There Is No Substantive Economic Recovery In Sight: Capitalism and Its State Are Running Out of Tricks

Pictured: A Maricopa County constable escorts a family out of their apartment after serving an eviction order for non-payment on Sept. 30 in Phoenix. [John Moore / Getty Images]

By Shawgi Tell

One of the fundamental economic laws under capitalism is for wealth to become more concentrated in fewer hands over time, which in turn leads to more political power in fewer hands, which means that the majority have even less political and economic power over time. Monopoly in economics means monopoly in politics. It is the opposite of an inclusive, democratic, modern, healthy society. This retrogressive feature intrinsic to capitalism has been over-documented in thousands of reports and articles from hundreds of sources across the political and ideological spectrum over the last few decades. It is well-known, for example, that a handful of people own most of the wealth in the U.S. and most members of Congress are millionaires. This leaves out more than 95% of people. Not surprisingly, “policy makers” have consistently failed to reverse these antisocial trends inherent to an obsolete system.

At the same time, with no sense of irony and with no fidelity to science, news headlines from around the world continue to scream that the economy in many countries and regions is doing great and that more economic recovery and growth depend almost entirely, if not entirely, on vaccinating everyone (multiple times). In other words, once everyone is vaccinated, we will see really good economic times, everything will be amazing, and we won’t have too much to worry about. Extremely irrational and irresponsible statements and claims of all kinds continue to be made in the most dogmatic and frenzied way by the mainstream press at home and abroad in a desperate attempt to divert attention from the deep economic crisis continually unfolding nationally and internationally. Dozens of countries are experiencing profound economic problems.

While billions of vaccination shots have already been administered worldwide, and millions more are administered every day (with and without people’s consent), humanity continues to confront many major intractable economic problems caused by the internal dynamics of an outdated economic system.

A snapshot:

1.      More rapid and intense inflation everywhere

2.      Major supply chain disruptions and distortions everywhere

3.      Shortages of many products

4.      “Shortages” of workers in many sectors worldwide

5.      Shortened and inconsistent hours of operation at thousands of businesses

6.      Falling value of the U.S. dollar and other fiat currencies

7.      Growing stagflation

8.      Millions of businesses permanently disappeared

9.      More income and wealth inequality

10.  High dismal levels of unemployment, under-employment, and worker burnout

11.  Growing health insurance costs

12.  Unending fear, anxiety, and hysteria around endless covid strains

13.  More scattered panic buying

14.  The stock market climbing while the real economy declines (highly inflated asset valuations in the stock market)

15.  Spectacular economic failures like Lehman Brothers (in the U.S. 13 years ago) and Evergrande (in China in 2021)

16.  All kinds of debt increasing at all levels

17.  Central banks around the world printing trillions in fiat currencies non-stop and still lots of bad economic news

18.  And a whole host of other harsh economic realities often invisible to the eye and rarely reported on that tell a much more tragic story of an economy that cannot provide for the needs of the people

The list goes on and on. More nauseating data appears every day. Economic hardship, which takes on many tangible and intangible forms, is wreaking havoc on the majority at home and abroad. There is no real and substantive economic improvement. It is hard to see a bright, stable, prosperous, peaceful future for millions under such conditions, which is why many, if not most, people do not have a good feeling about what lies ahead and have little faith in the rich, their politicians, and “representative democracy.” It is no surprise that President Joe Biden’s approval rating is low and keeps falling.

What will the rich and their political and media representatives say and do when most people are vaccinated, everyone else has natural immunity, and the economy is still failing? What will the rich do when economic failure cannot be blamed on bacteria or viruses? To be sure, the legitimacy crisis will further deepen and outmoded liberal institutions of governance will become even more obsolete and more incapable of sorting out today’s serious problems. “Representative democracy” will become more discredited and more illusions about the “social contract” will be shattered. In this context, talk of “New Deals” for this and “New Deals” for that won’t solve anything in a meaningful way either because these “New Deals” are nothing more than an expansion of state-organized corruption to pay the rich, mainly through “public-private-partnerships.” This is already being spun in a way that will fool the gullible. Many are actively ignoring how such high-sounding “reforms” are actually pay-the-rich schemes that increase inequality and exacerbate a whole host of other problems.

It is not in the interest of the rich to see different covid strains and scares disappear because these strains and scares provide a convenient cover and scapegoat for economic problems rooted in the profound contradictions of an outmoded economic system over-ripe for a new direction, aim, and control. It is easier to claim that the economy is intractably lousy because of covid and covid-related restrictions than to admit that the economy is continually failing due to the intrinsic built-in nature, operation, and logic of capital itself.

There is no way forward while economic and political power remain dominated by the rich. The only way out of the economic crisis is by vesting power in workers, the people who actually produce the wealth that society depends on. The rich and their outmoded system are a drag on everyone and are not needed in any way; they are a major obstacle to the progress of society; they add no value to anything and are unable and unwilling to lead the society out of its deepening all-sided crisis.

There is an alternative to current obsolete arrangements and only the people themselves, armed with a new independent outlook, politics, and thinking can usher it in. Economic problems, health problems, and 50 other lingering problems are not going to be solved so long as the polity remains marginalized and disempowered by the rich and their capital-centered arrangements and institutions. New and fresh thinking and consciousness are needed at this time. A new and more powerful human-centered outlook is needed to guide humanity forward.

Human consciousness and resiliency are being severely tested at this time, and the results have been harsh and tragic in many ways for so many. We are experiencing a major test of the ability of the human species to bring into being what is missing, that is, to overcome the neoliberal destruction of time, space, and the fabric of society so as to unleash the power of human productive forces to usher in a much more advanced society where time-space relations accelerate in favor of the entire polity. There is an alternative to the anachronistic status quo.

Shawgi Tell, PhD, is author of the book “Charter School Report Card.” His main research interests include charter schools, neoliberal education policy, privatization and political economy. He can be reached at stell5@naz.edu.

The Stimmy and the State

By Tyler Zimmer

Republished from Rampant Magazine.

In a recent piece in Jacobin, Matt Bruenig hails the new stimulus bill as a “watershed moment” in the fight against poverty in the United States. This dramatic “ideological reversal,” “a revolution in welfare state thinking,” as he describes it, has shattered a “25-year bipartisan consensus” against direct cash payments to the poor. “The fact that we had this debate and the pro-welfare side won is something to be happy about.”

Certainly there are provisions in the bill that benefit poor and working class people. But is this a major turning point in an ideological battle over the legitimacy of welfare state policies? Hardly.

It would be nice if our system of government was a forum for debating the merits of various ideological proposals to advance the common good. But this is simply not how the state under capitalism functions. 

Other things being equal, the state tends to promote the interests of the capitalist class at the expense of the working class majority. 

It does this for at least two reasons. First, the capitalist class spends enormous amounts of money influencing politicians—and this is why the two parties that dominate U.S. politics prioritize the interests of their corporate donors, not the majority of voters. 

Indeed, the 2020 election was the most expensive election in history, with more than $14 billion spent up and down the ballot, most of it paid for by super-PACs and extremely wealthy individuals. As Kim Moody noted in January, “the nation’s rich paid for the 2020 election, and they will be its major beneficiaries.”

Secondly, we’ve got to keep in mind that the state under capitalism depends upon tax revenue generated by capitalist economic activity—and this, in turn, puts governments under enormous pressure to promote a profitable investment climate for the ruling class. Because when profitability dips too low, capitalists lay people off, stop investing, tax revenues drop and a crisis ensues. 

This is a powerful barrier against reform absent sufficient pressure from below. 

These two reasons, then, are why capitalist states tend to consistently prioritize the interests of capital above those of workers. This explains, among other things, why huge banks were given enormous bailouts in 2008 whereas working class homeowners were left high and dry.  

Seen in this light, then, we have to ask: why has the government, which as we know is awash in corporate cash, recently decided to spend money on cash transfers and tax credits for the poor? And why has the ruling class itself been so vocal in supporting these measures? 

Context is important. As Bruenig himself points out, the most recent stimulus bill is not the first, but the third time in the last year that the government has sent out direct cash transfers, the first two coming when Donald Trump was still in the White House and Mitch McConnell was still Senate Majority Leader.

So, rather than representing a dramatic shift, the newest stimulus bill builds on what the previous ones already did. And far from having poverty reduction as their goal, these measures seemed quite obviously aimed at propping up demand and keeping the corporate profits afloat amidst the disruptions caused by the pandemic.

Let’s not forget that each infusion of stimulus had the effect of boosting the stock market—and, last I checked, these markets respond not to ideology as such but to expectations of profit. Indeed, at moments when deliberations over stimulus bills began to stall, markets often took a sudden plunge downward. 

There is indeed a shift going on, but it’s not an ideological shift in politician’s attitudes toward poverty—instead, what we’re seeing is better described as a shift in ruling class attitudes toward government spending and deficits as a way of stabilizing corporate profitability. 

This shift was well underway before Biden took office. As Robert Brenner pointed out months before Trump left office, “some $4.586 trillion, roughly 75 per cent of the total $6.286 trillion derived directly and indirectly from CARES Act money, [went to] the ‘care’ of the country’s biggest and best-off companies.” 

That’s “revolutionary” in a certain sense, but not in the sense that we (socialists) like. 

Still, the question remains: what explains the shift? The background is crucial: long-term stagnation and historically low rates of profit, combined with the sudden shock of the pandemic, caused the U.S. economy to shrink by 4-5% in 2020—the largest contraction since the 1930s. In these circumstances, the ruling class has come to prefer government deficit spending to the thin gruel of austerity, but not because they’ve experienced a sudden conversion to the cause of welfare and poverty reduction. On the contrary, massive infusions of cash from the government—whether in the form of fiscal or monetary policy—appear to be all that’s propping up their economic position. 

Of course, these inconvenient facts haven’t stopped the political boosters of the Biden Administration from engaging in a full-court press to tout the progressive credentials of the stimulus bill. Why they should be so eager to paint it as a historic move to eliminate poverty is obvious: the Democrats, in control of the White House and both chambers of Congress, have reneged on a slew of promises they made to voters in November. For example, they declined to raise the minimum wage to $15 an hour, they have more or less maintained most of Trump’s draconian anti-immigrant measures—we could continue. 

Meanwhile, economic inequality continues to soar as billionaires get richer; rates of unionization continue to stagnate or fall; unemployment and underemployment remain persistently damaging to millions of workers; and come September when the temporary measures from the stimulus will have run their course, bills, rent, mortgages and debts will still be there.

The only way to turn things around is to increase the organization and disruptive power of the working class. Hoping shifts in elite opinion about fiscal policy will morph into a new era of social democratic renewal is not going to cut it. 

Now, someone might reply that insurgent left politicians—like Bernie Sanders and “the Squad”—are the reason this shift in elite opinion is occurring. The idea would be this: Because Sanders ran a campaign that popularized certain pro-worker policies, politicians have been forced to make concessions to our side and reluctantly pass bills sending cash transfers to the poor.  

This strikes me as thoroughly unconvincing. Sanders relentlessly campaigned on a $15 minimum wage and even helped force Biden to give rhetorical support for the measure as a way of securing votes in the November election. But the $15 federal minimum wage is currently dead in the water, despite Sanders’s dogged support for it and despite the fact that the measure is enormously popular with voters. Denying a raise to tens of millions of underpaid workers isn’t exactly what you expect from a government that has been allegedly won over to the imperative of poverty reduction. 

It’s instructive to think about Amazon here. Certainly, Amazon’s owners don’t want a minimum wage hike, since this would dramatically increase their wage bill and eat into profits. But government deficit spending that temporarily boosts the purchasing power of the poor during a recession is clearly worth supporting. 

And let us not forget, of course, that Amazon is a major donor to the Democratic Party—as are similarly large corporations that would suffer a dip in profits if wages were suddenly hiked to $15/hr. Though unions donated a measly $100 million to support Biden’s campaign, the corporate employers who profit on the backs of non-union, low-wage workforces gave much, much more. 

The moral of the story, then, is that we should probably hold off on celebrating the stimulus bill as a major ideological shift to the left or as a substantial victory for our side. After all, capitalist economic expansion often results in some benefits for workers in the way of decreasing unemployment and rising wages—but we don’t celebrate cyclical upswings as victories for the left. 

Victories for the left occur when workers and the oppressed organize themselves, confront the powers that be and force them to grant us concessions. Genuine victories don’t simply make the lives of ordinary people better: they also teach them that, collectively, they have the power to push back against the ruling class and win. 

Though I’m happy that there are self-avowed socialists in Congress making arguments in favor of reform, this layer is currently small and lacks the power to veto policy or force through measures that the corporate-friendly majority opposes. And, outside the halls of government, the organization and combativity of social movements is not presently at a high enough level to wrest concessions from the ruling class. This means that we aren’t in a position to exert a strong influence on policy-making at the moment. 

To change that, we need more power. So in its relative absence, it doesn’t do the left any favors to pretend that we’re winning. And it certainly isn’t good to pretend, when it plainly isn’t true, that the Biden Administration and the Democratic establishment are our allies. 

What, then, is the alternative? 

There aren’t any shortcuts that I can see. But we’ve got to continue to recruit people to join socialist organizations. We’ve got to keep building on the explosion of activism against white supremacy from last summer. We need to find a way to renew the labor movement and spark a drive to organize the unorganized. And we’ve got to elect more self-avowed socialists to government. 

But none of these goals are well served by pretending that the current administration is sympathetic to our cause. The way forward has to include a sober assessment of the obstacles we face. 

Profitability, Investment, and the Pandemic

[Photo Credit: REUTERS]

By Michael Roberts

Originally published at the author’s blog.

Last week’s speech by US Federal Reserve Chair Jay Powell at the Peterson Institute for International Economics, Washington was truly shocking.  Powell told his audience of economists that “The scope and speed of this downturn are without modern precedent”. One shocking fact that he announced was that, according to a special Fed survey of ‘economic well-being’ among American households, “Among people who were working in February, almost 40% households making less than $40,000 a year had lost a job in March”!!!

Powell went on to warn his well-paid audience sitting at home watching on Zoom that “while the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks”. Indeed, if the continual downgrading of forecasts of global growth are anything to go by, then the number of optimists about a V-shaped recovery are beginning to dwindle to just the leaders of governments and finance.

Another study projects that US GDP will decline by 22% compared to the pre-COVID-19 period and 24% of US jobs are likely to be vulnerable. The adverse effects are further estimated to be strongest for low-wage workers who might face employment reductions of up to 42% while high-wage workers are estimated to experience just a 7% decrease.

And Powell was worried that this collapse could leave lasting damage to the US economy, making any quick or even significant recovery difficult.  “The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy.”, said Powell, echoing the arguments presented in my recent post on the ‘scarring’ of the economy.

Powell reckoned the main problem in achieving any recovery once the pandemic was over was that “A prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement. The result could be an extended period of low productivity growth and stagnant incomes.”  See here.

And there was a serious risk that the longer the recovery took to emerge, the more likely there would be bankruptcies and the collapse of firms and eve n banks, as “the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems.”

Indeed, last week, the Federal Reserve released its semi-annual Financial Stability Report, in which it concluded that “asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse, or financial system strains re-emerge.”  The Fed report warned that lenders could face “material losses” from lending to struggling borrowers who are unable to get back on track after the crisis. “The strains on household and business balance sheets from the economic and financial shocks since March will probably create fragilities that last for some time,” the Fed wrote.  “All told, the prospect for losses at financial institutions to create pressures over the medium term appears elevated,” the central bank said.

So the coronavirus slump will be deep and long lasting with a weak recovery to follow and could cause a financial crash.  And working people will suffer severely, especially those at the bottom of the income and skills ladder. That is the message of the head of the world’s most powerful central bank.

But the other message that Jay Powell wanted to emphasise to his economics audience was that this terrifying slump was not the fault of capitalism.  Powell was at pains to claim that the cause of the slump was the virus and lockdowns and not the economy. “The current downturn is unique in that it is attributable to the virus and the steps taken to limit its fallout. This time, high inflation was not a problem. There was no economy-threatening bubble to pop and no unsustainable boom to bust.  The virus is the cause, not the usual suspects—something worth keeping in mind as we respond.”

This statement reminded me of what I said way back in mid-March when the virus was declared a pandemic by the World Health Organisation. “I’m sure when this disaster is over, mainstream economics and the authorities will claim that it was an exogenous crisis nothing to do with any inherent flaws in the capitalist mode of production and the social structure of society.  It was the virus that did it.”  My response then was to remind readers that “Even before the pandemic struck, in most major capitalist economies, whether in the so-called developed world or in the ‘developing’ economies of the ‘Global South’, economic activity was slowing to a stop, with some economies already contracting in national output and investment, and many others on the brink.”

After Powell’s comment, I went back and had a look at the global real GDP growth rate since the end of the Great Recession in 2009.  Based on IMF data, we can see that annual growth was on a downward trend and in 2019 global growth was the slowest since the GR.

And if we compare last year’s 2019 real GDP growth rate with the 10yr average before, then every area of the world showed a significant fall.

The Eurozone growth was 11% below the 10yr average, the G7 and advanced economies even lower, with the emerging markets growth rate 27% lower, so that the overall world growth rate in 2019 was 23% lower than the average since the end of the Great Recession.  I’ve added Latin America to show that this region was right in a slump by 2019.

So the world capitalist economy was already slipping into a recession (long overdue) before the coronavirus pandemic arrived.  Why was this?  Well, as Brian Green explained in the You Tube discussion that I had with him last week, the US economy had been in a credit-fuelled bubble for the last six years that enabled the economy to grow even though profitability has been falling along with investment in the ‘real’ economy.  So, as Brian says, “the underlying health of the global capitalist economy was poor before the plague but was obscured by cheap money driving speculative gains which fed back into the economy”.  (For Brian’s data, see his website here).

In that discussion, I looked at the trajectory of the profitability of capital globally. The Penn World Tables 9.1 provide a new series called the internal rate of return on capital (IRR) for every country in the world starting in 1950 up to 2017. The IRR is a reasonable proxy for a Marxian measure of the rate of profit on capital stock, although of course it is not the same because it excludes variable capital and raw material inventories (circulating capital) from the denominator.  Despite that deficiency, the IRR measure allows us to consider the trends and trajectory of the profitability of capitalist economies and compare them with each other on a similar basis of valuation.

If we look at the IRR for the top seven capitalist economies, the imperialist countries, called the G7, we find that the rate of profit in the major economies peaked at the end of the so-called ‘neoliberal’ era in the late 1990s.  There was a significant decline in profitability after 2005 and then a slump during the Great Recession, matching Brian’s results for the US non-financial sector.  The recovery since the end of the Great Recession has been limited and profitability remains near all-time lows.

The IRR series only goes up to 2017.  It would be possible to extend these results to 2019 using the AMECO database which measures the net return on capital similarly to the Penn IRR.  I have not had time to do this properly, but an eye-ball look suggests that there has been no rise in profitability since 2017 and probably a slight fall up to 2019.  So these results confirm Brian Green’s US data that the major capitalist economies were already significantly weak before the pandemic hit.

Second, we can also gauge this by looking at total corporate profits, not just profitability.  Brian does this too for the US and China.  I have attempted to extend US and China corporate profit movements to a global measure by weighting the corporate profits (released quarterly) for selected major economies: US, UK, China, Canada, Japan and Germany.  These economies constitute more than 50% of world GDP.  What this measure reveals is that global corporate profits had ground to a halt before the pandemic hit.  Marx’s double-edge law of profit was in operation.

The mini-boom for profits that began in early 2016 peaked in mid-2017 and slid back in 2018 to zero by 2019.

That brings me to the causal connection between profits and the health of capitalist economies.  Over the years, I have presented theoretical arguments for what I consider is the Marxian view that profits drive capitalist investment, not ‘confidence’, not sales, not credit, etc.  Moreover, profits lead investment, not vice versa.  It is not only the logic of theory that supports this view; it is also empirical evidence.  And there is a stack of it.

But let me bring to your attention a new paper by Alexiou and Trachanas, Predicting post-war US recessions: a probit modelling approach, April 2020. They investigated the relationship between US recessions and the profitability of capital using multi-variate regression analysis.  They find that the probability of recessions increases with falling profitability and vice versa.  However, changes in private credit, interest rates and Tobin’s Q (stock market values compared with fixed asset values) are not statistically significant and any association with recessions is “rather slim”.

I conclude from this study and the others before it, that, although fictitious capital (credit and stocks) might keep a capitalist economy above water for a while, eventually it will be the profitability of capital in the productive sector that decides the issue. Moreover, cutting interest rates to zero or lower; injecting credit to astronomical levels that boost speculative investment in financial assets (and so raise Tobin’s Q) and more fiscal spending will not enable capitalist economies to recover from this pandemic slump.  That requires a significant rise in the profitability of productive capital.

If we look at investment rates (as measured by total investment to GDP in an economy), we find that in the last ten years, total investment to GDP in the major economies has been weak; indeed in 2019, total investment (government, housing and business) to GDP is still lower than in 2007. In other words, even the low real GDP growth rate in the major economies in the last ten years has not been matched by total investment growth.  And if you strip out government and housing, business investment has performed even worse.

By the way, the argument of the Keynesians that low economic growth in the last ten years is due to ‘secular stagnation’ caused by a ‘savings glut’ is not borne out.  The national savings ratio in the advanced capitalist economies in 2019 is no higher than in 2007, while the investment ratio has fallen 7%.  There has been an investment dearth not a savings glut.  This is the result of low profitability in the major capitalist economies, forcing them to look overseas to invest where profitability is higher (the investment ratio in emerging economies is up 10% – I shall return to this point in a future post).

What matters in restoring economic growth in a capitalist economy is business investment.  And that depends on the profitability of that investment.  And even before the pandemic hit, business investment was falling.  Take Europe. Even before the pandemic hit, business investment in peripheral European countries was still about 20 per cent below pre-crisis levels.

Andrew Kenningham, chief Europe economist at Capital Economics, forecast eurozone business investment would fall 24 per cent year on year in 2020, contributing to an expected 12 per cent contraction in GDP. In the first quarter, France reported its largest contraction in gross fixed capital formation, a measure of private and public investment, on record; Spain’s contraction was also near-record levels, according to preliminary data from their national statistics offices.

In Europe, manufacturers producing investment goods — those used as inputs for the production of other goods and services, such as machinery, lorries and equipment — experienced the biggest hit to activity, according to official data. In Germany, the production of investment goods fell 17 per cent in March compared with the previous month, more than double the fall in the output of consumer goods. France and Spain registered even wider differences

Low profitability and rising debt are the two pillars of the Long Depression (ie low growth in productive investment, real incomes and trade) that the major economies have been locked into for the last decade.  Now in the pandemic, governments and central banks are doubling down on these policies, backed by a chorus of approval from Keynesians of various hues (MMT and all), in the hope and expectation that this will succeed in reviving capitalist economies after the lockdowns are relaxed or ended.

This is unlikely to happen because profitability will remain low and may even be lower, while debts will rise, fuelled by the huge credit expansion.  Capitalist economies will remain depressed, and even eventually be accompanied by rising inflation, so that this new leg of depression will turn into stagflation.  The Keynesian multiplier (government spending) will be found wanting as it was in the 1970s.  The Marxist multiplier (profitability) will prove to be a better guide to the nature of capitalist booms and slumps and show that capitalist crises cannot be ended while preserving the capitalist mode of production.

The Great Recession, Six Years Later: Uneven Recovery, Flawed Indicators, and a Struggling Working Class

By Colin Jenkins

In July of this year, Barack Obama boasted of an impressive recovery the US has undertaken since the Great Recession of 2008, proclaiming, "We've recovered faster and come farther than almost any other advanced country on Earth." To support this claim, the White House released a report showing that, out of 12 countries identified as "advanced" (France, Germany, Greece, Iceland, Ireland, Italy, Netherlands, Portugal, Spain, Ukraine, United Kingdom and United States), the United States is "one of only two (the other being Germany) that experienced systemic financial crises in 2007 and 2008 but have seen real (gross domestic product) per working-age person return to pre-crisis levels."

Reports such as these have become commonplace in 2014, not only from those in the White House, but also from multiple media sources. Within mainstream circles, the recovery has generally been lauded by the Democratic wing of the media (MSNBC, Huffington Post, and of course reports from the White House) and questioned by the Republican wing (Fox News, the Wall Street Journal). Since the reports stemming from these sources are almost always politically-charged, they have a tendency to be misleading in at least some manner. In the rare instance where genuine information or analysis leaks from the mainstream, it is usually the unintended result of a media spin.

Ultimately, the intended purpose of these reports are reduced to either showing Barack Obama and the Democratic Party in a good light (by focusing on seemingly positive statistics) or showing Obama and the Democrats in a bad light (by focusing on seemingly negative statistics). Often times, the same statistics may be used; however, spun differently. Neither side is interested in formulating meaningful analysis, but rather in swaying voters one way or the other. Still, in this media tug-o-war, facts are sometimes used to support political arguments, and thus may be useful from time to time if one is able to pick them out of the fray. But, even when we catch a glimpse of fairly reliable statistics, how do we cut through the politically-charged spins to give them meaning?

Take Obama's July statement for instance. It suggests that the US has experienced a strong recovery since the 2008 economic crisis, right? Well, not necessarily. What it says is that the US has experienced a better recovery than 11 out of 12 of its "advanced" counterparts that "experienced systemic crises," which (it's important to note) were handpicked by the White House. According to the International Monetary Fund, there are actually 36 countries that are considered to have "advanced economies." And considering the global nature of the economy, it's difficult to claim that 67% of them avoided systemic crisis. When compared to the 36, the US ranks 12th in GDP growth and 9th in unemployment rate recovery. Not necessarily bad, but certainly not as good as suggested.

Which brings us to some other questions: How accurate are GDP and unemployment rates when assessing the overall economic well-being of a country? Why are such macroeconomic indicators used so frequently in mainstream analyses? Do they accurately represent the well-being of the working-class majority, or do they simply represent convenient fodder used to supplement political spins? Let's take a look.

Gross Domestic Product and the Dow Jones Industrial Average

Two major indicators used to determine the overall health of the economy are the Gross Domestic Product (GDP) and the Dow Jones Industrial Average (DJIA).

US GDP growth rates over the past six years suggest a strong recovery. Since falling more than 16 percent during the Great Recession of 2008-09, the GDP has experienced growth in 19 out of 21 financial quarters.

2013 was especially successful in terms of GDP growth, averaging over 3 percent for the first time since the recession. 2014 started out slow, dropping a little over 2% in the first quarter (Q1 2014); however, this was written off as an irregularity by analysts, including PNC Senior Economist Gus Faucher, who attributed the drop to " bad weather " that "was a significant drag on the economy, disrupting production, construction, and shipments, and deterring home and auto sales." Since that time, the GDP has been growing at a rate of 4.1% over the past six months.

The DJIA has shown even bigger signs of recovery. After being cut in half between September 2007 (15,865) and February 2009 (7,923), the DJIA has experienced an almost unfathomable boom.

It hit its highest point ever in November 2013, nearly five years after the recession, at 16,429, and has been breaking records ever since. Heading into November of 2014, it stands at 17, 390 - the highest point in its 128-year history.

Corporate Profits

Not surprisingly, the cumulative amount of corporate profits in the United States have paralleled the success of the stock market. American Enterprise Institute economist Mark J. Perry has illustrated a sharp correlation between the S & P 500 Index and after-tax corporate profits in the chart below:

Perry explains this phenomenon:

"Starting about 2009, a one-to-one relationship between stock prices and after-tax corporate profits has once again re-emerged, and both the S&P 500 and corporate profits have increased by the exact same 119% at the end of 2013 from their cyclical, recessionary lows. The all-time record highs for the S&P 500 Index in 2013 were being driven by record-high corporate profits as the chart shows, and it's almost certain that the ongoing bull market rally in 2014 continues to be supported by record-high corporate profits."

The corporate landscape has rarely been as conducive to generating profit as it is right now. As a result, the post-recession years have been dubbed "a golden age of corporate profits" by those in both mainstream and alternate media. Specifically, "corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008." As a percentage of national income, "corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950."

To put the significance of this growth in perspective, at the end of 2008, during the peak of the recession, US corporate after-tax profits totaled $671.40 Billion. At the end of June 2014, that total has nearly tripled to $1.842 Trillion.

Unemployment Rate and Job Growth

Another major indicator used to gauge the state of the economy is the unemployment rate. In October of 2009, after the residual effects of the recession had settled, the US unemployment rate officially hit 10% for only the second time since 1940 (10.8% in 1982). After hovering around 9% through 2011, the rate has steadily decreased over the past few years, dropping below 6% in September of 2014 - a level untouched since July of 2008.

This new 6-year low in the rate includes 1.9 million people dropping from the ranks of the unemployed, and the number of "long-term unemployed" falling 1.2 million over the past year.

According to the US Department of Labor, "employers added 248,000 jobs in September (2014)" and "payrolls have expanded an average 227,000 a month this year, putting 2014 on track to be the strongest year of job growth since the late 1990s." The job growth rate in 2014 included a 300,000+ jump in April. And much of this expansion has been fueled by the private sector, which "has now added 10.3 million jobs over 55 straight months of growth" since the recession.

Flawed Indicators

Based on assessments which focus on macroeconomic indicators like the GDP, DJIA, and Unemployment Rate, one could reasonably come to the conclusion that not only has the US fully recovered from the "Great Recession," but it has actually surpassed pre-recession levels in economic well-being. However, this begs the question: whose well-being? And a closer examination uncovers plenty of contradictions.

The contradictions that arise from such assessments are largely due to the inherent flaws of these indicators. According to the New Economy Working Group, "Gross Domestic Product (GDP) has many deficiencies as a measure of economic well-being. Most often noted is the fact that it can only add, which means it makes no distinction between beneficial and harmful economic activity." Also, GDP analyses focus solely on total growth, and do not attempt to assess levels of wealth distribution:

"There could be complete income equality with everyone's purchasing power growing equally. Or the society may be divided between a small minority of the extremely affluent and a majority of the extremely destitute - or anything in between. GDP gives no clue one way or the other. Growth in the incomes of a few billionaires can produce impressive growth in GDP even as a majority of people starve."

In fact, during the past half-century, the DJIA has lost almost all of its credibility as a reliable indicator of economic well-being. And since the rise of globalization in the late-1990s, it has become increasingly irrelevant to economic activity on a national level. "The Dow's biggest flaw, perhaps, is that it doesn't help us to make sense of an increasingly interconnected global economy - one in which what's good for GM isn't always good for the country," explains Adam Davidson. "GE, IBM and Intel, for example, all make more than half their profits in other countries. And while this may be great for their shareholders, it means little for most Americans."

The ever-increasing gap between corporate profit and workers income has also served as a death knell to the DJIA indicator. "In the postwar boom of the 1950s, the economy was growing so fast, and the benefits were so widely shared (throughout the socioeconomic ladder), that following 30 large American companies was a solid measure of most everyone's personal economy," Davidson adds. Back then, "what was good for GM really was good for the country." In a modern economic environment that rewards CEOs 331 times more than the average worker, and 774 times more than minimum wage workers, this is no longer the case. (In 1983, this ratio was 46 to 1)

Historically, the unemployment rate has been considered a fairly weak indicator of economic well-being, and for good reason. Its two major flaws lie in its failure to gauge levels of income, and its inability to consider things like "underemployment" and "hidden unemployment."

These lost categories include "people who have given up looking for jobs or work part time because they can't find full-time position." In 2014, as unemployment statistics suggest a vast improvement in labor participation, "more than 9 million Americans still fit into these categories, about 60 percent - or 3.5 million - above prerecession levels, according to the Labor Department."

Evan Horowitz explains:

"Let's say there are 100 people either working or looking for work. If 94 of those people have jobs, and six are seeking jobs, then the unemployment rate is 6 percent.

Notice that a lot hinges on people 'working or looking for work.' Say you want to work, but the job market is bad and you decide to put off the search until conditions get better. You're still unemployed, just not counted as unemployed by the government.

To return to the example, if three of those six people looking for work get discouraged and give up, the unemployment rate would fall to about 3 percent."

Furthermore, the unemployment rate completely ignores income. In other words, even rates that are considered to represent "full employment" (4-5%) essentially mean nothing if a considerable number of jobs pay poverty wages.

State of the Working Class

Because macro-indicators like the DJIA, GDP, and unemployment rates are severely flawed in their ability to reflect standards of living and economic well-being for a population, it is important to evaluate how the majority is fairing in this so-called recovery.

Since the US population throughout is largely driven by consumerism, a telling statistic is the market-based core personal consumption expenditures (PCE) price index, a measurement used to determine the amount of expendable income the average consumer possesses at a given time. According to Josh Bivens of the Economic Policy Institute, "the market-based price index for core PCE (i.e., excluding food and energy) rose just 1.3% over the past year, well below the Fed's 2% inflation target." This supports further evidence that impressive gains in GDP and corporate profits are simply not reaching (or trickling down to) a majority of Americans.

Despite recent and steady job growth, there are still 1.4 million fewer full-time jobs in the US today than there was in 2008. A recent survey conducted at Rutgers University reports that more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.

When considering workers who have given up on job searches, the unemployment rate is estimated at more than 12 percent.

A more accurate indicator than the unemployment rate may be the actual employment rate. When looking at this, we see that roughly 80 percent of " prime-age workers " (those between 25 and 54) had jobs in 2007. "That bottomed out at around 75 percent during the worst of the downturn, but has risen to only 76.7 percent since."

Despite steady job growth, new jobs simply do not stack up to the jobs that were lost. In sectors that experienced severe job losses due to the recession, workers are earning 23% less today. The average annual salary in the manufacturing and construction sectors - a particularly hard hit area - was $61,637 in 2008. It has now plummeted to $47,171 in 2014. Similar adjustments to income levels imply that $93 billion in lower wage income has been created during the recovery - meaning workers, across the board, are receiving a much smaller share than they were before 2009.

A report by the United States Conference of Mayors (USCM) also showed that "the majority of metro areas - 73 percent - had households earning salaries of less than $35,000 a year," hardly a living wage for families facing ever-rising commodity prices.

Despite increased productivity and corporate profits, most workers' wages have actually fallen. Biven reports, "From the first half of 2013 to the first half of 2014, real hourly wages fell for all deciles, except for a miniscule two-cent increase at the 10th percentile. Underlying this exception to the general trend at the 10th percentile is a set of state-level minimum-wage increases in the first half of 2014 in states where 40 percent of U.S. workers reside."

"As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966,"reported Nelson Schwartz in 2013. Dean Maki, chief US economist at Barclay's reports that "corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation," adding that "there hasn't been a period in the last 50 years where these trends have been so pronounced."

In the midst of impressive GDP growth, the US working class is experiencing a legitimate hunger crisis that does not seem to slowing down. "As of 2012,49 million Americans suffer from food insecurity, defined by the U.S. Department of Agriculture (USDA) as lack of access to 'enough food for an active, healthy life.' Nearly one-third of the afflicted are children. And millions of them don't even have access to food stamps, according to a new report from the anti-hunger organization Feeding America."

In May of 2014, there were 46.2 million Americans on food stamps, a slight decrease from a record 47.8 million in December 2012. According to the US Department of Agriculture, 14.8% of the US population is currently on the Supplemental Nutrition Assistance Program (SNAP). Prior to the recession, the percentage of the population requiring such assistance hovered between 8 and 11 percent.

According to the US Census Bureau, "in 2013, there were 45.3 million people living in poverty" and "for the third consecutive year, the number of people in poverty at the national level was not statistically different from the previous year's estimate." The official poverty rate is at 14.5 percent.

Conclusion

Between 2008 and 2013, the number of US households with a net worth of $1 million or more increased dramatically, from 6.7 million to 9.6 million. Households with a net worth of $5 million and $25 million respectively also increased. "There were 1.24 million households with a net worth of $5 million or more last year, up from 840,000 in 2008. Those with $25 million and above climbed to 132,000 in 2013, up from 84,000 in 2008."

The US government, or more specifically, the Federal Reserve, has been instrumental in this uneven recovery that has been characterized by massive corporate profits and booming millionaires on one side (a small minority), and falling wages, increased poverty, and frequent reliance on food stamps on the other side (a large majority).

According to a September 2014 study by the Harvard Business School, the widening gap between America's wealthiest and its middle and lower classes is "unsustainable," and "is unlikely to improve any time soon." The study points the finger at "shortsighted executives" who are "satisfied with an American economy whose firms win in global markets without lifting US living standards" for American workers, and therefore create an extremely polarized population where a majority of workers are disenfrachised from the business world.

The practice of quantitative easing (QE) - "An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply" - has become common during the recovery. Essentially, this practice "increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity." After three bouts of QE, all occurring since the recession, the Federal Reserve has acquired $4.5 trillion in assets , while adding at least $2.3 trillion of additional currency into the economy.

Robert D. Auerbach - an economist with the U.S. House of Representatives Financial Services Committee for eleven years, assisting with oversight of the Federal Reserve, and now Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin - estimates that 81.5% of this money has not been used to "stimulate the economy," but rather " sits idle as excess reserve in private banks."

Others have reported that, rather than sitting idle as Auerbach suggests, the money has actually funneled through to major corporate players, creating massive personal wealth for a select few. CNBC's Robert Frank reported just last week that "the world's billionaires are holding an average of $600 million in cash each - greater than the gross domestic product of Dominica," which "marks a jump of $60 million from a year ago and translates into billionaires' holding an average of 19 percent of their net worth in cash."

When considering the top-heavy recovery numbers, and increased misery for the working class, this comes as no surprise. And it certainly comes as no surprise to political economist Doug Henwood, who reported such trends back in 2012:

"Despite the strong recovery in cash flow, to record-breaking levels, firms are investing at levels typically seen at cyclical lows, not highs. Some cash flow is going abroad, in the form of direct investment, but still you'd think returns like these would encourage investment. Instead, they've been shipping out gobs to shareholder. Here's a graph of what I call shareholder transfers (dividends plus stock buybacks plus proceeds of mergers and acquisitions) over time:

Though not at the preposterously elevated levels of the late 1990s and mid-2000s, transfers are at the high end of their historical range. Instead of serving the textbook role of raising capital for productive investment, the stock market has become a conduit for shoveling money out of the 'real' sector and into the pockets of shareholders, who besides buying other securities, pay themselves nice bonuses they transform into Jaguars and houses in Southampton."

The Great Recession - like the 2001 recession before it, the 1990-91 recession before that, the 1981-82 recession before that, the 1973-75 recession before that, and so on - was the result of deeper systemic deficiencies. While the emergence of financialization opened the door for manipulative and predatory finance tricks (credit default swaps, mortgage-backed securities, NINJA loans, etc...) and helped to construct an impressively profitable house of cards, it is only part of the story. Ultimately, it is the boom & bust, cyclical nature of capitalism, along with its perpetually falling rates of profit (not cumulative profit), that are truly responsible, though almost always ignored.

The nature of this latest recovery suggests that the final nail in the working-class coffin, whose construction has been underway since the birth of neoliberalism, has been secured into place. Despite desperate measures used to pump massive amounts of currency into the economy through QE, virtually none has trickled down to the 99%. It's like déjà vu, all over again. And again… And again…