13 - 19 December 2001
Issue No.564
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Al-Ahram Weekly Online 13 - 19 December 2001 Issue No.564 |
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Terrorising the market
The United States' heavy investment in the war industry has failed to turn the economy around, writes Faiza Rady
There comes a time when the gods stop smiling on the super powers. As the forces of darkness take over, the wheels of fortune rotate on a downward spiral and the drizzle of discontent turns into a vicious storm.
In the United States the deadly cataclysm took the form of the 11 September terrorist attacks.
It was a storm that wreaked havoc not just upon the people but on the economy as well. Following Bin Laden's unproven yet likely involvement in the attacks on the World Trade Centre and the Pentagon, the airline industry showed symptoms of caving in. However, US President George W Bush, promptly came to the rescue -- bailing out the injured sector with a hefty emergency rescue package amounting to $15 billion -- courtesy of the American tax-payer. Despite the Bush administration's generosity, the attempt to prop up the airlines seem destined to failure. Unable to fend off exorbitant insurance premiums or cope with dwindling sales revenues, American Airlines and United Airlines are currently losing between $10 and $15 million a day, according to the New Statesman, a British weekly.
In addition to the $15 billion airline bailout, American tax payers are dishing out another $40 billion as an initial down-payment for reconstruction and increased security expenditures in New York and Washington. But this is small change compared to the hefty price tag of the holy crusade against terrorism. The New Statesman estimates that the US-led expedition against the demonised Bin Laden and his cohorts is costing tax payers an estimated $1 billion a week. A bill that is sure to swell further as the US expands its campaign to other "rogue" states such as Iraq and Somalia.
If this sounds like bad news to American tax- payers -- those charged with footing the bill -- it is music to the ears of the military-industrial complex. Eduardo Galeano, a prominent Ecuadorian writer, commented on the subtext of Operation Enduring Freedom, dismissing it as no more than patriotic mumbo-jumbo, yet another simplistic hoax tailored to pacify the masses. As always, the real purpose is elsewhere. "The usefulness of going to war is irrelevant. What is relevant is the profitability of war," Galeano believes.
With the production wheels spinning in high gear at General Dynamics, Lockheed, Northrop and other giant arms transnationals since 11 September, their stocks have been soaring on Wall Street.
So, has the war against terrorism triggered growth in the stagnating US economy? And has the pursuit of the ever-elusive Bin Laden proven good for business? Yes and no. While the Pentagon and the arms industry certainly benefited from an inflated military budget and massive sales contracts, accrued growth in arms manufacturing has hardly affected the rest of the economy. The costly campaign against Bin Laden has ultimately failed to deliver. "The impact of [generous defence and security spending] is likely to be modest," predicted the British weekly The Economist.
Last week, the Business Cycle Dating Bureau of Economic Research (NBER) officially announced that the boom-days of the American economy are long gone. The US economy has been mired in recession ever since March. According to the NBER's definition of the term, a recession sets in when there is growth slowdown, defined by a decline in employment, industrial production, real income, and business and retail sales over several months.
The NBER's somber assessment came as the market continued its free-fall on Friday when Wall Street's leading Dow index slipped by 91.2 points to level at a paltry 1007.94 by end of trading -- clinging above bear territory by a mere 7.94 points.
These alarming reports and dire forecasts of growth contraction have only compounded the market's poor performance. This, notwithstanding the Bush administration's commitment to a huge increase in the defence budget and Congressional approval for $344 billion for the Pentagon in 2002, a figure that accounts for almost a fifth of the entire federal budget of $1,9 trillion. "The country will be lucky if it sees growth of one per cent," The Economist predicted
But in the real world, beyond the US administration's rhetoric, growth contraction translates into retrenchment and lay-offs. For the first time since 1995 unemployment peaked at 5.7 per cent in November, up from 5.4 per cent in October. In October alone 415, 000 workers lost their jobs, and trade union data reveals that a total of 638,000 jobs have been slashed since 11 September. "The huge jump in unemployment rate makes it clear we are at a watershed," said John Sweeney, president of the American Federation of Labour-Congress of Industrial organizations (AFL-CIO).
The National Association of Purchasing Management (NAPM), an outfit that tracks industrial production in the US, reported that manufacturing activity plunged to 39.8 last month from 47 in September, marking the 15th consecutive month of decline. (An index below 50 indicates contraction in manufacturing). According to the US Labour Department's figures, more than one million jobs have been lost in manufacturing since last year.
The immediate future looks equally dismal. Boeing is planning to fire 30,000 workers over the Christmas period, with little or no severance pay. Collective bargaining with the company has deteriorated to the extent that SPEEA, the Seattle-based aerospace union, has thrown in the towel. Rather than further pursue futile labour negotiations with Boeing, the emasculated union has turned to charity work. It is now asking workers for cash donations to help ease the transition of the 30,000 former workers into unemployment. Since 11 September, Boeing has drastically cut back production, claiming huge profit losses caused through slumping demand and prohibitive insurance costs. But the workers do not buy the corporation's claim. "The mood is pretty angry," said Kurt Hanson, a union official, "A lot of people think 11 September is a cover for what management would have done anyway."
Meanwhile, as multinationals consider further job-cuts, American workers brace themselves to face a long hard winter. The gods are still frowning, and the war against Bin Laden has so far failed to deliver even Bin Laden himself.
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