From a bang to a whimper: Obama’s first year

Issue: 125
Posted: 16 December 09

Megan Trudell

The Obama presidency is in a quagmire. The tremendous promise encapsulated in the campaign slogan “Change we can believe in” and the enormous expectations of reform after the Bush years have not been realised. Energy has given way to hesitancy and the Obama government’s first year has seen it become increasingly entangled in the contradictions of profound crisis in the US. The conjuncture of recession and the deepening morass of war in Afghanistan have intensified divisions in the US political establishment. Government responses to the crisis have produced the twin, mutually reinforcing, effects of failure to deliver change for its most enthusiastic supporters and stoking political opposition to its right.

Obama’s visit to China highlighted some of the economic difficulties the US is experiencing. The combination of the vast costs of the stimulus package ($780 billion) and rising military spending is weakening its international economic position. In March 2009 the Chinese central bank called for a new global reserve currency to replace the dollar due to concerns about falling dollar values which threaten its investment in the US. When treasury secretary Timothy Geithner did not rule this out, the dollar plunged. Its value in November was 15 percent lower than its peak earlier in the year. The US trade deficit with China remains vast—$165.8 billion for the first nine months of 2009. Obama’s hopes for a more flexible exchange rate with China to boost US exports were predictably disappointed. China’s commerce ministry attacked the US for hypocrisy: “We’ve always known the US and the West as free-market economies. But now we’re seeing a protectionist side,” said a spokesman, citing several trade actions taken against China this year.1 On the day Obama arrived, the chair of China’s bank regulators also criticised US monetary policy, arguing that depreciation of the dollar combined with a refusal to raise interest rates was creating “new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies”.2 The two economies are so intertwined—an “uneasy co-dependency” according to the Washington Post—that the crisis is being mutually reinforced.

The Obama government’s stimulus package has staved off economic meltdown, but begs the question of what happens when it is withdrawn. With the US economy’s relative decline, its role as global military superpower becomes ever more important. Yet high and rising arms spending is increasing the pressure on the economy. The financial cost of the Afghanistan war has risen year on year. The figure in 2009 was $60.2 billion—up from $36.9 billion in 2007, $20 billion in 2005 and $14.7 billion in 2003.3 Overall US defence spending is $680 billion for 2009.4 These costs are set to rise further as Obama commits yet more troops to its disastrous Af-Pak strategy; troop levels are currently around 62,000 and Obama announced an increase of 30,000 in 2010—all this for a war which is more likely to profoundly destabilise US imperialism than to lift the country out of the economic doldrums.

In August, General Stanley McChrystal, commander of the Nato forces in Afghanistan, warned the US government that “failure to gain the initiative and reverse insurgent momentum in the near-term (next 12 months)...risks an outcome where defeating the insurgency is no longer possible”.5 Over 900 US soldiers have been killed in the war so far, nearly 300 in 2009—the highest by far of any year since the war began, and higher than any year between 1956 and 1964 during the Vietnam War.6 The larger the US presence, the higher the number of casualties, the more routine (and accurate) the comparisons with Vietnam in the media, the greater public opposition becomes. Polls in November show that a majority of the US population—58 percent—opposes the war in Afghanistan for the first time since it began in the wake of 11 September 2001.

The crisis bites

Approval ratings for Obama are down to 49 percent, with 44 percent disapproving of his performance. Behind these figures remain the pronounced class differences in support for Obama that were evident during the election. So while Obama’s approval rating has fallen among Americans of all income brackets, it remains highest among those on the lowest incomes: 59 percent of those who earn less than $2,000 a month compared with 48 percent among those on the highest (over $7,500) and 44 percent among those who earn between $5,000 and $7,500. Among black and Hispanic voters support for Obama is still stubbornly high—91 percent and 70 percent respectively.

Obama’s continued popularity with poor and working class Americans, and among black and Hispanic voters, who are more likely to be in the lower income categories, reflects the extent to which the exigencies of the economic crisis are wrecking people’s lives. As Gary Younge put it recently, “The impatience to see concrete results is not driven solely by unrealistic expectations but also by the fact that people are broke and desperate. For a growing number, change is not a slogan—it’s an urgent human need”.7

Despite US treasury secretary Timothy Geithner’s declarations of an imminent end to recession in the summer, the recovery seems unreal for millions of Americans. A common term among US economists is the “jobless recovery”. In a masterpiece of understatement, Geithner in October referred to the recovery as likely to be “a little choppy”. The real situation for vast and growing numbers of Americans is increased unemployment, foreclosures and the loss of health benefits. 558,000 people lost their jobs in October, bringing the total to 15.7 million unemployed—8.2 million of them out of work since the recession began in December 2007.8 The unemployment rate has broken the 10 percent barrier—hitting 10.2 percent in October, the highest for 26 years—and is projected to remain there for much of 2010.

One US economist recently stated, “The bottom line is that although labour market deterioration is clearly not occurring at the pace suffered late in 2008 and early this year, conditions remain brutal.” Moreover, there is no apparent end in sight. “We continue to believe that the healing process will be a slow one, and that households will be contending with weak income growth and balance sheet issues for some time”.9

A breakdown of the unemployment figures shows just how disastrous the situation is. Over one third of young black men are now out of work: “Joblessness for 16 to 24 year old black men has reached Great Depression proportions—34.5 percent in October, more than three times the rate for the general US population”.10

Even among those who are not in such dire need, increasing numbers polled state that their financial position is precarious: 65 percent of Americans say their personal finances are in fair or poor shape, a figure that has steadily increased over the course of the year.11

The “jobless recovery” would be an oxymoron were it not for the fact that US profits have recovered. Productivity increased by an annual rate of 9.5 percent during the third quarter of 2009—the largest gain since 2003.12 At the same time labour costs fell at a rate of 5.2 percent. Those workers who have kept their jobs are, in other words, being squeezed harder. Companies that have not made significant job cuts are cutting costs through shorter working weeks, unpaid holidays, wage cuts and shutdowns. These tactics are being pursued by large firms like Dell, Cisco and Motorola in the new technology sector that has boomed over the last three decades, but are also being used by smaller businesses. Profits exceeded expectations for 81 percent of Standard & Poor’s 500 companies—widely regarded as the best measure of the US economy—between July and September 2009.13

Banks are also benefiting from the recovery and are profiting directly from the government bailout. As Dean Baker of the Centre for Economic Policy Research (CEPR) wrote in the Guardian:

As we are constantly reminded, the financial crisis is behind us and the banks are back on their feet. In fact, they are more than just back on their feet. In many ways they are doing better than ever. The most recent data from the commerce department shows that the financial industry profits now account for more than 31.5 percent of all corporate profits. This is a higher share than at any point during the housing bubble years. Of course, it is not that hard to make profits when you get to borrow money from the Fed at almost no interest and then lend it back to the government at 3.5 percent interest.14

Restructuring and recession

Beneath the surface of the “jobless recovery” is the pressure US capitalism is under to offset the costs of the crisis.

For 30 years US capitalism’s answer to falling rates of profitability has been to restructure industry, often with the support of the unions, to the detriment of workers. The subsequent pattern of concessions, give-backs and “shared sacrifices” has enabled US business to transform productive operations leading to disorientation in the US labour movement.

The methods, and the suppression of resistance that was the union side of the bargain, have been part of a process, described by David Harvey as the “restoration of class power”, that has dramatically increased inequality in the US. A 2009 CEPR report concludes:

Taken together, these policies—a low and falling minimum wage; the de- or re-regulation of major industries; the corporate-directed liberalisation of international capital, product, and labour markets; the privatisation of many government services; the decline in unionisation; and other closely related policies—are the proximate cause of the rise in inequality. Of course, the underlying cause is a shift at the end of the 1970s in the balance of economic and political power following almost five decades of ascendancy of labour and other social movements.15

More workers had been driven into poverty by this process even before the current crisis hit. Between 2002 and 2006 (a period of economic growth) there was an increase of 350,000 families living on low incomes. In 2008, early in the recession, there were 42 million adults and children living in low income families. These workers typically pay more for housing, lack health insurance, but work harder, often in dead-end, non-union jobs.16 Their numbers can only have risen over the last year.

As Kim Moody explained in his recent book, US Labor in Trouble and Transition, US capital’s restructuring has been a remarkably successful process. Between 1990 and 2003 output per hour went up by two thirds and production rose 72 percent, meaning productivity increases accounted for 90 percent of manufacturing growth in this 13-year period. This was achieved at the same time as jobs were cut and wages were held down—in other words, the rate of exploitation was forced up through technological developments in transport and communication, and the importation of “lean production” or “constant improvement” (Kaizen) techniques from Japan. By 2003 “a workforce with almost three million fewer workers was producing much more with only modest gains in wages and almost no additional cost to capital”.17

Economic crisis has accelerated this restructuring process. The car industry is a good example: from the late 1970s assembly and parts plants began to relocate. There were several incentives for choosing the Southern states: cheaper labour, energy and land, state subsidies and lower taxes and—crucially—low to non-existent levels of unionisation.

Between September 2008 and 2009 average wages in the manufacturing section of the car industry fell by $1.42 an hour, while workers on average work an extra half an hour a week than they did a year ago.18 The South has largely escaped the plant closures that are devastating Michigan and Ohio after the GM and Chrysler bankruptcies. While jobs have been lost throughout the industry, the traditional “rust-belt” states have borne the brunt. In Michigan, which has the highest unemployment rate in the US—15.1 percent—the number of car workers has been cut from 47,800 to 31,100 in the last year, a fall of 14.2 percent. In Ohio 7,800 car jobs have gone. In the same period 800 workers have been sacked in Alabama, bringing the total to 11,000, and in Texas 200 jobs have been lost, leaving 9,300 car workers. The dramatic losses of GM, Chrysler and Ford have provided increased market opportunities for non-US car companies which have expanded into the South. Toyota, Nissan, Mercedes, BMW, Hyundai and others have benefited from Southern states’ “right to work” (anti-union) status and from large financial incentives from individual state coffers since the 1990s; the South Korean firm Kia, part of the Hyundai company, began production at its new plant in Georgia in November 2009.

The crisis in the industry as a whole is also facilitating continual developments in the intensification of work practices. At the Toyota plant in Huntsville, Alabama, which employs 900 people, “continuous improvement” measures have been voluntarily undertaken by workers in an ideological atmosphere of “shared sacrifices”. A woman assembly line worker describes how it works: “I came up with a couple of Kaizens for my work. I found that there was a fair amount of motion muda [waste] at my work station.” She suggested that the location of her tools and parts be rearranged, shaving three seconds off her work per engine. During a three month period employees came up with ideas that cut annual plant expenses by $1.2 million.19

Political tensions

The inequality of the recovery, with workers being forced to pay while banks and corporations have returned to profit and are justifying new bonuses, has generated real anger. As the Financial Times put it:

Over the next few months, the miseries on Main Street are likely to continue to diverge from the taxpayer-enabled profit taking on Wall Street. And the electorate’s sullenness could easily spill over again into raw anger—as it did in January and February amid revelations of the extraordinary bonus culture at AIG, Merrill Lynch and others.20

There is a significant problem for the left in relating to this anger, however, and the problem is Obama. Obama has presided over the continuation and extension of inequality, escalated the Afghanistan war, forced concessions in the car industry and given way to the private insurance companies over healthcare. The weight of the crisis is being felt particularly sharply by those—especially poor, working class and black voters—at the core of Obama’s electoral support and his support, though still real, is eroding as disappointment sinks in. The impressive movement that the Obama campaign mobilised to deliver the election a year ago has not been marshalled to fight for a public option in healthcare, to fight for jobs or for the Employee Free Choice Act (EFCA) which would make it easier for workers to organise and join unions, and is opposed by much of US business, including Citigroup which was bailed out to the tune of $50 billion.

In the absence of a strong movement for reform from the left or pressure from a resistant working class, the louder voices are once more those of a minority of conservative politicians and radio presenters opposed to “big government”. The weakness of the Obama government in the face of deepening economic gloom is stoking that opposition, encapsulating as it does a degree of class anger among “ordinary” Americans which has no other obvious outlet.21

As a result, the Republicans made gains in the recent elections for state governor in Virginia—a state won by the Democrats for the first time since 1964 in the Obama election—and New Jersey. The results suggest, in addition to local factors, that those—mainly white—workers who came late to the Obama campaign have found little in the government’s priorities to alleviate their economic predicament.

The re-emergence of visible manifestations of conservative populism, however, are indicative of the weakness of the Republican Party as a political force; instead the likes of Sarah Palin and “shock-jock” Rush Limbaugh are increasingly vocal and are backing conservative candidates against those chosen by the party machine. The mobilisations of the right, such as those in opposition to healthcare reform, have been small but nonetheless illustrate the potential for anger over economic pain to be channelled by conservative forces if progressive forces sit on their hands.

Gary Younge makes this point about the healthcare protests: “The problem is not that the right were organised but that—with a few exceptions—the left has not been. At the very moment when he needed the ‘movement’ that got him elected most, it appears to have largely stopped moving”.22 It has stopped moving largely because Obama has refused to mobilise it and there is not sufficient confidence and pressure for independent action on a mass scale. It is not a surprise that the US president prefers not to revive a movement that may escape the control of the Democratic Party apparatus. But his equivocation risks alienating his own constituency and those who were pulled into his orbit by the tremendous power of his campaign for change, as well as reigniting cynicism of the “liberal” Democratic establishment that could well benefit the right.

The lesson from the Great Depression of the 1930s in the US is that reform and resistance to the effects of the crisis will ultimately depend on a significant movement from below pushing for them. At the moment that movement is absent. There are, however, other social and political processes taking place that suggest possibilities. The intensification of work, job cuts, falling wages and demands for concessions prevent, but can also cause, struggle; capital’s drive to save itself also forces more groups of working class people to resist. As Kim Moody argues, “The very barriers thrown up by capital and its worldwide reorganisation of production and work are the consequence of the same forces that propel these different groups of workers to fight in the first place”.23

One telling example in the current climate is the substantial vote of car workers in October against accepting an agreement from Ford and the United Auo Workers Union for the next four-year contract due to be negotiated in 2011. The proposals included a “no-strike” provision on wages and benefits and the reclassification of skilled jobs in order to reduce Ford’s costs. Seven out of ten assembly plants voted down the contract. In Kansas City workers voted 92 percent against the deal and in one Kentucky union branch representing two assembly plants the vote was 84 percent against.24

The car votes are important because they indicate a fracture in the acceptance of a key tenet of US capitalist ideology, more prevalent than ever during economic crisis: that all classes are “in it together” and that the American dream—the equal entitlement of all Americans to shares in prosperity—rests on an equal contribution to productivity. The adherence of US unions to the belief that raising productivity delivers benefits for their members has been deeply damaging. As US business has forced through continual concessions and weakened collective bargaining, the idea has been a profound hindrance to building an alternative to capitalism.

The harsh realities of devastated and abandoned industrial areas, job cuts and inadequate or non-existent social assistance has put workers under pressure to accept the logic of “shared sacrifice” in times of trouble. But the same conditions can also provoke the bitter realisation that the American dream is a fiction for the great majority, and that governments—including Democratic ones—will always take the side of bankers and corporations unless forced otherwise. This is a key ideological aspect of the shift leftward in the US; working class consciousness, the realisation that workers are not “middle class” at all, but are engaged in a battle with US capitalism, is being forged through the painful experience of the realities of class division during the crisis.

Obama’s election reflected this, as large numbers of workers, white as well as black, broke from the Republicans to vote against the erosion of their living standards and for the possibility of change. The potential exists for these workers to be mobilised to protect their livelihoods. Kim Moody makes the point that if the union membership was mobilised to defend workers and build the unions, it could organise recruitment campaigns that could in turn fight for the EFCA, healthcare, to organise the South, and fight for a “stimulus” for workers rather than bankers. With imaginative, grassroots campaigning it could be harnessed to fight for these things and could also conduct the ideological argument that Americans are not “all in it together”.

The deep desire for change that got Obama elected has not gone away. The potential for organisation of immigrant workers has not disappeared. The occupation at Republic Windows and Doors in Chicago, like Visteon in Britain, was a glimpse of struggle producing new tactics to fit a changing world. The potential for real change in the US is there. As ever in the history of US working class politics, it is leadership that is the 64 thousand dollar question.


Notes

1: Wall Street Journal, 16 November 2009.

2: Business Week, 17 November 2009.

3: Figures from nationalpriorities.org

4: Figures from globalissues.org

5: COMISAF Initial Assessment published in the Washington Post, 21 September 2009.

6: Figures from icasualties.org

7: Guardian, 8 November 2009.

8: Bureau of Labor Statistics.

9: Quoted in the Financial Times, 6 November 2009.

10: Washington Post, 24 November 2009.

11: Pew Research Centre, http://people-press.org/report/561/anti-incumbent-sentiment

12: Bureau of Labor Statistics. Labour productivity figures exclude the farming sector.

13: Data from Bloomberg, 5 November 2009.

14: Guardian, 5 October 2009.

15: Schmitt, 2009.

16: “Working Hard, Still Falling Short”, report on the working poor. Low incomes are defined as 200 percent of the poverty threshold (around $41,000 a year in 2006-roughly £25,000 for a family of four), www.workingpoorfamilies.org

17: Moody, 2007, pp25-26.

18: Bureau of Labor Statistics.

19: Reuters, http://blogs.reuters.com/route-to-recovery/2009/11/16/toyota-plant-workers-sheltered-from-the-downturn/”

20: Financial Times, 29 October 2009.

21: See Trudell, 2006.

22: Guardian, 30 August 2009.

23: Moody, 2007, p6.

24: Reuters, 1 November 2009.


References

Moody, Kim, 2007, US Labor in Trouble and Transition (Verso).

Schmitt, John, 2009, Inequality as Policy, Centre for Economic Policy Research report, www.cepr.net/documents/publications/inequality-policy-2009-10.pdf

Trudell, Megan, 2006, “The Hidden History of US Radicalism”, International Socialism 111 (summer 2006), www.isj.org.uk/?id=216