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US faces a perfect storm on all fronts

After the devastation delivered by a perfect storm, the prospect of the United States falling off a “fiscal cliff” within two months is not one that America’s ruling political and corporate elites are looking forward to with any relish.

With next week’s presidential and general elections on a knife-edge, the economic future is as unpredictable as the super-storm that has wrecked large areas of the east coast and shut down New York.

While the media coverage of the impact on the United States is wall to wall, you should know that storm Sandy destroyed 70% of the crops in southern Haiti, still far from recovered from the 2010 earthquake, and caused widespread deaths of livestock. Jamaica, Cuba, the Bahamas were badly damaged too.

The US government will, of course, print the billions needed to repair the country’s infrastructure and get transport moving again, the aforementioned Caribbean nations will stagger on until the next storm arrives, no better prepared in the future than this time around.

Even in New York, however, the gross inequality that is the feature of the city and many other places across the country, showed itself in the storm. As Reuters’ David Rohde reported:

There were residents like me who could invest all of their time and energy into protecting their families. And there were New Yorkers who could not. Those with a car could flee... But the city’s cooks, doormen, maintenance men, taxi drivers and maids left their loved ones at home.

The city is the most economically divided it has been in a decade, according to the New York Times. Over 20% of the city is in poverty. In Manhattan, the wealthiest 20% made $391,022 a year on average. The poorest 20 percent made $9,681. Manhattan’s richest fifth made 40 times more money than its poorest fifth. Only a couple of other countries in the world in sub-Sahara Africa display such inequality.

Manhattan is the home of the New York Stock Exchange which will open again today. Whilst eight million are without power, and likely to remain so for days, the show must go on.

But the so-called fiscal cliff is looming large. This is a combination of expiring tax cuts coupled with mandatory spending reductions by the federal government totalling some $600 billion. Unless Congress can agree a deal – which seems most unlikely – the cuts will automatically kick-in on December 31. Many corporations have postponed investment decisions to see what happens.

The uncertainty gripping the economy is matched by the certainty that more extreme weather events will hit the country. One meteorologist, asked how a storm could do so much damage, ruefully explained that in addition to the full moon and high tides, Sandy itself had been driven off its northward course and onto the coast by two weather fronts moving on opposing paths. Crucially, rather than losing momentum the storm had picked up energy from the sea warmed as a consequence of the changing climate.

Earlier this year, scientists calculated that fossil fuel producers intended to extract reserves which would, by mid-century, generate carbon dioxide emissions five times greater then the level considered “safe” to prevent a 2 degree rise in global temperature. So Sandy’s impact is just a small indicator of the much worse results we can expect to see if current economic, social and political relations are allowed to continue.

Priorities have to change if civilisation is to find a way forward. Capitalist logic, driving in two opposing directions, stands in the way of progress. A “return to growth” is essential for profitability, but overcapacity must be eliminated to make it possible. That’s why the wages of US workers are being driven down and the living standards of many Afro-Americans are lower than ever. Whoever wins next Tuesday, it won’t be the average American.

Gerry Gold
Economics editor
31 October 2012

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