#52 - Behind the so-called US economic "boom", rocketing profits, growing inequalities, increased exploitation

November 2000

The myth of the "American dream"

For a number of years now, British politicians and commentators have been hailing the state of the US economy and more specifically what the so-called experts describe as its "unprecedented growth" since the early 1990s.

Of course, British politicians have a vested interest in doing so. Wasn't it in the name of the American "success story" that Labour introduced its first programme of cuts after the 1997 general election? The concept of the "flexible labour market", including Blair's "New Deal" and Brown's tax credit system, was explicitly borrowed from similar schemes implemented in some parts of the USA, under the pretext that this was the way out of unemployment. But likewise also for the planned school vouchers system and the new concordat between the NHS and private health companies.

It is indeed US economic growth that has become the justification for many attacks against the working population and the jobless. What is presented here as the US economic "success story" is supposed to vindicate the idea that the well-being of the population as a whole can only be improved by helping companies to increase their profits. And when the CBI and other bosses' organisations have the nerve to complain bitterly about what they call the "tax and red-tape burden" which is imposed on them here, they always point to the US economy as an example of what could be achieved should business really be given a free ride. As if they had not had enough of a free ride already, and at great cost for the majority of the population!

But then, of course, if British politicians and bosses are so keen to hide their anti-working class policies behind the model of the USA, it is also because the so-called "American dream", of a society where everyone has a chance to escape from poverty, is still alive today.

It is alive, of necessity, for the tens of millions of poor workers and slum dwellers of South and Central America, whose conditions can only be compared to those of 19th century Europe. And every day tens of thousands of them try to cross the electrified barbed wire along the border between the USA and Mexico in the hope that they will benefit from the slight relaxation of border controls due to the US bosses' need for non-skilled labour. And if so many immigrants from poor countries seek refuge in Britain today, it is less because of Britain's relative affluence or allegedly generous welfare state, as Jack Straw and the Sun would have it, than because it is sometimes seen as the best crossing point to the USA.

But this "American dream" is not just alive among the population of the poorest countries. It is also alive among many more millions of workers, in the USA itself and across the industrialised world, because while the capitalist system remains in place, economic growth seems to be the best way for the poor to improve their lot.

This "American dream", however, has always been a myth. It has always been a cover used by the small minority which makes up the American capitalist class to extract enormous profits out of the illusions of the huge American working class. And today, this myth is wearing thin, as the past nine years of economic growth in the USA - which are hailed so enthusiastically over here - have in fact brought no benefit whatsoever to the vast majority of the US working population, but rather the opposite.

What's in an "economic boom"?

But first, the present economic "boom" in the USA should be put in its proper context - that is the crisis which has affected the world economy since the early 1970s.

Despite the whole period up to the 1970s often being described as the "postwar boom", it actually involved several economic cycles. In general, however, the US economy tended to expand through these alternating spells of growth and recession and the capitalist class was not hard-pressed in its search for profits. For a majority of the US population this resulted in a relative improvement of their conditions. Although not for all. It must be recalled, for instance, that squalid conditions in the Black ghettos were, in addition to the semi-official discrimination against them, decisive in sparking off the inner-city uprisings of the 1960s. And the militancy of the black slum dwellers probably did a lot more to force through the improvement of welfare measures than the relative prosperity of the US economy throughout these years. All in all, however, the balance sheet of this period was indeed improved conditions for the working class - whether in terms of wages, housing, health or education.

Since the early 1970s, however, the pattern in the USA has been very similar to what it has been here and across Europe. Instead of a general expansion, the ups and downs of the economy have averaged out in stagnation. The bosses' search for profits has become more vicious. And they have increasingly looked to public resources as a means to top up these profits. As a result, cost cutting - both at company level and in public services - has become the watch word at the expense of working people. So workers' conditions have deteriorated more or less constantly throughout this whole period.

The present spell of economic recovery is no exception to this general rule. Although it is portrayed as the sharpest and longest "boom" in the USA this century, official figures show a different picture. Indeed, the average rate of growth over the nine years of this so-called "boom" is only about 2/3 of what it was in the 1960s. Furthermore, these figures reveal that this growth is mostly attributable to a handful of industries - mainly in high-tech sectors such as electronics and communications - while the other productive industries are either stagnating or shrinking, both in terms of production and in terms of productive investment.

The economic experts explain that the power engine behind the present economic growth is US consumption, or at least the consumption of a section of the population. However, their own figures show that the level of indebtedness of the US population as well as that of US companies has reached unprecedented levels. In and of itself, this is an indication of the fragility of this phenomenon which, in the last resort, depends entirely on the willingness of the banking system to lend money to consumers and companies. But in addition, a significant part of this indebtedness is linked to the situation of the stock markets, as both companies and the large US middle classes have borrowed heavily in order to benefit from the sharp increase in share prices over the past years. It might take only a relatively small hiccup in Wall Street for this mass of debts to collapse like a house of cards, precipitating the fall of millions into bankruptcy.

Official unemployment figures - which should be taken with the same large spoonful of salt as here - have shrunk to 4.2% of the active population, or nearly 6 million jobless. This may well be a record low since World War II, but it does mean that even in such a period of so-called expansion, the capitalist system still remains incapable of providing everyone with a job.

But more importantly, the same official figures show that this economic growth has not resulted in what the experts call an "uncontrollable wage spiral". In other words, the average income of the working population has not improved as a result of increased economic affluence. This should be enough to worry these experts. After all, if the purchasing power of the population does not increase, this means that the present economic growth cannot sustain itself through the increased consumption of the population as a whole - which was what mainly fuelled the economic growth of the 1960s. In other words, the present economic growth is already showing built-in limits.

But it obviously takes much more than that for business experts to start worrying about the system. In fact, they are delighted. For once, they may be able to show a period of growth under capitalism which does not result in inflation - or so they hope, because contrary to their prejudices, wage increases are not usually a cause but rather a consequence of inflation. Nevertheless, these same experts are also baffled, or at least they claim to be. Such a low level of unemployment with so little upward pressure on wages, has no precedent in economic history, they say. And yet, it is not hard to figure out what this phenomenon actually means. It means that wages have been kept down while profits were increasing, or to put the facts on their feet, that profits have increased primarily thanks to wage costs being kept down, in other words thanks to an increased rate of exploitation of the working class.

That being said, it now seems that US economic growth is beginning to run out of steam. This year has been marked by a long series of what business journalists call "profit warnings" - i.e. advance announcements by companies that their profits are likely to be lower than expected. Admittedly there is an element of speculation in this. The name of the game is to prevent share prices from falling too sharply when the real figures are announced. And a bit of media preparation can even help to boost share prices if the real figures turn out to show a lower-than-expected drop. Besides these "profit warnings" do not mean that companies are going into the red, far from it. Their profits remain enormously overinflated. But they do show a certain stagnation which can only translate into more cost-cutting on their wage bills and already minimum investment programmes and, as a result, shrinking markets for some industries.

So, far from being the healthy economic wonder hailed by commentators here, the US "boom" turns out to be rather asthmatic. It is both fragile and largely dependent on US companies getting away with turning the screw on the working class. Instead of heralding a new lease of life for the capitalism system as a whole, it appears as a continuation of its on-going crisis. All the more so because, due to the dominant position of the US in the world, its economy is in a position to draw more benefits from the world market than any other.

The irresistible rise of US capital

Indeed the US's dominant position on the world market is a major factor in the relative upturn of its economy today. But what is the origin of this dominant position?

It should be recalled first, that unlike in the old European countries, the rising US bourgeoisie did not have to contend with a parasitic nobility already entrenched in the political and economic fabric of society. Once the native populations had been decimated to make space for the new conquistadors, the American capitalists had no other propertied class to fight. The main obstacle they had to deal with was their own heterogenous nature. On the one hand the Southern agricultural bourgeoisie, whose wealth depended on the exploitation of slave labour, and on the other hand the Northern industrial bourgeoisie, whose wealth relied on another form of slavery, waged labour, based on the regular supply of immigrants from the rest of the world. And it took one of the most murderous wars in history, the American Civil war, to sort out this North-South social rivalry and pave the way for the development of large-scale industry across the country.

Once this fundamental contradiction in American society was resolved, the relatively small US bourgeoisie found itself with an enormous territory to play with, almost unlimited natural resources of just about every kind, and a continuous influx of immigrants, who arrived with their skills and their hope for a better life. The role of the pioneering spirit of these immigrants should not be underestimated. Rail barons such as Morgan may have been among the main beneficiaries of the conquest of the West, but without the courage, inventiveness and determination of fresh immigrant pioneers, who were robbed of the benefit of their efforts in most cases, they would have achieved nothing.

On this basis, US capitalists were able to develop the largest domestic market in the world. Meanwhile the expansion of their European rivals was increasingly hampered by the straightjacket of national borders whose existence resulted in periodic conflicts, both in Europe and in the colonised parts of the world. So by the turn of the 20th century, the US economy had taken over the leading position in a number of industries - even though Britain still hung on to its position as the world's leading power, despite its ageing industry.

Having shared out the world between them, the capitalist classes of the three main powers of the time - Britain, France and Germany - could only expand at the expense of one another. This resulted in one world war and then a second one, without actually resolving their rivalries. Meanwhile, the American capitalist class was able to get the best of both worlds. They kept out of the intra-European rivalries while developing their own backyard on the American continents - and a sphere of influence in South East Asia which they shared out between themselves and Japan. Each world war gave a major boost to US industry by providing it with a huge market for weapons, among other things. By the end of World War II, not only was the USA the largest industrial power in the world, but it had also replaced Britain as the world's banker and as imperialism's main police force.

Faced with the overwhelming rise of their American rival, the old imperialist capitalist classes tried to protect themselves by using all the resources of their states, but to no avail. Large-scale nationalisations were carried out across Europe after the war to rebuild industry without the capitalists having to bear the cost of the investment, but in the end these reconstruction programmes had to be financed by US capital through the Marshall plan. Meanwhile European troops which had been dispatched across the world to restore the former colonial empires came up against the postwar anti-colonial upsurge, which marked the beginning of the end for the colonial era. The plundering of the Third World ceased to be the monopoly of a handful of European colonial powers. The main beneficiary of this new world order was, of course, US capital.

A question of balance of forces

The dominant position of US capital on the world market allowed it to play a unique role in the financial explosion of the 1980s. It must be recalled that the beginning of that decade was marked by the combination of two factors. The Third World debt crisis resulted in a massive flow of private capital towards the industrialised countries. But at the same time, because of the crisis of the capitalist economy, the owners of these funds were reluctant to tie them up for any length of time. They wanted to make a quick buck without the risks. This was one of the aims of the financial deregulation that took place across the industrialised world during that decade. It involved the removal of many of the remaining barriers to the circulation of capital across the world.

At the same time, the states of the rich countries sought to meet the new demands made by capital. The wave of privatisation which started during this decade was designed as much to provide the financial vultures with new prey as to increase public income, at a time when state funding was increasingly used by companies as a means to boost their profits. Soon the same process was extended to Third World countries under the pressure of the bailiffs of imperialism, the IMF and the World Bank.

By the late 1980s, stock market indices started their long march towards the sky as the mass of capital attracted by the new offerings was building up. A huge speculative bubble began to develop. The parasitism of capital reached new heights.

This was the beginning of the so-called "globalisation" of the world economy - an exacerbation of the mechanisms used by imperialism to exploit the planet since the beginning of the 20th century. In this process, which removed many of the barriers which had helped - within certain limits at least - to contain the plundering of the world by imperialist companies, the most powerful of these companies got the lion's share. And, of course, the most powerful by very far, were the US giants.

The power of these giants can be illustrated in many ways. Of the world's 500 largest companies in terms of stock market value, 219 or 42% are based in the USA as opposed to 146 which are based in the European Union. One economist noted, for instance, that in 1990 the sum total of the turnover of all foreign subsidiaries of US companies was larger than the GDP of any country in the world, except the USA itself. Another measure of the power of the US giants is given by the fact that 40% of all cars imported into the US are produced by companies which are partly owned by one of the three main US car manufacturers. Whichever way consumers' preferences go, it is still the shareholders of these three companies who cash in - whether the cars they buy are German, Swedish or indeed Japanese.

In the sphere of finance, the predominance of US capital is even more overwhelming. Wall Street - not the City of London - calls the shots. British TV business programmes almost always start with the latest news about the Dow Jones and NASDAQ, the main stock market indices in New York. It is towards the American stock markets that European and Japanese so-called "investors" shift their capital - not to invest, of course, but to speculate. If the euro has been going down so sharply since its introduction at the beginning of last year, it is partly for this reason. Just as a large part of the £135bn "investment" which flowed out of Britain last year went to the US in the hope of getting a share of the stock market bounty there.

US financial domination is illustrated by the primary role of the dollar in the world economy. Almost half of the world's trade is carried out in dollars, while 57% of the world's foreign currency reserves are in dollars. Despite the hopes of the European states, the euro has been unable so far even to dent the domination of the dollar in worldwide finances.

This situation gives US capital an enormous advantage. While any significant increase in a country's indebtedness normally results in the weakening of its currency, not so for the USA. Because unlike any other country, the USA can pay for its imports and repay its debts using mostly its own currency - and it can always print more dollars if need be. As a result the USA can be the most indebted country in the world without this threatening its economy, at least in the short term.

The privileged situation of the US economy over the past period is not, therefore, only the reflection of its particular material circumstances. It is also the result of a relationship of forces which allows US capital to cut itself a proportionally larger share of profits worldwide than that of its lesser rivals. This relationship of forces is not confined to the economic sphere. The military and diplomatic policy of US imperialism is entirely geared to maintaining and improving the balance of forces to the advantage of US capital, against the populations of the poor countries as well as against its imperialist rivals.

That being said, the primary source of the renewed affluence of US capital remains the exploitation of the working class in the USA itself.

Growing inequalities

The hype around the US economic "boom" always points to all kinds of alleged "success stories", from Silicon Valley and the expansion of the so-called "New Economy" to the bright careers made by British entrepreneurs who moved to the States in order to escape from the straightjacket of Britain's over-regulated society - or so we are told.

What these enthusiastic descriptions of the US economy always fail to mention is the exorbitant price paid by the tens of millions of anonymous workers without whose labour the US economic machinery would come to a halt. Indeed, the present relative economic growth of the US economy is first of all the result of the increased exploitation of the US working class over the past two decades.

So today, after nine years of economic growth, social inequalities have increased considerably. For instance, the income of the richest 1% Americans (less than 3 million people) is about the equivalent of that of the 100 million at the bottom of the scale. And this gap has increased significantly since, in real terms, the income of the top 1% increased by 120% over the past twenty years while more than half of the population had its income cut over that period. When it comes to wealth, this gap is even more blatant: the assets of the 400 richest Americans are equivalent to those of the poorest half of the population. This says it all!

One end of the social spectrum, the richest, has benefited from the return of profitability to its pre-crisis level, which took place in the USA, as in most industrialised countries, in the mid-1980s. Then, during the past decade, profits increased 50% faster than GDP, meaning that those who live off these profits, shareholders and top company management, saw their incomes increase a lot faster than the national income. The explosion in share prices only benefited a tiny minority, simply because, contrary to the usual fairy tales that can be found in the newspapers, most Americans do not own any shares. Out of the gains made on the stock market during the 1990s, more than 3/4 went to the 10% richest Americans, and almost half of these gains went to just 1% of all shareholders.

But this new-found affluence did not benefit the other end of the social spectrum - the poorest - at all. True, the proportion of people living below the official poverty level has gone down from 15% in 1993 to slightly over 10% today. But this is just about the same level as 20 years ago, and this after nine years of economic growth! And since the size of the population increased over that period, so did the number of poor - who were officially 32 million in 1999.

However the "poverty line" is a very dodgy indicator of deprivation and the way it is measured makes it even more dodgy. Not only does it wildly underestimate the real number of poor in terms of resources, but it fails to take into account gross factors of poverty such as the increasing ghettoisation of a whole section of the population. But even in those terms, official figures show that the proportion of those classified as "very poor", which used to be 33% twenty years ago, has increased to 45% of the poor as a whole. In other words, the economic growth is actually pulling the poor down, rather than up, the social ladder.

The fact that there are officially 6 million unemployed as opposed to 32 million poor, shows that in the USA as in Britain, actual wages have gone down so much that many people have to work in order to be poor. Often they have to work at not just one job, but several. The pattern of what has been happening over the past period is familiar; very similar, indeed, to what has happened in Blair's Britain.

There have been massive cuts in the relatively stable and better paid jobs in large companies. Today, nearly 25% of the workforce is employed under so-called "non-standard" contracts - which include part-timers, agency workers, contracted self-employed and people working on zero-hour contracts. As to the new jobs which have been created, mostly in the service industries, less than 10% belong to the relatively better-paid high-tech category. Three times as many jobs have been created in catering, for instance, but on appallingly low wages. Significantly, the number of those employed in so-called "personal services" - such as hairdressers, dry-cleaners, shoe menders but also house cleaners, servants, chauffeurs, etc.. - has doubled since 1992. And this does not just expose these so-called new jobs as low-paid, unproductive and unable to replace the massive numbers of productive jobs cut over the past period. It also shows that there are a lot more people at the top who can now afford to have servants.

Sweated labour

Even for the section of the working class still working in the big industries, real wages only started to increase again in the last few years. And to date, these wages fall very short of their level two decades ago.

The federal minimum wage - which served as a blueprint for Blair's minimum wage here - was increased only twice over the last nine years - in 1996 and 1997 - which pushed it up to $5.15/hr or almost exactly £3.60, on the basis of the currency rates at the time. In total these increases benefited around 20 million workers. However, despite these two increases, the real value of the minimum wage has shrunk by 21% over the past twenty years. As to the average hourly wage, despite having increased somewhat over the past few years, it is still 4.5% below what it was twenty years ago in real terms.

Only the salaries of the better-paid workers increased over the past decade, by an average of 12.5%. Of course, this does not include company executives, whose salaries and perks of all kinds doubled in real terms over the same period.

The standard of living of the working population has been reduced so much that one worker in four does not earn enough to get above the poverty line and one in ten is even classified as "very poor" - against one in 25 two decades ago.

In order to survive most workers not only have had to work at several jobs, but also do massive overtime. So the average number of hours worked has increased by the equivalent four weeks a year, up to 1,898 hours, which is more than in any European country or Japan.

Judging from what business commentators write here, one might get the idea that productivity has increased considerably in the USA. In fact, outside a few high-tech industries such as electronics, computers, etc.., the normal annual rate of increase due to the regular renewal and improvement of ageing equipment is stagnant or even decreasing. But since companies fail to invest on any significant scale, productivity increases are mostly achieved through the intensification of labour and job cutting programmes. Everywhere production speeds have been increased and breaks have been cut to almost nothing. And far from disappearing, the 19th century conditions that used to prevail in some industries, such as textiles in the Chinese districts, or fruit canning in Southern border areas, have become entrenched and tend to spread to other industries with a high input of immigrant workers.

In this context, the car industry can be considered as a relatively "privileged" sector, so to speak, due to its fighting traditions and high level of union organisation. And yet over the past twenty years more than one job in two has been cut in the three US car giants alone - i.e. General Motors, Ford and Chrysler. But the remaining 400,000 workers produce twice as many cars as were produced in 1978. Such a result can only be achieved by imposing killing speed-ups and massive overtime. The United Auto Workers' union claims that 86,000 jobs could be created in these three companies just by putting an end to overtime.

Overtime developed into a generalised curse in the 1990s. It became frequent for workers, even in large companies, to do twelve-hour shifts. In some cases, the bosses countered attempts at opposing such shifts by sacking the entire workforce and replacing it with jobless workers.

It is not hard to imagine the consequences of such long shifts in terms of safety. Even in industries where safety considerations should be even more vital, such as transport, the pattern is similar. For instance, following the crash of an American Airlines jet at Little Rock, the press revealed that the crew had been working for 13 ½ hours, and that this was the normal length of their shifts.

The rate of accidents on the job has increased across industry, due to a combination of labour shortages, exhaustion of the workforce, lack of investment and disregard for safety on the part of company officials who are primarily concerned with cutting costs. Ford is a regular offender in this respect. Already, in 1993, this company was fined $750,000 for falsifying its statistics concerning accidents at its production sites. This was the second such fine incurred by Ford. But it did not change its policy regarding safety. A typical example of Ford's negligence was provided by an explosion at the Detroit River Rouge plant, the largest car manufacturing estate in the US, in February 1999.

The explosion itself took place in the heating plant, which provides the rest of the estate with electricity, steam and hot water. In the heating plant itself, 30 workers were severely burnt, six of whom died later from their burns. The 14 survivors will probably never be able to work again. There were no emergency generators in working order, so the whole plant was plunged into darkness. Everything, from the lines and the steel furnaces to the paint cabins, was brought to a halt. And since the plant management had never bothered to work out evacuation procedures it was pure luck that no-one else was seriously hurt in the rest of the estate.

Following this accident various pieces of information filtered through, which made it possible to deduce the real reasons for the explosion. The immediate cause was a faulty gas valve which had actually been reported long before - by one of the workers who had been killed. But in fact the problem went a lot further back. In 1966, a control system, which would have prevented such an explosion, was disconnected because it triggered the alarm too frequently. However this system was never replaced. In 1980 a safety inspection recommended that a new control system should be put in place. It took ten years for the plant management to respond to this recommendation - which they did by issuing a note explaining that such a system would not be cost-effective! Subsequently a number of inspections commissioned by insurance companies made the same recommendation again, but with just as little effect since they had no power to impose anything on Ford managers. In the end the dead and injured boiler room workers paid the price of Ford's greed.

And this is not the end of the story. As cost-cutting continues in maintenance and safety provisions, small-scale explosions, local fires and gas leaks are regular occurrences at Ford River Rouge, and workers continue to be injured. But never mind, whatever happens, Ford managers are always there to put pressure on the workforce to carry on working, even when they are surrounded by smoke or poisonous fumes. The only thing that counts for shareholders, after all, is that the sweat of the working class feeds the so-called US economic "boom".

The state against the poor

In the social war waged by the capitalists against the working population, the state has thrown all its weight onto the side of the bosses. The drastic reduction of welfare provisions - which were already rather limited in the USA - has played an important role in reducing the standard of living of the working class while helping the bosses to undermine workers' conditions. At the same time cuts in welfare programmes have allowed the state to divert an even larger share of public resources into companies' coffers.

Direct state subsidies to support capitalist profits are, of course, nothing new in the USA. Despite the myth of the USA's "free enterprise", the US state has a long tradition of economic intervention on behalf of capital - just like its counterparts in Europe - particularly since the 1930s, when the Roosevelt administration practically bailed out the whole of American industry at taxpayers' expense. Only this intervention has become even more extensive since the resumption of the world crisis in the 1970s - just as it has in Europe. From the top to the bottom of the complex ladder of the US administration and elected bodies, the main preoccupation is to find the best way to channel public funds towards companies - under whatever pretext. How much these public subsidies to private profit actually represent is difficult to gauge, as there are no official statistics available on such matters. But some estimates put them at a minimum of $250bn a year, or the equivalent of nearly half of Britain's annual budget for this year!

But as this enormous amount of money has to be found somewhere, social programmes, federal and local government services and wage bills, etc.. have become the target of systematic cuts.

One of the main targets for these cuts was the benefit system for the poor. The 1996 welfare reforms made all benefits conditional on availability for and acceptance of, any job that was on offer. This did a great deal to bring about the mushrooming of very low-paid casual jobs as well as to undermine the situation of the most defenceless in society - like single mothers, the disabled and the long-term unemployed. All the more so, because, in addition, the 1996 reform provided that even under these drastic conditions, claimants could only get benefits for a total of two years over the entire duration of their lives - something that Blair and Brown did not dare to introduce here with their "New Deal" and "Welfare to work" schemes, despite their obvious similarities to Clinton's welfare reform.

For many of those caught in the net of those functionaries in charge of policing welfare benefits, this reform has meant a reduction in their already very low incomes. It has contributed to the growth in number of those classified officially as "very poor". But this does not prevent Clinton from boasting of having reduced the number of claimants by 51%, down to 7 million this year. On the contrary, Clinton is all the more keen to underline this "achievement" because it allows him to justify offering subsidies to companies under the pretext of helping them to create jobs, and all this, he stresses, at no cost to the taxpayer since the number of claimants has gone down.

However, what Clinton fails to mention is what actually happened to those who had been thrown out of the benefit safety net. The proportion among them who never found a job, varied between 30 and 50% across the country. Others found a job but lost it within three months and were not allowed back on benefits. One indirect but vicious consequence of this reform did, however, cause a scandal in the country when it was disclosed. After just one year of enforcement, the 1996 reform resulted in ten million children being deprived of any medical insurance, after their families had exhausted their benefit entitlement. The public outcry forced Clinton to back peddle and to promise some form of funding to make up for this. However nothing has been done about it to date.

The great pension scam

The same policy is being applied to the state pension system. This is the main social programme managed by the federal state. It is a "pay as you earn" system, with contributions from both employees and employers. The contributions of active workers are used to pay a pension to the aged, equivalent in average to 38% of their previous wages. This pension makes up the bulk of the income earned by two pensioners in three. It is, therefore, a very important welfare provision for the US working class.

During the 1990s, a campaign gathered momentum around the idea that once the postwar generation reached retirement age, the pension system would no longer be able to cope with the increased numbers of pensioners. This is a tune that we've heard for years in Britain and which is, indeed, sung by every government in the industrialised world. Of course, just like here, no-one even hints at the possibility that after so many years of huge tax breaks, the capitalist class could be made to pay for the shortfall - assuming there is one, which remains to be seen.

In the USA a first measure has already been introduced to "prepare the ground" for the announced doomsday of the pension system. From this year it will be necessary for workers to carry on working after 65 in order to get their full pensions. Retirement age will reach 67 by 2022, that is, provided a new extension is not introduced before that, because already some politicians are arguing in favour of increasing retirement age to 70.

In other words, at a time when the intensification of workers' labour is offering the US economy a breathing space, the same workers, who are bound to be even more worn out than before, as a result of their working lives, will be allowed even less time to rest and enjoy a pension - which they paid for throughout! And they call this a welfare system! That being said, on this account too, there is nothing to choose between Clinton and Blair, since the very same arguments have been aired here over the past three years and the Labour government makes no mystery of the fact that it intends to go down the same road - that is after the coming general election, of course.

In any case, despite Clinton's alarmist claims, the US pension budget still shows a huge surplus for the time being. In fact, year in and year out, this surplus is used to buy Treasury bonds. In other words it is used to cover the enormous deficit of the federal state. At present the accumulated surplus of the pension budget amounts to $1,000bn and it should reach over $3,500bn within two decades. If so, there should be no problem in financing the pension system, unless of course the federal authorities do not really intend to refund what they have borrowed from the pension budget - which may well be the case.

Of course, just like here, the state pension is far too low to provide pensioners with a decent income. So, in periods when the balance of forces was more favourable to workers, large companies have had to provide top-up pensions financed jointly by the bosses and the workforce. Originally the pension funds which were set up to manage these contributions were run by the union machineries, jointly or not with the employers. But increasingly, large companies have turned to insurance companies and other specialised financial institutions to manage these funds. And some of them are huge, particularly those of government employees.

But in this area too, workers have been losing out over the past period. First because of the massive job cuts in large companies, the proportion of those covered by such additional pensions has gone down to just over half of all waged workers. But in addition, among those who are covered by such a scheme, only 58% will actually get a top-up pension when they retire. The others will only get a one-off payment, the amount of which will depend on the performance of the stock market over the coming years. If the stock market collapses, or simply if share prices start edging down, millions of workers will have paid the same contributions but will get very little in exchange.

This last type of pension scheme has become increasingly widespread over the past years, under the pretext that the stock market was so buoyant that it could only be advantageous for workers. But the real reason is that the cost for employers is a lot less - simply because such pensions include fewer guarantees. In August 1999 alone, 500 large companies transformed their traditional top-up schemes into such individual private schemes. Among them IBM, for instance, has already saved $200m at the expense of its 140,000 workers.

Sick politics

There is no equivalent of the NHS or similar European healthcare systems in the US. Private companies have always been successful in opposing the introduction of a unified public health insurance system.

The only compulsory contributory health insurance is Medicare. But this is a system that benefits people only once they reach pensionable age and it is actually part of the pension system. It insures 40 million people but only covers around half of average health costs - so for instance pensioners still have to pay for medicines and dental treatment. And, of course, the cuts in the Medicare budget introduced by Clinton ($56bn in 1993 and $115bn in 1997) have not helped to improve this scheme.

In addition to Medicare, there is another (non-contributory) federal health insurance programme, called Medicaid, which is meant for the poorest. For millions of people Medicaid is effectively the only way to get any treatment. But there again, drastic budget cuts have reduced its scope over the past years. In particular it has become much more difficult to qualify for this scheme. Today, 60% of those living below the poverty line are not even entitled to Medicaid.

For the rest of the working class, health insurance is entirely dependent on the goodwill of their employers. There is no law that makes it compulsory for the bosses to provide any kind of health cover for their employees. After World War II, many large companies signed contracts with the insurance industry to provide some sort of collective health cover for their workforces. But over the past period, the bosses have had the same policy towards these health insurances as they had towards wages. Just as they sought to cut real wages, they did their best to reduce their contributions towards these schemes. So they began by refusing the regular annual increases which used to be part of any wage contract, so that the cover of the insurance was reduced. Then they demanded that employees should also contribute towards their health insurance, which was not usually the case before. By combining such tricks with a few others, companies managed to reduce their contributions to health insurances by 3% a year over the past decade. The result is that by now the actual health cover provided to workers has shrunk considerably, even though they also have to pay for it.

Today 63% of all workers are covered by such health insurances schemes as opposed to 70% twenty years ago. Since then the army of those working in casual jobs or small companies has increased considerably and they have no health cover whatsoever. Their only option is to buy a private health insurance from one of the many financial sharks which feed off this industry - that is provided they can afford it. Today 44 million people cannot afford to pay for such insurance. The only way they can get any treatment is by being admitted as hospital emergencies. In theory every hospital has a statutory duty to admit patients without health cover, but only provided they require urgent treatment. Since the assessment of this urgency is entirely in the hands of the hospital's management, it is not hard to guess that if they have to choose between a paying patient and one who has no cover, they will choose the former. And in fact some private hospitals have gone one step further by closing down their emergency facilities so as to avoid their duty altogether.

The US health sector is indeed entirely dominated by money. Strictly speaking it is an "industry", and a very profitable one at that. Anyone who can afford to pay, can get the best treatment in the world, since there is no shortage of very sophisticated equipment and facilities. In fact more money is spent on healthcare in the USA than in any country in the world - more than twice in proportion to GDP than in Britain. But most of this money goes straight into the coffers of the private insurance companies, hospital chains and drug companies which make up this industry. These are not small businesses. They are major companies quoted on the stock market and they are meant to provide the same rate of return on capital, and if possible more, than Ford or Microsoft. Profit-making is the watchword throughout the industry and, to all intents and purposes, those who cannot pay are left to die.

The result is disastrous. The world's richest country ranks far lower than many others in terms of life expectancy, infant mortality and the treatment of diseases linked to urban poverty - not for lack of resources or investment, but because of a social organisation entirely geared to serve profit.

Profit against public services

Cuts at every level of government are resulting in increasing dereliction in every sphere of public services. No wonder, since overall, the share of GDP devoted to maintaining and building infrastructure has been halved over the past two decades.

Even safe drinking water is no longer guaranteed. In July 1996, an urgent warning was issued over water quality in Washington itself - and for good reason, since part of the town's water mains date to as far back as 1900! It is common for private water companies to be caught producing water with a bacterial count far higher than the legal limit. Problems usually associated with poor Third World countries are increasingly the norm in the USA, for lack of funding.

Education is a reliable mirror of any society. In the USA, for historical reasons, education developed under the control of local and state governments. But the federal authorities never made any attempt at unifying the system, so that it lacks homogeneity and is very unequal.

Rich districts have very good schools with enough teachers and large facilities, whereas the schools in poor districts tend to be cramped in derelict buildings, with large class sizes and a chronic shortage of teachers. Likewise there are a number of prestigious universities in the USA which attract the best of the world's scientists, because of the quality of their students and the unlimited amount of funding made available for research. But at the same time, half of all urban ten-year olds - those from the poorest backgrounds - are unable to read. And in the poorest districts only one child in four comes out of school with the basic three "Rs".

These appalling results are never blamed on social conditions, lack of funding or anything of the kind. They are blamed, just like here, on failed management. And a powerful campaign has developed in favour of privatising school management, much in the way that Blunkett deals with so-called "failed schools" in Britain. Needless to say, by now, ad hoc companies have already been set up and are ready to grab this potential bounty. So far these companies have made no profits but banks and speculators are so convinced that they will be in business very soon that their shares are quoted on the stock markets and are performing quite well.

Other privatisation schemes are being discussed too. One of these - school-voucher schemes - is already beginning to develop. The idea is to allow parents to send their children to a school of their choice, by paying a "market fee" based on the facilities and quality of the school. State-issued vouchers would be used to meet part of the cost and those parents who are willing to pay more would be able to choose a school with a higher "market fee". Again, this is not very different from the school-voucher schemes which have been discussed in the past in Britain. The aim is to bring free education to an end by giving parents no choice but to top-up the value of the vouchers given to them by the state. At the same time, this leaves plenty of scope for profits to be made - whether through the management of the school-voucher schemes themselves or through the merger of a growing private education sector with the existing public sector.

Either way, profit is being introduced in an already very unequal and chaotic education system and its parasitism can only make things worse. Private schools financed by public funds are mushrooming, from 100 in 1994 to 1,700 in 1999. That may not sound like a lot but it is a new trend and a fast-developing one. Since the overall education budget remains more or less the same, the increasing funds going to these new private schools can only mean more cuts for state schools, which will have drastic results, particularly in the poorest areas, where schools are already barely surviving and are in urgent need of increased resources.

Beyond the material and social aspect of these changes, some of the new private schools targeted at the not so well-off, are bound to resort to some means of rationing education, in order to cut corners - for instance by reducing the choice of subjects or cutting out some subjects altogether. Even more worrying is the fact that due to the absence of any federal system designed to outline a curriculum across the USA, politicians have been allowed to use school programmes as a vehicle for their reactionary demagogy.

So, in Texas for instance, it is possible to do science studies without ever hearing anything about the evolution of species or the formation of the universe. And the fact that many of the new private schools are using religious banners in order to attract customers means that this kind of obscurantism is likely to spread on an even larger scale. This is ironical, when today the generalisation of the use of "information technology" is presented as a knowledge "revolution" which will rejuvenate the capitalist system...

The US working class movement

In most respects, the developments which have been described so far are similar to those experienced by the working classes in all industrialised countries. And like elsewhere, the US working class found itself paralysed in front of what amounted to attacks against its conditions and for the same reasons. It was not paralysed for lack of the necessary militancy and dynamism required to counter these attacks, but because it did not have the one instrument which would have been decisive in such a battle - a party which represented its political interests.

From this point of view, however, the American working class is at a disadvantage compared to its European counterparts. Indeed, in the USA there has never been a working class political tradition comparable to the tradition which developed in Britain in the formative years of the Labour party, or in Continental Europe with the growth of the mass socialist parties up to World War I. Similarly the growth of mass communist parties in several European countries, in the aftermath of the Russian revolution, was not mirrored in the USA.

Not that there were no attempts to set up a workers' party in the USA, because there were, even very early on in fact. Many of the immigrants who came to settle brought with them the political traditions of the working classes of their own countries. Among them, were many political refugees who had fled Eastern Europe, Spain, Italy or Ireland, because of the repression aimed against socialist and anarchist activists in these countries. At the turn of the century, working class politics was very dynamic. But these recent immigrants were often cut off from the main body of the emerging American working class. Divisions due to language also made it difficult for them to join ranks in an effective way, even among themselves. Moreover they had to face a confident and ruthless capitalist class, which was used to destroying all obstacles in its way, whatever the cost, rather than to compromise, as the older European capitalist classes tended to do when enough pressure was applied.

The most successful attempt at setting up a workers' party was probably the meteoric transformation of Eugene Debs' Socialist Party into a national party, on the eve of World War I. By that time, the Socialist Party was present in every state of the USA. It had 120,000 members and many mayors and councillors in its ranks. Its publications included 13 daily papers, 298 weeklies and 12 monthlies. In the 1912 presidential election Debs, who ran as the party candidate polled 900,000 votes - a considerable result in those days.

However, under the wave of repression which came with the USA's involvement in the war, the Socialist Party found itself in a difficult position. Debs himself was jailed for his opposition to the war, together with many party activists. After the war the repression became even more vicious, in the wake of a large strike wave. The supporters of the Russian revolution, whether they came from the Socialist Party or the revolutionary-syndicalist movement, regrouped eventually to form the Communist party. But the pre-war momentum was lost. And the degeneration of the Communist movement under Stalin came too early to allow the fledgling American communist party to develop into a real force on a revolutionary basis.

Subsequently there were other circumstances in which a workers' party might have emerged. This was particularly the case in the second part of the 1930s, when a huge wave of militancy expressed the determination of a whole generation of workers to reclaim the ground lost to the bosses during the Depression, and with interest. This period was marked by powerful battles but although the capitalists did resist the rising militancy, the main obstacle in front of the movement was the absence of an alternative policy, that is a policy different from the reformist policy advocated by the leadership of the Congress for Industrial Organisation, the CIO, who led the movement.

In the end, the US working class movement remained under the domination of the machineries of the unions, which as early as World War I, and even more so after World War II, became entirely integrated into the machinery of the state through the Democratic party. And the idea that somehow workers and employers had an equal interest in boosting profitability, remained the prevailing line in the working class movement.

The union leadership and the bosses' attacks

This idea was the dead-end into which the leaders of the AFL-CIO, the US trade union confederation, continued to lead workers right through to the 1980s and on into the 1990s.

And yet there was no lack of will to resist among the working class. In 1978, for instance, when union leaders tried to get the miners to endorse new contracts which involved a cut in their health insurance and pension cover, they burnt these contracts and staged a strike which lasted 111 days, cutting that year's production by half - and they won. But this was the last strike won by a significant section of the working class. When in August 1980, the air traffic controllers tried to stage a national strike, Reagan sacked them and the strike was defeated. This defeat, in and of itself, was an important factor in giving the bosses enough confidence to take the risk of a confrontation by making large -scale cuts in workers' conditions.

Meanwhile in strongholds of the working class such as the car industry, the union leaders were busy advocating the need to help the bosses to boost their profits. Thus, in 1980, under the pretext that Chrysler needed to be saved from bankruptcy in order to preserve jobs, the car workers' union, the UAW signed the first big industrial contract to involve major cuts in wages and welfare provisions. In addition, by signing this contract, the UAW also signed away the two weeks paid holiday they had just won, while agreeing to several factory closures and a wave of redundancies.

The Chrysler contract became the normal pattern for wage contracts in the car and other major industries. With each contract, new "sacrifices" were demanded from the workforce, in the form of cuts in wages, jobs and conditions, under the pretext that this was the only way to save jobs. And the union leadership was all too willing to show their "responsibility" to the bosses by indulging in this "partnership", as John Monks would call it today in Britain. And this is a partnership that goes pretty deep. At Ford for instance, two years ago, the UAW paid for an advertisement on Detroit radio celebrating Ford products and the commitment of the workforce to ensure the highest quality against the company's competitors.

Despite everything, there were many instances of resistance to these attacks by workers. But they always remained isolated. Even when the union leaders did mount solidarity campaigns by providing financial help to the strikers and organising demonstrations against the company involved or even boycotts against its products, they never provided workers with a policy which would have allowed them to break out of their isolation.

Thus, in 1994, when some Caterpillar plants went on strike - and this was a long strike, lasting a year-and-a-half - other Caterpillar plants remained at work as did subcontractors, despite the fact that all of them were organised by the same union as the strikers - the UAW. It was not that UAW just failed to bring out the other plants. The point is that the UAW leaders chose not to call them out on strike in the first place and made no effort to generate any active support for the strike among these workers. So it was no surprise that the strike was defeated despite the determination of the strikers themselves. Whether it would have been possible to force Caterpillar to give some ground is another question, but the point is that the UAW did not even try, showing their own determination not to allow workers to measure their strength on any real scale.

When they were not busy condoning the bosses' attacks by championing the need to improve productivity, the union leaders indulged in crass nationalist campaigns. First, there was the AFL-CIO's campaign in favour of "buying American", during which UAW activists were seen smashing the windows of Japanese-made cars in Detroit's factory car parks. Then came the launch of NAFTA, the free-trade zone between the USA, Mexico and Canada. At that point union leaders embarked on an all-out campaign against the threat that cheap labour posed for "American workers'" jobs. More recently, the World Trade Organisation and China became the targets of similar nationalist campaigns. And what is common to all these campaigns is the same idea that underpins the "partnership" policy - namely that US workers and bosses have the same interests in defending profits.

The main consequence of the policy of the trade union leaders has been to split the ranks of the working class, to isolate one section from another, the workers in each company from those in its competitors, and to divert their attention away from the real issue - the parasitism of capital and the capitalists' greed. In a context where it would be indispensable to act collectively with a clear objective, in order to build a more favourable relationship of forces, such a policy can only cause major damage.

Moreover this policy obscures the fact that workers belong to the same social class with the same interests, totally opposed to those of the capitalists and that it is this opposition of interests, and nothing else, which is expressed by the bosses' on-going attacks. In short, this policy acts as an obstacle to the realisation that the working class is engaged in a social war against the bosses and that it can only win this war as a class.

What future for the USA and the world as a whole?

No-one can say how long the present period of economic growth will last in the USA, least of all the business commentators who, when they speak about it, sound as if they are saying their prayers. Because, for all the hype about the "New Economy" and other fashionable themes, these commentators have got a fairly good idea of how fragile their latest "boom" is. Just think of what they said when the NASDAQ, the index of the "New Economy"on the stock market, started its gyrations a few months back. They are constantly trying to reassure themselves that things are not about to collapse, that the rise in profits and share prices is going to carry on, etc.. This is how confident they are of the health of their crippled system.

Because the reality is that there cannot be any real expansion of the economy without a substantial expansion of its productive forces. So far the expansion of the US economy - or that of the much more limited British economy, for that matter - has only been based on the increased exploitation of labour. Whatever fairy tales they may tell about IT, computers and the "New Economy" - not to mention "e-commerce" - these only represent a tiny amount of the tangible value created in the economy as a whole. And no matter how fast digitalised hot air can circulate on the Internet, it still remains hot air. If some entrepreneurs eventually manage to make some profits out of it (which most are very far from doing up till now) these profits will only be a share of the value produced by the workers who make the communication equipment they use or the clothes or other commodities they sell.

In other words, all the evidence shows that the present US "boom" is just another of the "normal" blips which occur in capitalism's economic cycles, in this case, the third such cycle since World War II. The growth period may be longer than usual this time - and maybe this has something to do with the fact that the recession of the 1980s was rather deeper than previous ones. But in any case this growth period will come to an end eventually, if only because it cannot sustain itself for very much longer, if the purchasing power of the working population carries on falling. Another period of economic shrinkage will come. Then the problem will be to know how far down this will take the economy, and with it the conditions of the working class.

At present it is the US economy which is pulling the rest of the world behind it on the way to limited growth. But this growth has no future and it is only a matter of time before the US pulls everyone else down again into some kind of recession. And yet the US economy could play a very different role on a world scale. Its enormous natural and human resources, its powerful productive machine, its high scientific and technological level and its huge borderless territory, show just what immense potential this productive power could have if it served the world population as a whole.

Capitalism cannot be the future of the USA any more than it can be the future of mankind. In the capitalist framework the dynamism of the US economy and society is used to increase injustices and exploitation within the USA and in the rest of the world. The expropriation of the American capitalist class would make it possible, on the other hand, to use the tremendous organisational capacities of the US multinationals for the benefit of mankind. Indeed these multinationals have the means to assess both needs and resources almost instantaneously and they have the means to adjust production accordingly. It is only the existence of capitalist profit and the resulting economic warfare between rival companies which prevent these sophisticated worldwide machines from playing a constructive role for the benefit of all, thereby paving the way for a viable future, for the whole of mankind.

But the USA does not only have this powerful economic machinery. It also has the most powerful working class in the world - powerful in terms of numbers, diversity, culture and also simply because it has been shaped by the world's most powerful economy. The American capitalist class may have been rich enough to corrupt the trade union machineries and turn them into an appendage of its own state, but it cannot bribe a whole class.

Like all revolutionaries of the 20th Century, including Lenin and Trotsky, we have confidence in the potential of the US working class. Twice already in the course of the last century, first in the 1930s and then, although in a more limited way, during the black uprisings of the 1960s, the US working class has shown its capacity to rebel and to fight. But this was still only a brief glimpse of the energy that it would be able to put into the fight for the social transformation of the world. Up to now however, there has not been a revolutionary organisation which has proved capable of developing the potential of this working class. In the USA - just as in Britain- the future depends entirely on the re-emergence of a revolutionary communist current capable of winning the trust of the American working class in order to open in front of it the gates to a future worth fighting for.