From today's Sacramento Bee:

Sales of new cars and light trucks in California fell a whopping 19.1 percent in the third quarter from a year ago, according to a report released today.

The California New Car Dealers Association said its industry has been "turned upside down" by the credit crunch and general economic downturn. "Clearly this is not a prescription for a vibrant new vehicle market," the report said.

It was the latest evidence of a significant recession.

Mind you, the recession has just begun. There are between 7 and 23 more months to go, and possibly more, depending upon whether you believe the recession will be short, moderate or lengthy. Despite the loss of market share to Japan, the automobile industry remains the backbone of many communities. It absorbs a lot of semi-skilled labor that would have otherwise been paid much less, and therefore unable to live a middle class lifestyle. It has formed a critical component of consumption in an American economy that has fueled growth around the world.

With rumors abounding that GM and Chrsyler are about to merge, or, alternatively, that Ford or GM or Chrysler or any combination thereof must file bankruptcy, the future, at least within the US, looks bleak. At best, a downsized industry producing fewer vehicles, with many of them manufactured elswhere. At worst, an industry considered American in name only, with nearly all vehicles and parts manufactured and assembled outside the country, with the exception of plants operated by Japanese companies. GM is already seeking a $5 Billion loan, possibly for the purchase of financing a Chrysler merger.

The contraction, and possible eradication, of the domestic automobile industry will be an enormous socioeconomic development. If not for a crisis that engulfs the entire neoliberal capitalist world, it would be the domestic center of attention. It will accelerate the sub-proleterianization of America, hollowing out middle income consumption through deindustrialization. Foreclosed out of their homes, discharged from their jobs as plants are permanently shuttered, along with others in businesses that rely upon them, many will find themselves constituting a new floating population with no personal and economic security. The union movement would experience a devastating, if not fatal, blow.

It is hard to suppress thoughts about one possible solution: another war, much larger in scope than the ones launched by Bush, a war instigated for the purpose of utilizing the excess industrial capacity within the US economy. No doubt, an extreme solution after all else fails, but, so far, the all else hasn't been very effective, has it? If forced to choose between more egalitarian policies that would increase demand going forward, and a militarism that would present the allure of preserving existing inequalities and hierarchies of power, while employing people within the military and armaments plants, which one do you believe that the elite will choose?

Labels: American Empire, Credit Crunch, Death of Detroit, Global Recession, Imperialism, Neoliberalism, Sub-Proletarianization of America, Unions, War

American Leftist was ahead of the curve in regard to the anticipated economic pillaging of war ravaged Lebanon by international lenders. Now, Asia Times Online has discovered the story:

On Thursday, the International Monetary Fund (IMF) said the damages could reach $3.5 billion or more for infrastructure alone.

"We have heard of preliminary estimates of $3.5 billion in infrastructure damage, to which one needs to add the impact of the massive displacement of the population, the exodus of many professionals, and possible private sector bankruptcies," the IMF's representative at the Stockholm meetings said in a statement.

At this rate, Beirut will most certainly continue to turn to international lenders and donors for help with reconstruction for a long time. And this, debt watchers say, will in turn plunge the country into greater debt.

World Bank figures show that Lebanon was already up to its neck in debt - some $22.2 billion - even before the war. For a country of only 3.5 million people, the smallest Arab nation, it is a colossal burden.

"What was already a difficult budgetary and debt situation has been made much more precarious by the conflict," the IMF said. Government debt stood at 175% of gross domestic product (GDP) at end-2005, one of the highest ratios in the world. "The conflict has made matters much worse," the IMF said.

The country's main creditors are Saudi Arabia and France. Both have pushed for a neo-liberal set of policies in Beirut that led to the privatization of pubic assets and, critics say, the empowerment of local elites and foreign companies at the expense of the middle classes and the poor.

The European-based Committee for the Abolition of Third World Debt (CADTM) notes that in 2004, Lebanon paid out $4.4 billion to service its external debt and warns that new borrowing will bring further pressure from rich nations and international financial institutions such as the IMF.

"This implies another increase in its debt and in new economic measures of structural adjustment which accompany it," said Éric Toussaint and Damien Millet of CADTM in a brief assessment of the country's new needs. "Therefore, the Lebanese people are going to have to pay very dearly, in the years to come, for consequences of this war inflicted by Israel in violation of international treaties governing relations between states."

Yes, new economic measures of structural adjustment. Let's look to that old friend of the blogger, wikipedia, for more information:

Structural Adjustment Programs (SAP) are loans from the IMF given to a nation with certain conditions. Nations are required to follow these conditions for approval of the loan. These conditions are technically known as "conditionalities".

Some of the conditions commonly are:

Cutting social expenditures, also known as austerity,

Implementing user fees in basic services such as education and health,

Focusing economic output on direct export and resource extraction,

Devaluation of overvalued currencies,

Trade liberalization, or lifting import and export restrictions,

Increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets),

Balancing budgets and not overspending,

Removing price controls and state subsidies,
Privatization, or divestiture of all or part of state-owned enterprises,

Enhancing the rights of foreign investors vis-a-vis national laws,

Improving governance and fighting corruption.

Perhaps, wikipedia has a sense of humor, as it placed improving governance and fighting corruption at the bottom of the list. Certainly, this has never been a priority of foreign lenders in the past, if anything, they have preferred inept governance and pervasive corruption as a means of procuring assets at firesale prices, securitizing them and then transferring the proceeds out of the country, as they have done numerous times in countries like Mexico, Russia, Indonesia, Argentina and South Korea.

In any event, it appears that Lebanon, like Iraq, constitutes a new model of primitive accumulation whereby lenders seize upon opportunities created by the destruction of countries through conflicts initiated by the United States or its allies, like Israel. With the depressed commodities prices of the 1980s and 1980s, and the economic distress that they generated around much of the world, a fond, distant memory for the loan officers of global finance capital, they are making the transition to something more straightforward and crude, military neo-liberalism, as described by the Retort collective. Meanwhile, Hizbollah, and, probably, in the background, Iran, rebuild homes, hospitals and schools.

Labels: IMF, Israeli/Lebanese/US War, Lebanon, Neoliberalism, War