to economic bubbles, particularly in housing, which helped make the collapse of 2008 so deep and lasting. The destructive possibilities of the financial sector’s activities continue unchecked. The banks have lobbied tenaciously to prevent any restrictive regulation. In fact, just last month the Securities and Exchange Commission abandoned efforts to tighten regulations on money market funds. All those who follow the financial sector agree that nothing substantial has been done to prevent a monumental financial disaster that will require an even bigger bailout than before.
Even more alarming has been the growth in derivatives trading. Paul Wilmott, an economic quantitative analyst, has estimated that the total amount of derivatives being played in the markets is $1.2 trillion — 20 times the amount of money currently in the global economy. Despite the enormous risk the exposure to such debt puts the economy in, financiers continue to realize more short-term profit through these investments than job creating production in manufacturing.
The main players in the private sector are not interested in job creating investment. The reality is that workers are too broke to buy much, therefore demand is too weak for big business to realize profits by making more goods. Better from the big business elite’s perspective to hoard trillions and invest in financial speculation, though it puts the world economy in peril.
In contrast to the claims of both Obama and Romney — and both of them know better — the private sector will not create the jobs necessary to lift workers out of the Great Recession. No matter how many incentives big business is showered with, there will not be enough to overcome the limits the profit motive places on investment, given the concentration of wealth, growth in financial speculation, and the lack of demand resulting from workers’ impoverishment.
The private sector is the problem, not the solution for the jobs crisis. It will take investment in the public sector to create full employment and lift up the economy. This investment can be funded by taxing corporations to the point where our nation is facing surpluses rather than deficits. Owners of immense wealth have for too long been let off the hook from paying their fair share.
There is no shortage of work that desperately needs to be done. Industries need to be retooled to reverse climate change. Our infrastructure needs to be maintained and, in many cases, rebuilt. Public education needs to be improved and expanded rather than privatized. Social services and health care need to be made available for everyone who needs them.
Unfortunately, this is exactly the opposite of the approach of both presidential candidates and their corporate funded parties. Workers need to wrest control of the economy from the 1% by building a politically independent mass social movement to place our needs, such as a federal jobs program to create full employment, on the front stage.
All progressive changes that have benefited the vast majority have been the result of such struggles. Our salvation from the Great Recession lies in forging the necessary grass roots/workers unity to rediscover our power to set the political agenda.
[i] “The Rich Get Richer” by Steven Rattner
[ii] “US firms hoarding $2 trillion” by John Aidan Byrne
[iii] “The low-wage jobs explosion” by Tami Luhby
[iv] “Michael Moore says 400 Americans have more wealth than half of all Americans” by Politifact http://www.politifact.com/wisconsin/statements/2011/mar/10/michael-moore/michael-moore-says-400-americans-have-more-wealth-/
[v] “Wal-Mart Heiress’s Art Museum a Moral Blight” by Jeffery Goldberg http://www.businessweek.com/news/2011-12-19/wal-mart-heiress-s-art-museum-a-moral-blight-jeffrey-goldberg.html
[vi] “Financialization” Wikipedia