Crisis in the US: Social and Economic Effects, Restructuring and Methods of Adapting

Introduction

The text below first appeared in ECHANGES, No, 130, Autumn 2009 as part one of a three part series on the social effects of the crisis in the U.S . We’ve shortened the original French, cutting background material on US public sector finances and social programs and correcting minor factual errors. With its focus on actions not usually considered “political” in the traditional use of the word, we think this text makes an important contribution to understanding the full ramifications of the crisis and the responses to it within the US.

We hope the question at the end, “what weight should be put on the proliferation of resistances?” stimulates wider debate, discussion and research on the larger question which frames it: do these actions in some way, despite “not following traditional paths…testify by their existence and forms to (changing) something in the capitalist system” or “are they only adaptations, helping the system overcome the crisis without changing basics?”

Most events described here took place in the earlier phase of the crisis. For several months, roughly beginning with the first bank bailouts and in the fall of 2008, through the Republic Windows occupation and ending in the spring of 2009, it seemed like a larger social explosion was building. However, even as unemployment, foreclosures and evictions remain at record highs, little in the way of the open mass action predicted by many in the traditional left has taken place. Many actions mentioned in the text, like the bank occupations, have since died out, or are no longer as visible.

But if traditional forms of class struggle can’t yet be detected, there are signs that on the micro-level, in the areas where individual resistance merges into the collective so well identified in this text, subtle but real changes are brewing. A good example is the May 31, 2010 New York Times article, “Owners Stop Paying Mortgages and Stop Fretting,” describing how, “ A growing number of people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This disrespect for capitalist norms of legality and private property among people who previously believed in “playing by the rules” (and maybe to a certain extent still do), can signal the beginning of larger shifts in consciousness and action, not in response to propaganda by leftist groups but by the real press of social events. They form the type of “innovating experiments that will leave traces” in the future.

We hope the question at the end, “what weight should be put on the proliferation of resistances?” stimulates wider debate, discussion and research on the larger question which frames it: do these actions in some way, despite “not following traditional paths . . . testify by their existence and forms to (changing) something in the capitalist system” or “are they only adaptations, helping the system overcome the crisis without changing basics?”

The United States’ Place in the World

[1]

Before describing the effects of the crisis, it’s important to remember that economically and militarily the US remains by far the world’s strongest capitalist power.

The third largest world state in territory, nearly the same size as China, and with almost 304 million inhabitants, the U.S can meet 72% of its energy needs. Its natural resources—such as minerals and rich agricultural land—are the third most plentiful in the world.

Despite deindustrialization, a 12.5% fall in output and 0.5% in recent months, its industrial output remains one of the world’s highest. For example, the US is the second largest global steel producer.

The US invests more in research and development, notably in new technologies, than anywhere else. To give an idea of the extent of this investment, the research budget of the California university system alone is greater than all of France’s.

The public, business and private debt load – one of the causes of the present crisis – and especially the trade deficit are often stressed to highlight the weakness of the American economy. China, which owns 40% of this debt, is often falsely posed as holding one of the keys to the situation in the US.[2] In fact, this deficit often comes from output financed by American capitalists (recouping thus a good part of the surplus value), who by importing goods at low cost holds down wages in the US itself.

The cause of the crisis in the US must be found in the context of the world capitalist economy and not credited to internal causes. These internal causes of course exist but in fact only shape the way this crisis is expressed. Despite successive setbacks and getting embroiled in unsolvable conflicts, US military strength rests on the deterrent effect of its impressive number of military bases spread over the world.

US confidence in its domination can be shown by the fact that US custom duties are the weakest in the world (3.5%) making the country one of the champions of unregulated capitalism in the global market. This economic domination is maintained by low production costs, underwritten if needed by subsidies, like those for agriculture.

Behind the Subprime Disaster: Widening Income Inequality in the US and the Decline of Workers’ Buying Power

“I think the banking institutions are more dangerous to our liberties than entire armies taken to combat. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” (Thomas Jefferson, third US president)

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” (Henry Ford)

Before addressing the current financial crisis in the US, it’s important to point out that at least over the past decade, the average American family income has steadily declined. Estimates place the average decline of real income between 2000 and 2008 at 1000 dollars per household. Of course, this average affected different social categories unequally. Taking the auto industry as an example, to curb international competition, notably from Japanese implants in the southern US, the “Big Three” (GM, Ford, Chrysler) have steadily reduced wages and benefits (retirement and health) for more than a decade. Between 1989 and 2004 productivity rose 28% in these companies while salaries only increased 4.1 %. The significance of the drastic measures taken by “The Big Three” in auto can be seen in the fact that they have to provide guaranteed pension and health insurance for more than 2 million workers and retirees.

The decline in income for the US as a whole can be measured by other facts. From 1982 to 2005, average income rose 147% while the price of consumer goods only rose 106%. However, health care expenses increased 251% and education costs 439%, which on the whole represents an impoverishment. Other data express the same tendency: from 1989 to 2004, for the average family, income rose 35% – but retirement costs increased 119%, housing, 56%, and debt by 119%, of which 103% was mortgage debt. The same from 2000 to 2008: while average incomes rose 3%, the cost of health insurance jumped 58%.

The decline in income can be gauged another way. After the year 2000, the average personal savings rate was near to or close to zero, which is where trying to maintain living standards with credit comes from, in hopes their situation would improve, with well-known results. This income decline only worsened with the “subprime” crisis. The Gross Domestic Product shrunk from 6.3% in the 4th trimester 2008 and 6.1% in the 1[3] trimester 2009. In December 2008, it was estimated that household consumption fell 14.7% in a single year.[4]

Shrinking incomes of a large part of the population resulting in increasing housing, health, and retirement costs answers the question why in the same period an explosive growth in all types of credit, notably mortgages, developed.

The response was two-fold.

On one side, the needs of creditors, the many types of financial establishments who, disposing of capital more and more important because of gathering surplus value coming from global business operations, had to make it grow. The bursting of the tech bubble led them into financial speculation like the LBO (Leveraged Buy Out), but also into what appeared better bets, especially real estate. To a certain extent, they were helped by a division in credit operations. On one side a stock market with large reserves for businesses and bond markets and, a popular credit supermarket with sellers hawking loans like door-to-door salesmen selling vacuum cleaners, with all that occupation’s dubious practices, relentlessly competing to land clients.

On the other side, clients who, believing in social mobility and the benefits of property, (maybe a sign of social achievement) let themselves get easily persuaded in taking on such loans for both security and as symbols of social achievement. With falling living standards, it is precisely this concern with artificially preserving social rank and security not only in property but also in all its accessories which came to be the flaw which eventually engulfed the whole financial sector. The flood of mortgage loans had a double-fold effect: a boom both in construction and in consumption as a whole, linked to the home on one side by rising home values since money flowed with the pace of construction not far behind.

At first, the slow decline in incomes mentioned earlier didn’t cut into the growing mortgage market. On one hand, lack of new and potential clients because of market saturation resulted in declining incomes, intensifying even more the competition among lenders making loans consented to by clients who couldn’t pay because of their low incomes, notably with the lure of low introductory interest rates. This was seen in debtors’ defaults in the first wave of foreclosures. On the other hand, real estate speculation made those who previously held mortgages believe they held an asset whose value would never stop growing. New loans were offered, guaranteed by this speculative value, which were more readily agreed to because the drop in incomes drove mortgage holders to either maintain living standards or face any emergency with fewer resources to fall back on. This delusional extension of individual credit was a sort of substitute for class struggle because it permitted quick and easy solutions to falling incomes.

Thus formed, the whole system only functioned by self-perpetuation, that is, with borrowers regularly making payments. What Madoff carried off on a small scale with a few large clients, all the credit companies relying on bank networks did on a much larger scale with enormous numbers of small customers. Because of slowly declining revenues, the system reached a saturation point, then halted and started unraveling in a spiraling freefall. The economic crisis started striking the most vulnerable working-class sectors, leading to an even sharper fall.

Certainly, this trend of decline started well before 2008, not only in this risky mortgage market (the “subprimes”) but also in the US economy. The end of that year marked the 24th month that construction had fallen and the 27th consecutive month that manufacturing had also shrunk. Today, every economic sector is affected by unemployment; in April 2009, the official unemployment rate was 10% but the real rate was 16%. In that month alone, there were 149,000 jobs lost in manufacturing, 46,000 in distribution, 110,000 in construction, 135,000 in financial services and 269,000 in other sectors.

At the same time, salaries stagnated – when they weren’t “adjusted” downward. If recent financial indicators could have provoked an inflation rate of more than 6%, counter-trends, like selling goods below market value at other times raised deflationary tendencies. This continuing development makes it especially risky to predict if this unstoppable cycle of interdependence can’t continue to unravel. The more revenue falls because of unemployment, from downward pressure on salaries or from inflation, the more the real estate market erodes, the more consumer spending shrinks and the more the crisis spreads.

In a special number of the Financial Times (May 5 2009) dedicated to “The Future of Capitalism,” an article noted there was no “credible alternative to the market economy.” Strangely, all the political class on all sides, including the “revolutionary reformists” ultimately gave credit to theories of economic liberalism that Richard Posner, a supporter of the Chicago School, summarized this way: “Financiers share an initial responsibility in the depression, but can no more be blamed then a lion could be blamed for having eaten a zebra. Capitalism is Darwinian.”

The Present Limits of Traditional Means of Class Struggle

An important part of the population, those who because of their income and activities can be considered as part of the “middle class”[5] is doubly punished, first, by losing their jobs and incomes, then by loss of its possessions. This time, they find it impossible to turn to real estate loans either because they have been evicted from their asset or else because plummeting real estate values cut them off from loans they previously would have drawn on. The question which interests us, is how workers, whatever their “rank” on the social scale, defend themselves against what for everyone is a worsening in living conditions; a degradation which affects people differently according to their place in the social hierarchy.

To answer this question, responses connected to work itself (against layoffs or worsening working conditions) have to be separated from responses against worsening living conditions, beginning with the effects of creditors repossessing homes (the ravages of “sub-primes”).

Contrary to what takes place in other countries, hardly any struggles against layoffs take place, although there’s sometimes the rare factory occupation as in Chicago (Republic Door and Window) and in Canada (Windsor, Ontario, dependent on auto and across from Detroit). Confronting lay-offs, like in France, everyone aims to get or even increase financial compensation. Even if these objectives are sometimes won, they have not had, as the “revolutionary” milieus hope, the effect of stimulating other struggles, so far remaining isolated cases, as in the example of workers at HartMarx (apparel) in Chicago or of a subsidiary in Rochester, New York. Furthermore, such struggles haven’t included any attempt to get the company re-opened, let alone take over production through self-management. Afraid of losing their jobs, those workers still employed (which despite unemployment is still the largest part, nearly 80-90%), don’t try to launch struggles or they try to weather the storm,.

There are still examples of struggles to renew contracts during which the bosses, taking advantage of the bleak economy, try imposing take-backs. Nearly all end in defeat, sometimes after months on strike. What took place in the “Big Three” in auto, all almost bankrupt even after years of union concessions and restructuring, shows how workers only accept new concessions to protect their jobs, even at the price of worsened working conditions. One of the conditions imposed by the government for the economic bail-out of the “Big Three” was that salaries had to be aligned with those at non-union Japanese transplant firms in the southern US But these non-union companies try to force workers into accepting wages aligned to the prevailing minimum wages of the states in which the plants are found, a never-ending race, among other concessions, in the fall of wages. Attempting to protect their profit margins from declining sales, companies cut wages with threats of layoffs. More than a quarter of wage-earners were affected, notably in non-union companies. Whether in the auto giants or in non-union shops, workers accept harsher working conditions without many struggles from fear of swelling the ranks of the unemployed.

A New York Times article from April 5th, 2009 states that “American workers have largely stayed off the streets, even as unemployment soars and companies cut wages and benefits,” adding that “they tend to view themselves as part of an upwardly mobile middle class.” On the other hand, the article states the younger generation has “found more effective ways to change the world. It’s signed up for political campaigns, and it’s not waiting for things to get so desperate that they feel forced to take to the streets.” American workers keep away from demonstrations as much from fear of seeing their jobs relocate as from any concern over preserving their image as members of the “middle class” with its hopes and ambitions. Many develop feelings of guilt and shame over what they consider a personal failure. In 2008, 159 strikes were recorded, versus 1352 in 1981.

Faced With a Fall in Social Position, No Individual Solutions

Resistances, if one can call them that, rather than stop-gaps that are imagined as temporary, are thus outlets for responses to a slow or sharp sliding down the social scale tied more to incomes than to any role under capital, coming more from a social fiction, an ideological conditioning, than from the reality of any power in the capitalist system. From this situation came the feeling that one was a member of the “middle class.”

It was inevitable that these “solutions” were first and still are individual. Everyone looks for a port in the storm. It’s a matter of preserving not so much basic survival, as with the very poor, but the appearance of status. This status, supported by family income, appeared more a frame of mind based in part on appearing well-off and secure, with hopes for going further. The fall in social position of those considered as “middle class” makes these people not react first by contact with exploitation (loss of wages, benefits, employment) but to a symbol of social status: the house. Losing “your” house is to lose an essential element of idealized social status.

Recent American newspapers are full of detailed testimonies to the different ways people use as compensation for hiding their loss in position. This is often independent of the mortgage problem, which we examine separately.

An example of one family’s situation: A couple with two children, the husband unemployed, the wife employed. They don’t have mortgage debt and are trying simply to survive, not even to maintain “status.” The family has cut non-essentials like movies and restaurants, focusing their worries on housing: they have successively lost their telephone, cable and finally their car for non-payment. When he finds a job, they first get back is their car, an absolute necessity in the U.S with the size of its cities and lack of public transportation.

For every household in financial straits, a study has shown in what order they economize:

  • Cutting back electricity and heat.
  • Looking for part-time work or working overtime.
  • Postponing non-essential medical spending (dental, physical exams, tests).
  • Borrowing from savings or retirement accounts.
  • Borrowing from friends.
  • Taking any available work. Brice Rump, president of a temporary work agency, Toledo Job, stated, “. . . the level of people who come to the agency is unbelievable . . . What I am seeing is a large number of very talented people who are trying to land anything. Everyone is moving down.”
  • Young people joining the military.[6]
  • Older people, whose pensions are inadequate from shrinking retirement plans, returning to work in temporary jobs where they compete with the young. More than 25% of those over 60 years old now expect to work until they die, versus 15% before the recession.[7]

This could be the situation of anyone facing financial trouble in all the industrialized countries. But rising unemployment (officially, more than 650,000 newly unemployed in February 2009 alone; since the crisis began, more than 7 million jobs have disappeared) changes these priorities of economizing somewhat. This rising unemployment is not slowing: in a single week, July 18, 2009 more than 30,000 joined the ranks of the unemployed. At that time, there were more than 4.4 million Americans out of work for more than 27 weeks – with more than half receiving no benefits.

Guidelines from 2008 set the poverty threshold at $10,830 for an individual (double for families), with nearly 40 million Americans falling into that category. Falling back on welfare isn’t always a choice because stricter income guidelines and sometimes pride keep many from applying. It is the same concerning health care coverage, which we will examine later. Spreading company financial difficulties makes job searching hard, even for lower work hours or short-term jobs. One example: A small state like Rhode Island, which rapidly industrialized in the 1960s followed by the real estate boom, went into decline in 2005 accompanied by rising unemployment. An offer for 80 jobs attracted over 500 applicants.

Unemployment compensation is itself subject to limits. Where labor law guarantees unemployment benefits, employers try by different means to avoid paying, by claiming employees left for reasons other than layoffs. A quarter of unemployed penalized in this fashion have to spend months appealing to get benefits. Benefits vary from state to state.

The ripple effects from mortgage defaults can’t be separated from the drop in personal incomes from previous years, a drop that quickened in 2007-2008 and jumped even more in 2009 because of rising unemployment. Two types of defaulters have to be distinguished: those who were unconscious victims of subprime mortgage and those defaulting from unemployment stemming from the economic crisis. What is the percentage of each? The first group had in some way escalated the process, which spread, affecting the whole consumer economy. That said, the effects of the world economic crisis in the U.S shouldn’t be underestimated. This crisis has only reinforced the factors around which in turn the national character of “risky” mortgages has unfolded.

The real estate market and mortgages – whether “toxic” or not – is in a kind of chaos. Slumping building prices not only deprive financial institutions of money, but also impoverish home owners, whether in default or not. In May 2009, real estate values had dropped 30%, returning sometimes to 1920s prices, with one in five borrowers owing more than the property was worth. Financial institutions are forced to destroy their own now completely depreciated properties. In California that same month, an unfinished housing complex needing an extra million dollars to complete was bulldozed after the bank decided tearing down the unsold buildings would be cheaper, only costing 100,000 dollars. The same thing took place in Cleveland, Ohio, where one street was so full of repossessed homes, now ransacked and vandalized, that it was more “profitable” to tear them down. This financial landscape is aided by all sorts of mercenaries: speculators who buy empty vandalized houses in bloc for minute sums, then sell them on the internet to gullible buyers, now indebted owners of uninhabitable houses they can’t afford to fix.

Others from the same wholesale buy-ups re-sell units for 500 dollars by offering all the necessary materials on credit for a charge of 400 a month, less than rent. Among bankrupt credit agencies, good mortgage titles from debtors who don’t know who owns their title circulate.

Overall it is hard to get more complete statistics. But even partial statistics give an idea of the extent of evictions, the “repossession” of homes by lenders, most often credit establishments–backed up by the whole banking circuit. At the end of 2008, one in ten mortgages in the state of Maryland, 100,000, were in default. In the US as a whole, in April 2009 alone, more than 150,000 more defaults were registered. Half of repossessions are concentrated in 35 out of 50 states, with California, Texas and Nevada at the top.

Those who lose their homes often in a few weeks lose everything. They are often still in debt because the value of their foreclosed house is less than they owe the bank. Those foreclosed on look first for support from close relatives and in makeshift solutions because they are destitute, still hoping that present circumstances won’t last long because “things will work out.” An American or “middle class” mindset? Newspapers are always full of testimonials to temporary “solutions,” which even if testifying to a certain distress, won’t last long, especially if affecting families. At the same time, these individual solutions tinged with hope are for the time being somewhat collective. They testify that “possible” solutions exist, even if the future remains totally unclear. What will happen if this temporary situation lasts, if the number of those living in makeshift conditions increases sharply? Who can say if that will turn into collective responses, which appear to be starting up in the related area of evictions?

We limit ourselves to sketching an outline of these stop gap measures today:

  • Sharing housing with parents or friends, even if this means living in a garage. But it is the least worst of solutions, a solution which also rebuilds a class position.
  • Relying on motels: a 44 year old middle class college graduate became unemployed and ended living with his wife and three children in a run-down motel room. The environment is not like his prior one: domestic arguments, prostitution, drunken fights. Furthermore, if he didn’t pay from 800-1400 dollar per month, he would have to leave 28 days later because then the stay would change into a rental the motel owner didn’t want.
  • Living in trailers or mobile homes in over-crowded pre-existing trailer parks.
  • Emergency shelter, an even more temporary solution since such shelters can be closed during the day and every spring. One homeless man describes conditions in these shelters: “I have been arrested because I refused to go to a shelter and I was jailed at Rikers (an island jail in New York City). I couldn’t help laughing when I saw that my sheets were stamped with “Department of Homeless Services” because prison and a shelter are one and the same. It is an example of the link between Homeless Services and the prison system here in New York. This system is completely against us. We are treated like cattle, fed like birds and worse of all, treated like everyday trash pushed to the curb.” [8]
  • Tent cities which have sprouted up all over the country in isolated areas or in kinds of shanty-towns where insecurity is the rule because of police crackdowns and temporary toleration by officials.
  • In covered parking lots, where people can sleep in their cars.
  • Substituting for overloaded or non-existent community centers, public libraries become places where people go not only looking for warmth or sleep, but also to find representatives and counselors [ … ]

Even if census counts regularly underestimate children’s situation, especially in urban families and even if before the recession, child poverty rates had risen significantly, all indicators show that in the recent period, the numbers of children living in single parent families or in unemployed households sharply increased and is still rising, while many states ,facing shortfalls, cut-off programs helping destitute families.[9]

Entering Illegality: Start of Collective Solutions

But not everyone tries to go as far as finding stop-gap solutions; they slide into hopelessness, which doesn’t mean those searching for solutions aren’t prey to a range of psychological pressures, with interpersonal problems of varying severity. More than half of college age adults have mental health problems (one fourth not treated): depressions and anxieties are often drowned in alcohol or drugs.

Beyond family disruptions (break-up, domestic violence, which has jumped 18%), suicides increase (reaching unprecedented levels; the suicide rates in 2008 rose 28% over 2007). Other acts signaling individual despair take place, like burning down a repossessed home (which can also be insurance fraud), and armed resistance to eviction agents which can get out of hand. These acts can end in “mass murders” whose frequency is rising dangerously, from suicides of whole families up to shootouts in schools and elsewhere or else in increasing common crime. For example, in June 2008 in Detroit, (800,000 inhabitants) 30 murders were counted – a monthly average![10] One example of these resistances stemming from hopelessness: an older man barricaded himself in his apartment, resisting eviction with weapons until exhaustion. The siege lasted 5 hours, involving 100 police and helicopters before this veritable military operation finally cut him down. This isn’t an isolated case. Likewise, there is a surge in banks or business robberies, not only by local gangs or organized crime, but also by ordinary individuals. A dramatic increase according to an FBI report: 22% in southern California, 421% in Orange County, 54% in New York, and often for small amount–one, for $1,410 “to pay my rent” and another for $1,000 to stop eviction. In the US, there are now 7.3 million prisoners, including those on parole (one out of 31 adults), and their numbers are rising.

Exploiting the need for money for everyday expenses, the banks tried to expand the credit card system, shifting problems they experienced in the mortgage sector. The dimensions taken on by this new speculative threat in May 2009 led the government to more strictly regulate the credit card industry, and imposing a 45 day delay before increasing interest rates (such changes were one cause of subprime defaults.) Right now, household debt per family averages $10,500 and these total personal debts, excluding sub-primes, climbed to 2.5 trillion dollars. The upward curve of credit card defaults mirrors exactly the progressing wave of unemployment.

But on the other side, there at the same time what could be described as positive steps, sometimes individual, sometimes collective.

In place of burning down a house being repossessed, some people getting evicted have quickly stripped all fixtures from the house, including the paving stones, leaving only walls. They are helped in this by organized gangs that have become specialists in gutting empty houses post-eviction or after former inhabitants abandoned them. We will see later the effects of the vandalized houses in the ebb and flow of real estate in the US.

A squat is a form of individual taking back but squatting in his or her own house or in an abandoned house, is a longer-term repossession, a direct and continuing confrontation with the authority of the property owner. Often, this form of action, which looks individual on the surface is in fact collective because refusing to evacuate or squatting in a former home can only take place with open or tacit support from others. This resistance takes many forms but appears outside parties and unions, having more in common with solidarity and mutual aid networks appearing in Latino demonstrations against anti-immigrant legislation. These forms suggest shifting neighborhood relations possibly signaling the appearance of a community of class interest and subsequent solidarity.

There too, we can only mention these examples because it concerns local movements rarely federating beyond the state level. […] As a rule, these local movements skirt or act wholly outside the law, and range from peaceful occupations to confrontations stopping evictions or auction sales. In Florida, a group of sympathetic lawyers, “Take Back the Law,” set up another group, “National Coalition for the Homeless,” regrouping a dozen similar groups across the US They organize a form of civil disobedience, signing up homeless candidates to supply them empty houses which otherwise would be quickly taken over by vandals or squatters. They give legal advice to start asking lenders to “produce the note” which blocks evictions because with the collapse of real estate agencies, no one knows any longer who ultimately owns the debt.

  • In Minnesota, a similar organization, “Human Rights House” has organized a clandestine network baptized an “underground railroad for the modern world.”
  • “Women in Transition” in Kentucky hunts for properties to squat and redistribute.
  • “Metro Atlanta Task Force for the Homeless”: Intending to stay legal, this local organization approaches banks to negotiate legal occupations of abandoned houses.
  • A group of unemployed construction workers in Cleveland, Ohio, fixes up abandoned houses for free, giving them to those without homes.

Picture The Homeless (PTH) in an article in Left Turn magazine, “Housing, Race and the Shelter Industrial Complex,”[11] defined its task fighting for housing “regardless of race, color, or economic status” is that up to a certain point, everyone is experiencing hard times one way or another” […]. There are enough abandoned houses in Manhattan alone to house the entire homeless population in NYC. Picture the Homeless, with its allies, has proven it. As long as there are so many men, women and children in the streets of New York, then we will continue our fight. We want also to draw attention to the fact that it’s everyone’s problem and we need everyone to organize… […] Many of our discussions don’t offer the opportunity to go beyond a certain level. During these discussions, it’s important that they don’t unfold in a particular organization. It is one of the reasons why PTH is a member of groups like ‘Right to the City’ or ‘Coalition to Save Harlem.’” What is the national influence of such organizations, which appear to spring up across the country? Without doubt, it is the same people organizing or participating in more radical actions demonstrating against evictions and court hearings, and taking direct action against banks or top bankers. An ambiguous slogan circulates on the internet: “If government doesn’t want to regulate banks, then break them up.” We don’t know the national significance of these “Rapid Defense Teams” trying to organize demonstrations and intervene against evictions. We can only compile a list of these direct actions:

  • In October 2008, more than 30 banks received envelopes containing white powder.
  • A bank occupation in Oakland involving 40 people called by the organization ACORN; the police threw demonstrators out.
  • Last February in Greenwich, Connecticut more than 300 demonstrators gathered in front of the homes of two head bankers who had refused to renegotiate mortgage loans, blockading the bankers inside and covering nearby walls with graffiti. Similar demonstrations took place Boston, Detroit, Memphis, and Cleveland.
  • On April 9th, thousands of mostly immigrant demonstrators marched in Los Angeles streets for immigrant rights because of worsening conditions.
  • A wave of threats, more than doubled in two years, against judges and prosecutors; so many that some of them have to seek 24 hour police protection, change their route, and install security systems at home. A special hi-tech national center has been set up to track down the origins of these threats. Bombs have been set in front of certain courts.
  • An outside health clinic held on August 11-18 in Los Angeles treated more than 3,000 patients unable to pay for healthcare for free, some for serious medical problems.[12]

Sharp cuts in education also sometimes provoke counter-responses:

  • On May 21st in Detroit, more than 200 students protested the firing of two school administrators opposing mass school closings, layoffs of 33 principals and 900 teachers.
  • In Los Angeles, 9 teachers went on hunger strike against layoffs of 2,250 teachers.
  • In Santa Cruz, 100 teachers and students organized a committee against restructuring and increased class size; 400 demonstrate on May 22nd, occupying university offices without arrest.

Other initiatives, both individual and collective, which we don’t hear much about, have taken over vacant or public land for subsistence cultivation, as in Detroit and elsewhere. Another response we don’t know how widespread it is and raises many questions: unemployed workers working free for an employer, either not to sink out of sight or to have a future foot in the door. This phenomenon isn’t individual; there exists an internet site listing volunteers and companies (mostly start-ups) positioned to “welcome” them. These seem similar to French job training schemes but have to be private in the US.[13]

What weight should be put on this proliferation of resistances, as much individual as collective, acts of desperation as much as offensive acts, survival measures, all actions often skirting legality? On one side, we can welcome these responses which, although not following traditional paths, testify no less, by their existence and forms of organization, as attempts to change something in the capitalist system. But on the other hand, we can also draw the conclusion that the system’s tolerance (despite the repressions setting limits) makes these same social phenomena only adaptations helping the system overcome its crisis without fundamentally challenging it.. It is the future which will answer this question but we can nonetheless think, to one extent or another, these new experiences will leave traces.

A recent article in the Washington Post asked: “Where are all the protests?” concluding that there is much dissatisfaction but a few protests. Yet we can see the government has brought back special anti-terrorist units from Iraq to carry out the National Guard’s normal role of securing internal security in case of social unrest. The ruling class is more aware of the dangers threatening society and assign more significance to new signs and unusual methods of resistance than traditional political groups imprisoned in orthodox schemes of class struggle. [ . . .]

  1. [1]

    Crisis–its effects and the actions taken everywhere to contain the economic and social consequences–doesn’t just affect one country but is a problem of capitalism worldwide. Even if individual countries are unequally affected and take actions specific to each state, the interdependence of these actions and the effects of the crisis stretch beyond borders. On questions of the necessary overall theoretical considerations, over which both capitalists and reformers and “revolutionaries” disagree, it’s hard to sort out what is the real impact of government attempts at rescuing and their medium and long term outcomes. Only one certainty emerges: the tendency (not new but accelerated) to find new sources of profit restoring the rate of surplus value by focusing not only on making new products but also by changing working conditions. Previously, these tendencies were expressed in restructuring, concentration and changes in everyday business practices. It is workers who suffer the worse effects. More than ever, class struggle remains the basic element in the system’s capacity to survive.

    In the end, the only subject preoccupying all the powerful is in knowing just how deep this crisis is. Is it one of those periodic crises, like prior ones, which have regularly shaken the capitalist economy since the end of WWII and which were apparently overcome in a few months? Or is it a crisis on the scale of the 1930s, which was only resolved by world war? Such a question is linked to what we ask in understanding the possibilities for the system’s survival. Comparing a graph of one year decline in worldwide industrial production in June 1929 with that of April 2008 shows identical curves (Financial Times, June 16th, 2009).

    Another more practical discussion, but which we don’t want to bring up here, concerns the question if the present crisis is a financial crisis or an economic crisis of overproduction. The fact the collapse brought on by the crisis had been in the US especially notable for financial sector decline can lead to thinking that with the excessive credit boom and the independence of financial capital from ties with industrial capital, this is above all a financial crisis. This point is reinforced by the series of emergency steps taken by most States to avoid collapse of the whole banking system. Yet economic circles and political leaders are especially looking for any signs signaling an end to the crisis in manufacturing and consumer spending because it is in effectively resuming capitalist production ( and therefore exploitation of labor in different conditions than those which led to the crisis) that an exit from crisis can eventually develop.

    In this article we won’t address this set of questions. Even if we stress the international character of the crisis, the measures taken to overcome it, and class resistance, it’s not to privilege a particular case to consider what is happening in the United States as an essential element in evaluating the effects of the crisis and the steps taken nationally to overcome it. Just considering the present estimate of worldwide financial losses, US losses alone add up to 2,700 billion out of a world-wide total of 4,400 billion–or 60% of the total. American steps to contain the effects of these losses are therefore essential, which justifies devoting special interest to the US We want to show concretely how the crisis unfolds in the country, its social consequences, and what steps are taken on different levels to respond to these effects, if not to overcome the crisis itself.

  2. [2] Some examples can be given of the relative weight of China’s development in respect to the world economy. Africa is often mentioned as an example of China’s capitalist expansion. In 2008, total trade in Africa expressed in dollars rose to 74 billion with China, 425 billion with the EU, 224 billion with the US, 267 billion with Japan and 186 billion with South Korea. China barely represented 6% of total trade, with higher percentages of investments made by India and Malaysia. If nuclear weapon stockpiling gives another measure of the relative strength of China, the number of nuclear arms inventoried is 10,500 for the U.S, 14,000 for Russia, 320 for France and 180-240 for China, as many as Israel. Even with the nuclear weapons cuts between 1700 and 2200 for Russia and the U.S in 2012, China will remain far from the US (Le Monde 24/4/2009).
  3. [3] st
  4. [4] This fall in incomes didn’t affect all classes. From 2001 – 2007, for the 1% richest, income increased 10% per year while for the remaining 99%, it only increased 1.35% per year, less than the annual rate of inflation. The 15,000 richest families (0.1% of the population) saw their incomes grow 5.46% in 2006 and 6.04% in 2007 (this annual rate was only 0.9% in 1979).
  5. [5] Using the term “middle classes” to speak of workers is vague. A farmer, a craftsperson, a shopkeeper are “workers owning the means of production,” (in reality, owners of debt) are labeled middle class; they have the entrepreneurial spirit… For those who are proletarians having only their labor power to sell, there is indeed a hierarchy in the worldwide labor force, without taking up again Engels’ ideas concerning England of a labor aristocracy bought-off with crumbs from the capitalists. A debatable point, because the rate of exploitation in England was higher than elsewhere. In fact, in the present context, the great gaps in incomes, both domestically and internationally, narrows, independently of any place in the hierarchy of authority, a hierarchy of incomes in which higher placed layers in this hierarchy have access to living conditions impossible for the lowest levels to reach.
  6. [6] Seeing an influx of candidates escaping poverty, the Army has raised its admission standards, which had been lowered to assure a minimum of replacements. At the same time, the age limit has been raised from 35 to 42 years, responding to an influx of applicants whose curve matches rising unemployment rates (Baltimore Sun, August 16th, 2009).
  7. [7] “Older Workers Rush Back into Jobs Market as Downturn Wrecks Their Retirement Plans” (Financial Times, May 10th, 2009).
  8. [8] “Housing, Race and the Shelter-Industrial Complex” by a “bunch of folks at Picture the Homeless” in Left Turn, January-February 2009.
  9. [9] “Study: Recession likely to leave kids worse off” (Washington Post).
  10. [10] Every year 30,000 firearms deaths are recorded in the USA, an average of 84 per day.
  11. [11] Left Turn, January-February 2009.
  12. [12] This “open-air clinic” was set up by a humanitarian organization Remote Area Medical, initially founded to provide free health care to the poorest South Americans. The symbolism of having to provide the same services in the richest state in the US is obvious.
  13. [13] “Crisis spurs people to work for free – good or bad?” (Reuters Agency, July 7, 2009).

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