By Ding Gang
When I went to New York recently, I met two friends working at Wall Street. I found they were both happy and worried, happy for their expected bonuses this year and worried about US economic prospects.
Wall Street is starting to make money again, which should be a good thing for the US. But my friends believe that in the context of the whole US economy, it’s not the time for Wall Street to be rolling in profits. If it does, it’s making money through financial games, not through investing in labor – and, in particular, in US manufacturing.
According to my friends, many banks have obtained government money, but they invest the money in the stock market or even deposit cash at the Federal Reserve, rather than providing loans to enterprises and helping them expand production. Federal Reserve data shows that in the first half of this year, the total cash deposit of banks at the Fed has reached $1 trillion.
The US government has invested a lot of money to stimulate economy, but a clear sign of US economic recovery should be that companies begin to make money, expand their business and recruit more staff. If there is no significant improvement in these aspects, the government’s stimulus policy has not really promoted enterprise development and the money is probably still in the hands of Wall Street financial predators. This is why my friends are worried about the future prospects of the US economy.
Like the banks, the US companies are not lacking cash. According to Federal Reserve statistics, the S & P 500 companies jointly hold $1.8 trillion in the first half of this year, far more than they need.
This data can only show that US companies do not intend to respond to Obama’s call for domestic investment and production expansion in order to promote employment. They are waiting while looking for better investment opportunities that may not come from the US.
It’s precisely because some US banks and enterprises haven’t taken action that the unemployment rate continues to rise. In November, the US unemployment rate remained at 9.6 percent for the fourth consecutive month, which is also the 16th consecutive month of it remaining at 9.5 percent, the longest period since records began. The most severe economic recession since the 1930s has caused 8.4 million people to lose their jobs.
American capitalists of course love the country, but capital doesn’t always love the country and it loves profits. Capitalists are eventually dominated by capital, otherwise there will be no capitalists. This is the biggest reality of capitalist politics with no exception.
Therefore, I am afraid it is not realistic to expect that the US investors will follow the requirements of Obama’s administration and draw back the capital invested in China or other emerging economies to set up factories in the US.
In fact, the Obama’s administration’s determination to improve the US manufacturing sector has natural anti-globalization tendencies, because the capital will always flow to the places with low labor costs, high level of research and development, rich human resources and large market. This is the reality the US economy is facing today. Globalization, driven by US capitalists, ultimately forces the US to taste the bitter results.
Will US manufacturing make a comeback? Yes. But not now, nor can it be realized by one or two US government stimulus packages. Perhaps there are only two ways, either lower the price level of labor, that is, reduce wages and benefits, or patiently wait until the labor price levels in China and other emerging economies rise to a certain level.
Both ways are painful, but they reflect the inevitable aftermath of the formation of a global market.
The author is a senior editor with People’s Daily. email@example.com