Wednesday, April 15, 2020
Trump calls on states to move quickly to reopen their economies
https://www.wsws.org/en/articles/2020/04/15/open-a15.html
By Barry Grey
15 April 2020
On Tuesday, President Donald Trump seemed to back off from his plan to establish a new White House “Opening Our Country” task force and instead announced that he would be teleconferencing with corporate leaders, politicians and all 50 state governors this week to initiate a back-to-work plan that would be implemented on a state-by-state basis.
Trump announced his stepped-up drive to force workers back to work, under conditions of rising infection and death tolls and an abysmal lack of testing and on-the-job health safeguards, at his daily coronavirus task force press conference. As he made his announcement, governors in the Northeast and the West Coast were joining together to plan out their own return-to-work programs.
The governors of seven eastern states—New York, New Jersey, Connecticut, Delaware, Pennsylvania, Rhode Island and Massachusetts—announced on Monday that they would work together to gradually loosen social distancing rules and reopen non-essential industries that had been closed due to the pandemic.
The governors of three West Coast states—California, Washington and Oregon—also announced a similar pact on Monday. All but one of the 10 governors, Charles Baker of Massachusetts, are Democrats.
The bipartisan character of the drive to reopen business without having brought the disease under control was underscored by presumptive Democratic presidential candidate Joe Biden’s op-ed piece in Monday’s New York Times, headlined “My Plan to Safely Reopen America.”
The Wall Street Journal on Tuesday congratulated both Trump and the Democratic governors for moving to lift the restrictions on profit-making. In an editorial headlined “Reopening the Economy, at Last,” it said:
“At long last our political leaders are considering how they can reopen the American economy they put into a destructive coma. Let’s hope this overdue process doesn’t devolve into another fight between governors and President Trump that will confuse Americans and slow the return to normal economic life.”
The editorial went on to complain that “The focus for weeks has been on the course of virus infections, the danger of overrun hospitals, and the death toll.”
In a similar vein, the Washington Post published an editorial with the headline, “The next phase: Can we find a way to begin reopening even as we live with the virus?” The newspaper’s owner, Amazon boss Jeff Bezos, has made billions off of the pandemic, with Amazon stock hitting a new record high on Tuesday.
At his Tuesday press conference, Trump barely sought to conceal in whose behalf he was pushing for a rapid return to work. He hailed the record surge in the stock market since the passage last month of the bipartisan multi-trillion-dollar corporate bailout bill, and predicted that the markets would not only recoup their losses from the near-shutdown of the economy and the explosive growth of unemployment, but would soon hit new highs.
He then listed dozens of S&P 500 corporations with which he would be consulting on Wednesday, including the top firms in agribusiness, banking, defense, energy, the hedge fund and private equity sector, the restaurant and food industry, transportation, telecommunications, hospitals, pharmaceuticals, health insurance, high tech and the professional sports leagues.
The total wealth of the CEOs with whom he will be plotting the back-to-work drive is in the tens of billions, enough to provide a significant number of the masks and personal protective gowns that are desperately needed by health care workers, grocery workers, logistics workers, transit workers and others for whom the lack of such equipment is fueling disease and death.
He said he would be consulting with “thinkers” from such right-wing institutions as the Heritage Foundation and the Hoover Institution, and named individuals including right-wing economist Arthur Laffer and the Iraq War conspirator Condoleezza Rice. On Friday he plans to meet remotely with religious leaders. On Thursday he is to meet with the governors in all 50 states to lay down the guidelines for the reopening of their states.
He did not mention a single doctor, public health expert or scientist in the long list of consultants.
Trump said different states would reopen on different dates, but he was convinced some would begin lifting restrictions even before May 1.
It is one thing, however, to announce a premature return to work. It is another thing to carry it out. The ruling class is well aware of the seething anger in the working class over the catastrophe that has been inflicted on it as a result of the incompetence and indifference of the entire political and economic system.
Workers have rebelled against being forced to work under unsafe conditions, with wildcat strikes and protests being organized by autoworkers, nurses, Amazon workers, grocery and Instacart workers and food processing workers.
The entire political system is being discredited, as trillions are funneled to bail out the financial oligarchy while nothing serious is being done to organize mass testing and provide needed hospital beds and ventilators. Nearly 17 million workers have filed for unemployment benefits over the past three weeks, and millions more have had their pay cut. The bailout bill has done next to nothing to provide income for workers who live paycheck to paycheck, resulting in the appearance of massive food lines across the country for the first time since the Great Depression.
The crisis has fueled tensions and conflicts within the ruling class and the state. The Northeast and West Coast governors have called for a gradual reopening of the economy and promised expanded testing to head off a new surge in infections and deaths. On Monday, Trump reacted angrily to their actions, declaring that governors had no authority to determine how the restrictions would be lifted, and that as president, he had “total authority.”
New York Governor Andrew Cuomo responded to Trump’s assertion of unconstitutional and authoritarian powers by declaring that Trump was not a king and the states had powers within the constitutional framework of the United States. However, far from mounting a defense of democratic rights, by the time of his daily press conference Tuesday morning, Cuomo was calling for a partnership with the fascistic occupant of the White House.
He said: “The president will have no fight with me… This is no time for politics, and it is no time to fight. I put my hand out in total partnership and cooperation with the president. If he wants a fight he’s not going to get it from me.”
Trump seemed as well to have had second thoughts about provoking an immediate constitutional confrontation with the states. At his Tuesday press conference he did a 180-degree turn and said each state would decide for itself how and when to reopen.
The Democratic governors in no way represent a progressive or democratic opposition to Trump. Workers in their states will face brutal and deadly conditions if they are forced back to work without a massive deployment of resources to ensure their safety. At the same time, millions of workers who have been laid off will never get their jobs back, and many will he hit with wage cuts and speedup.
States and cities across the country are preparing massive cuts in schools, social services, pensions and public employee jobs to impose huge deficits from lost revenues on the backs of the working class. New York City Mayor Bill De Blasio has already announced a hiring freeze and budget cuts, and Detroit Mayor Mike Duggan has threatened a return to bankruptcy and the imposition of a new emergency financial manager. Both are Democrats.
For all the Democrats’ talk of a “safe” reopening of their state economies and the need for sharply expanded testing, isolation, contact tracing and care of those infected, they have done nothing to put these conditions in place, and have no intention of doing so in the future. This is because the corporate oligarchy is implacably opposed to the diversion of the required resources from their money-mad pursuit of personal enrichment.
Talking out of both sides of his mouth, Cuomo said on Tuesday that his group of governors in the Northeast would begin to reopen businesses only under conditions of mass testing. He then said: “How do you start to do the massive testing that we’re going to have to do here? And that we don’t have the capacity to do today? The capacity does not exist.”
World economy to take biggest hit since Great Depression
https://www.wsws.org/en/articles/2020/04/15/imfr-a15.html
By Nick Beams
15 April 2020
The International Monetary Fund has forecast that the world economy is entering its worst slump since the Great Depression of the 1930s and the loss of output will “dwarf” that suffered in the global financial crisis 12 years ago.
Even on the assumption that the second quarter records the sharpest downturn, followed by a recovery and then a rebound next year, the IMF said the world economy will lose $9 trillion in output over 2020 and 2021. This is an amount equivalent to the combined economies of Japan and Germany, the world’s third and fourth largest respectively.
It said under the assumption that the pandemic and the required containment measures peak in the second quarter for most countries, global growth would fall to minus 3 percent this year, a 6.3 percentage fall from the forecast issued in January.
This “major revision over a very short period” made what the IMF has called the Great Lockdown the “worst recession since the Great Depression, and far worse that the global financial crisis,” IMF chief economist Gita Gopinath wrote in a comment on its World Economic Outlook report issued yesterday.
Gopinath said the IMF forecasts were grounded in its “baseline scenario” in which it anticipated global growth would rebound to 5.8 percent next year. But even if that did take place, the recovery would only be “partial,” with the level of economic activity below that projected for 2021, before the virus hit.
However, given the uncertainty surrounding the pandemic, the IMF has projected more adverse scenarios. The outbreak may not recede in the second half of the year, leading to longer periods of containment that would worsen financial conditions and a further breakdown of global supply chains.
Under these conditions, Gopinath wrote, “global GDP would fall even further: an additional 3 percent in 2020 if the pandemic is more protracted this year, while, if the pandemic continues into 2021, it may fall next year by an additional 8 percent compared to our baseline scenario.”
The IMF has predicted a contraction of growth in the advanced economies of 6.1 percent with emerging and developing economies, excluding China, expected to experience negative growth rates of between 1 percent and 2 percent in 2020. Income per capita will fall in over 170 countries.
The actual falls could be steeper than estimated by the IMF at this point, with the forecasts of private sector organisations pointing to an even larger contraction. In recent years the IMF has had to revise down its forecasts amid the marked slowdown in the world economy that had developed well before the coronavirus shock.
An example of the possible depth of the collapse was highlighted in a report by the UK Office for Budget Responsibility, also issued yesterday. It said if the lockdown of the British economy proceeded for three months then it faced a 35 percent plunge in the second quarter.
It said this was not a forecast but should be taken as a “reference scenario” because it could not predict how long the restrictions on economic activity would need to be maintained.
However, if they stayed in place, education, accommodation and food services would be the hardest hit, with contractions of 90 percent and 85 percent respectively. Similar estimates have been made by government statisticians in France.
The IMF said multilateral cooperation was “vital” for the health of global recovery. But precisely the opposite is taking place.
In a comment on the IMF report, Financial Times economic columnist Martin Wolf wrote that the world was confronting the “biggest economic disaster since the Depression of the 1930s.
“The world has come into this moment with divisions among its great powers and incompetence at the highest levels of government of terrifying proportions.”
He noted that the “negative-sum economic nationalism that has driven Donald Trump throughout his term as US president, and has even emerged within the EU, is a serious danger… If the world economy is broken apart, as happened in response to the Depression, the recovery will be blighted, if not slain.”
Wolf cited the conclusion drawn by the Peterson Institute for International Economics in Washington which stated: “Put simply, in the COVID-19 pandemic, lack of international cooperation will mean that more people will die.”
But just as the insatiable drive for profit via financialisation has undermined public health systems around the world, so the division of the global economy into rival nation-states and great powers is provoking a struggle of each against all. This is rapidly rendering any international collaboration a dead letter.
The IMF also issued a warning about the state of the global financial system saying it had already felt a “dramatic impact” and “further intensification of the crisis would affect global financial stability.”
The massive injection of money by the world’s central banks, amounting to at least $6 trillion, along with their indications of a readiness to do still more, has stabilised markets in recent weeks.
But signs of stress have emerged in major short-term funding markets, including the global market for US dollars. Less developed economies have been hardest hit, experiencing an outflow of about $100 billion, the largest on record.
Major markets could also be impacted if the spread of the pandemic required further containment measures exacerbating the COVID-19 shock.
Asset managers facing large outflows could be forced to sell into falling markets, accelerating the decline. Leveraged investors may face further margin calls, aggravating selling pressures.
“As firms become distressed and default rates climb higher, credit markets may come to a sudden stop, especially in risky segments like high yield, leveraged loan and private debt markets. These markets have expanded rapidly since the global financial crisis, reaching $9 trillion globally, while borrowers’ credit quality, underwriting standards, and investor protections have weakened,” the IMF stated.
In other words, the consequences of the policies of central banks since the global financial crisis are coming home to roost. The continuous supply of ultra-cheap money to enable the continuation of the very same speculation and parasitism that produced the 2008 crash has created the conditions for an even bigger disaster.
The IMF noted that banks have more capital and liquidity than they did 12 years ago but they could be tested in the face of a “sharp slowdown that may turn out to be more severe and lengthy than currently anticipated.”
Measures of bank capitalization based on market prices were now worse in many countries than in 2008, giving rise to a concern that “banks and other financial intermediaries may act as an amplifier should the crisis deepen further.”
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