In the Worst of Times, the Billionaire Elite Plunder Working Class America
https://socialistaction.org/2020/09/05/in-the-worst-of-times-the-billionaire-elite-plunder-working-class-america/
September 5, 2020
By NICK BAKER
In the midst of a global pandemic, unprecedented economic collapse, mass
unemployment, hunger and desperation, the stock market is booming and
the richest of the rich are richer than ever before.
Since March, more than 58 million people in the U.S. have filed for
unemployment. The Internal Revenue Service now predicts that the U.S.
economy will have almost 40 million fewer jobs in 2021 than they
predicted before the pandemic, as a result of the prolonged economic
depression. As it becomes widely recognized that the economy is not
going to “bounce right back” into full activity – even when coronavirus
cases do eventually decline – and that the current depression will
continue for a long time, companies are doing anything they can to drive
their stock prices higher.
Desperate to maintain their profits, many large corporations are
planning massive layoffs and acknowledging that currently furloughed
workers are not going to have jobs to come back to. The Wall Street
Journal reports that a recent study found, “nearly half of U.S.
employers that furloughed or laid off staff because of COVID-19 are
considering additional workplace cuts in the next 12 months.” The
companies say low-paid workers will be the first to be cut.
Twice as many workers had their pay cut by July 1 as during the
Bush-Obama recession that began in 2009, according to the Washington
Post. More than 10 million private sector workers have had their wages
cut or been forced to work part-time.
Car company Tesla forced all workers to take a 10 percent pay cut from
mid-April until July. In the same period, Tesla stock skyrocketed, and
CEO Elon Musk’s net worth has now quadrupled from $25 billion to over
$100 billion. Business software company Salesforce announced record
sales levels one day and layoffs of 1,000 workers the next. The
company’s stock rose 26 percent.
Among small businesses, another study found that 50 percent of all
small-business employees who were furloughed since March are still
without work. Twenty-eight percent are still furloughed; 22 percent have
been permanently laid off. Even in the government’s rigged and severely
undercounted unemployment statistics, the number of people who have been
unemployed 15-26 weeks is nearly double what it was at the height of the
2009 recession — and exponentially higher than at any other time since
the Great Depression of the 1930s.
The “stimulus” bills signed by Trump and passed by Democrats have
already given away trillions to major corporations and tens of billions
in tax cuts to the richest Americans. Even two-thirds of the original
set of supposedly “small-business”-focused Paycheck Protection Program
loans went to large corporations, such as Ritz Carlton, while gifting
billions in fees to the banks that distributed the loans.
While millions of low-wage workers, “many of whom work in service jobs
in hard-hit industries such as hospitality, travel and retail…have lost
jobs, been furloughed or seen their hours cut,” writes the Wall Street
Journal, “the livelihoods of white-collar professionals…have remained
largely intact.”
The super-rich are getting richer than ever
On August 18 — a day when 1,349 people died of COVID-19 and tens of
millions were unemployed — the S&P 500 stock index hit an all-time
record high with the tech-focused Nasdaq 100 index already well into
record territory. Financial newspapers announced a new “bull market,”
predicting that stock prices would only go higher.
The runaway success of the stock market in the present context has come
as a shock to many people. Barely two weeks before stocks reached an
all-time high, the United States announced the largest 3-month fall in
the economy since the Great Depression. Even calling it the largest
doesn’t quite capture the magnitude. The 9.5 percent contraction from
April to June was four times larger than the previous largest drop since
World War II.
Economies around the world are in freefall. The GDP of the OECD
countries, the world’s largest economies, fell almost 10 percent in the
same period — also four times greater than in the 2009 global collapse —
and global GDP is expected to decrease by 5 percent this year, a
historic amount. Yet the stock market blithely rushes along, as the
mega-rich try to squeeze the last drops they can out of it, ahead of the
abyss.
Bloomberg News reports that the 500 richest people in the world have
increased their wealth by $871 billion so far this year, though “the
surge in wealth is especially concentrated in the upper ranks of the
billionaires index.” During the week of August 24–28 alone, the world’s
500 wealthiest people increased their wealth by $209 billion. The
world’s 10 richest billionaires now collectively have more than $1 trillion.
Amazon CEO Jeff Bezos, the richest person in the world by a wide margin,
now boasts personal wealth of $204.6 billion, as of August 26. His
riches largely come from Amazon stock, which has risen 80 percent so far
this year. Bezos’s wealth has nearly doubled during the pandemic,
including one single day in which he made $13 billion.
Historical estimates vary, but most agree that John D. Rockefeller and
Andrew Carnegie are the only U.S. tycoons who have ever had more money,
adjusted for inflation, than Jeff Bezos now has.
The largest stock gains this year have gone to the largest companies,
especially in tech, as the pandemic and the economic collapse have
become a boon for monopoly capitalism. Tech monopoly Apple is now the
world’s most valuable company, with its total stock worth over $2
trillion — the first company ever to reach that mark — having increased
by $1 trillion in just 21 weeks.
The secret to Apple’s incredible success? It has engaged in the largest
stock buybacks in history, re-purchasing $360 billion of its own stock
since 2012, according to the New York Times. This self-enrichment tactic
inflates the value of a company’s stock by buying it back from
shareholders, thus giving money directly to the shareholders by the tens
and hundreds of billions and enriching them further by decreasing the
number of remaining shares available for investors to buy — driving up
the share price.
Apple has spent $141 billion on buybacks in the past two years alone,
after Trump’s 2017 tax cuts enabled the company to return to the U.S.
tax-free $252 billion in profits. Apple had held the money in tax havens
for years, explicitly refusing to pay taxes and claiming that, if
returned to the U.S., the money would be used to “create” tens of
thousands of jobs — but that they wouldn’t do it if they had to pay
taxes. Trump’s 2017 Tax Cuts and Jobs Act removed the repatriation tax
on the same false premise, and, once returned, the money was used for
its intended purpose all along and given straight to the company’s
millionaire and billionaire shareholders. One of those billionaires is
the company’s CEO Tim Cook — though his wealth of $1 billion is rather
pitiful by ruling class standards.
Other tech monopolies like Microsoft and Google have also seen enormous
increases. Both Amazon and Microsoft are on pace to join Apple at the $2
trillion level later this year. The only other publicly traded company
in the world that comes close is Saudi ARAMCO, the Saudi Arabian state
oil and gas company. By comparison, the total stock of Walmart, by far
the world’s largest company by revenue — i.e., actual products made and
sold — is worth $370 billion.
Giving the lie to this wild stock rally, corporate profits fell almost
25% through the first half of 2020, despite consumer spending – the
overwhelming majority of the U.S. economy – being heavily propped up by
the $600 unemployment supplement, near-zero interest rates, and to a
lesser extent the $1200 stimulus checks. The unemployment supplement
effectively replaced the lost wages of unemployed workers, enabling them
to continue making needed purchases, while low interest rates have
fueled a spending bonanza for the wealthy who have been largely
unscathed by the economic depression.
These overheated and entirely fictitious stock market gains are the
reason that CEOs, leading shareholders and corporate executives have
dumped more than $50 billion in stock since May. CNN notes that these
“insiders,” as they are known, “are privy to more information about the
true health of their companies than average investors. And if they were
confident in the market rally, insiders would be unlikely to sell now.”
With the unemployment supplement ending and no future stimulus checks
announced, spending by the wealthy alone will not be enough the maintain
the façade covering an economy in the midst of an historic collapse.
Working class suffers while the rich splurge
“The recession is over for the rich, but the working class is far from
recovered,” wrote the Washington Post on August 18. Less than half – 42
percent – of jobs lost during the pandemic have returned, with workers
in low-wage jobs being the least likely to be back working. People of
color and women have fared worst. Women make up two thirds of those
employed in the 40 lowest-paid jobs, with women of color making up the
majority of low-paid workers.
“Black men and women have recovered about 20 percent of the jobs they
lost in the pandemic,” reports the Post, while white men and women have
recovered 40 and 45 percent of their lost jobs, respectively. Between
February and May 2020, 11 million jobs held by women have disappeared.
The U.S. Census Bureau reports that “one in five working-age adults is
unemployed because COVID-19 upended their child-care arrangements,” with
women three times more likely than men to have to leave their jobs – and
up to five times more likely to decrease their work hours – to take care
of children. The losses in the workplace that women are facing today
will be felt for decades.
Some 30–50 million people in the U.S. are at risk of eviction in the
coming months, as temporary eviction protections end. In a recent U.S.
Census Bureau survey, “nearly half of Hispanic renters and 42 percent of
Black renters said they had ‘no confidence’ or only ‘slight confidence’
they could pay their August rent,” the article states.
At the same time, food prices are rising at the fastest rate in nearly
50 years, making meat and eggs unaffordable for many. The price of beef
alone is up 25 percent this year. The same Census Bureau survey found
that “20 percent of Hispanic households with children and nearly a
quarter of Black households with children say they don’t have enough to
eat.”
The Kaiser Family Foundation estimates that 27 million people in the
U.S. have lost their health insurance during the pandemic.
While tens of millions of working-class people struggle, starve, and are
constantly threatened and harassed by their landlords, record-low
interest rates are fueling huge spending sprees for the wealthy.
Mortgage interest rates are at the lowest in U.S. history, leading to
record levels of house purchases by those who have no financial worries.
Car sales, too, are benefiting from low interest rates. “Some
dealerships have had their best July ever,” reports the Post. Needless
to say, these cars are not part of the miles-long lines at drive-up food
banks.
Though tens of millions are now jobless, retail sales have returned to
pre-pandemic levels, with massive gains going to big box stores such as
Target, Walmart, and Home Depot, which are seeing their largest sales in
history. Meanwhile 100,000 small businesses closed permanently by
mid-May and estimates are that hundreds of thousands more will not
survive the pandemic and the burgeoning economic depression, putting
additional millions of workers out of work.
As the small businesses close, the Walmarts and Targets move in to take
their place. This is part of the process by which capitalism translates
catastrophe into “opportunity,” accelerating its tendency towards
monopoly and consolidating the marketplace into fewer and fewer hands in
a desperate search for higher profits.
Fed prints shovelfuls of money for the rich
The Federal Reserve Bank has been constantly printing money and forking
it over to the rich. In the last economic collapse, under George W. Bush
and Barack Obama, the total amount came to over $29 trillion. No doubt
the final accounting this time around will leave that number far behind.
The August 18 New York Times, noting the ever-widening economic gap
between capitalists and workers, says that the Federal Reserve has no
plans to stop driving piles of cash to the rich anytime soon. “The Fed
has started new programs to buy Treasury bonds and other financial
assets to calm investors, and is financing those programs by essentially
creating new money,” writes The Times.
At the beginning of the crisis, the Fed instantly bought $3 trillion of
the Treasury and corporate bonds, largely in the form of buying huge
amounts of corporate debt from major companies like Microsoft,
Coca-Cola, McDonald’s, Exxon Mobil, Walmart, AT&T and Visa. These large
purchases of debt by the Fed both fund the companies and drive down the
cost of issuing debt for the companies.
While the Federal Reserve Bank has a program to lend to small and
medium-sized businesses, called the Main Street Lending Program, it has
made almost no loans to these companies. Of the $600 billion earmarked
for the program, only $92 million – 0.015% – has been loaned. This is
because the commercial banks who set up the loans and keep a small
percentage while selling the rest to the Fed, are not interested in
making small, near-zero-interest loans to small businesses with almost
no expected profit and a greater downside if the small companies go
under. The banks would much rather be using their funds to make
enormous, higher-interest, much more profitable loans to massive
corporations in need of large amounts of debt to get themselves through
the economic crisis.
In this way, the natural profit-driven mechanics of capitalism ensure
that larger companies crowd out the smaller ones, agglomerating to
themselves ever greater shares of the marketplace.
Monopoly capitalism consolidates its gains
The stock market has rebounded after the shortest “bear market” in
history — “a marked display of what analysts describe, by turns, as
optimism, hubris or sheer speculative greed,” says The New York Times.
Maintaining these stock surges, however, “is heavily reliant on federal
spending, easy monetary policy and continued signs of progress in the
hunt for virus vaccines.” The reader may note that such things as lower
unemployment, more social spending, higher wages, and lower coronavirus
case numbers and deaths in the short-term – not to mention even actual
corporate revenue and profits – are not among the concerns of the stock
market.
While stock indexes may be at record highs, the gains are far from
universal, even among major companies. “Almost all the gains in major
stock market indexes this year are attributable to the surging share
prices of a few giant technology companies, foremost among them Apple,
Amazon and Microsoft,” reports The New York Times.
“A weak economy can actually be quite good for Wall Street,” explains
The Times, “if it means that the Fed keeps the river of freshly created
money — what’s known on Wall Street as liquidity — flowing into
financial markets.” The Times notes that this is why studies show
“little connection” between economic growth and the stock market.
On August 27, Federal Reserve chair Jerome Powell announced that the
central bank would be keeping interest rates at near zero for the
long-term, even if it causes inflation to rise, all but stating outright
the government’s intention to try to drive the stock market up as high
as it possibly can.
Michael Hartnett, chief investment strategist at Bank of America Global
Research, quoted in The New York Times, calls this the “nihilistic” bull
market of 2020. “The performance of the market in the face of such dire
expectations for growth, he wrote, is just the latest example of
investors betting that low growth will prompt the Fed to continue
pushing money into the financial system, ultimately bolstering stocks.
In other words, stocks are going up not because of economic optimism,
but because the future looks fairly grim.”
It’s much worse than 2009
Many economists, including Federal Reserve chair Jerome Powell, predict
that this downturn will last a very long time — and for good reason. It
took the U.S. economy nearly 10 years to add the number of jobs that
have been wiped out so far this year. The share of the population that
has a job is at its lowest level since the 1960s — and far lower than at
any point during the Great Recession.
Wall Street investment bank Goldman Sachs predicts that the U.S. economy
will contract by 4.6% this year — nearly double the 2.5% contraction in
2009, the worst year of the Great Recession.
With states’ tax revenue plummeting while workers were laid-off or
furloughed en masse, state governments are now seeking to re-balance
their budgets not by raising taxes on the rich — heaven forbid! — who
have received 95% of income gains since the Great Recession of ten years
ago, but by massive austerity suffered by workers and the poor,
disproportionately women and people of color.
Already, 2.8 million state and local government workers have lost their
jobs since February — over four times more than the 750,000 jobs cut
during five years in the Bush-Obama recession. There are estimates that
the jobs of 2.8 million more state and local government workers could be
cut.
These massive cuts to jobs for state and local government workers come
on top of already enormous cuts in public employment. Before the
pandemic, twenty-one states and Washington D.C. still had fewer
government jobs than in July 2008. Those jobs are especially likely to
be held by women and people of color — and are much more likely than
average to be unionized. Public sector unionization is currently at 37
percent, compared with 7 percent in the private sector.
California Democratic governor Gavin Newsom has imposed a 10 percent pay
cut on all state employees and suspended planned pay raises. Newsom, who
is a multi-millionaire, pledged that his own pay would also be cut 10
percent, but the Sacramento Bee found two months later that he had not
taken any cut at all and kept receiving his full $17,000 per month salary.
Democratic governor of New York Andrew Cuomo is planning similar massive
austerity. Cuomo and state Democrats are cutting billions from Medicaid
during a pandemic, alongside massive cuts to public education. Cuomo,
who briefly became a media darling for his daily COVID-19 press
conferences that took the pandemic much more seriously than Trump,
refuses to raise taxes on rich New Yorkers. New York City is home to 92
billionaires.
What more can we say about a diseased system where the worst of times
for the vast majority become the best of times for the corporate elite?
Capitalism, alternately administered by one of its twin parties of war
and plunder, cannot be reformed. It must be abolished at the hands of
the vast majority who suffer its inherent evils. Today, the first
legions of those forces are in the streets in unprecedented numbers
condemning capitalism’s systemic racism. They portend earthshaking
struggles in the period ahead. Join us! Join Socialist Action!
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Robert G. Ingersoll
“Progress is born of doubt and inquiry. The Church never doubts, never
inquires. To doubt is heresy, to inquire is to admit that you do not know—the
Church does neither.”
― Robert G. Ingersoll,