It Will Take More To Appease The Economy Than Sacrificing Workers
To state the obvious, the COVID-19 catalyzed economic crisis is far from over. It could be argued it’s barely even begun. For all the pain and difficulty that working people are currently experiencing, the real impacts have yet to be felt at the commanding heights of the economy, regardless what market analysts and those in power might say.
While the massive $1.5 trillion stimulus package, and the unprecedented ~$5 trillion Federal Reserve balance sheet have shovelled mountains of cash into the fire, these measures are at best a gesture of class solidarity by those in power before the inherent cannibalistic tendencies of Capital can no longer be repressed.
These gestures towards bailing out capital and saving the “right” people at the expense of the “wrong” people have quickly broken down to display the internal fault lines within the capitalist class itself. The traditional alliance between the petit-bourgeoisie and the actual masters of the world is being unilaterally broken, although your small business owners haven’t fully accepted or yet understood that fact.
Large publicly traded companies have been claiming the emergency loan funds offered by the stimulus package aided by financial institutions like JP Morgan Chase that prioritized their largest customers at the expense of their smallest. Funds for emergency loans to small businesses allocated to the SBA are running out, and will likely not be replenished in the foreseeable future.
Small business owners are “shocked” and “angry” that such funds instead went to massive chains like Shake Shack. They’re quickly receiving a crash course on Capitalism in Crisis, and their belief that their “hard work” would be equally valued and lauded in a time of catastrophic economic calamity as it is when the line goes up shows just how deep their ideology goes.
While small businesses face an extinction level event, and the likely proletarianization of tens of thousands so-called middle class business owners, the blood soaked god of commerce still demands yet more sacrifices. The capitalist class is all too happy to oblige.
In times of crisis, when the rate of profit has fallen dramatically, and the capital investment necessary to extract a profit has risen in the face of increased efficiencies, the end result is necessarily bankruptcies and consolidation.
The weakest of two US industries in particular have been marked for the ritual sacrifice, cannibalistic consumption at the hands of their erstwhile class allies. Brick & mortar retail, and energy.
Both retail and energy have been the beneficiaries of the most recent “expansion” in spite of their inability to compete or grow meaningfully without interventions on their behalf. Retail has had its demise predicted for years on end, and domestic energy production – largely from fracking – hasn’t really been profitable outside of times where oil prices have been artificially inflated.
Both industries struggle to maintain the massive capital investments required to continue doing business by carrying enormous amounts of debt that they are now discovering they will be unable to make payments on. For retail, especially department stores, this is due to apparel sales being down nearly 50% and total retail down 8.7% since the beginning of the COVID-19 crisis. For energy, it’s the massive drop in the price of oil, far below the price per a barrel targets most companies require.
As a result, dozens of companies across both industries now appear to be on the verge of collapse. While layoffs, Chapter 11 Bankruptcy, debt reorganization, and a variety of other tactics may keep them afloat just a bit longer, for many the writing’s on the wall.
For retail, as many brands have already sold off their vast real estate holdings and turned to renting, the only assets of value they still hold are their existing inventories and their brand. With an incredibly uncertain future for in-person shopping the likelihood that all but the most storied are simply shuttered for good is high. Those with names that have cache will likely have their brands sold off merely for the value of the name, and retail stalwarts like Neiman Marcus or Lord and Taylor may soon be offering collections exclusively on Amazon, or be owned and operated by the likes of Walmart.
Shale and natural gas production will face a slightly different fate. Their brands are already largely anonymous. Thousands of wells, large and small, were held by thousands of companies, large and small. The innumerable petty fracking millionaires will be wiped out or will cash out, but that doesn’t mean their wells will be shuttered. Instead, the fractured fracking picture will gradually be centered in an ever smaller number of hands. The existing oil and gas giants will grow even larger as they swallow the upstarts. Economies of scale will be leveraged to take the flagging domestic energy sector into safer waters. What emerges after the bloodbath is through will be larger, stronger, meaner, and more powerful than ever before.
It’s easy to joke about living in a monopolistic corporate dystopia, but we’re inching ever close to just that. The tendency of the rate of profit to fall won’t cease any time soon, and as crises become more frequent consolidation of wealth and power in industry and at the individual level will continue to accelerate. The divides within society will only become more stark as the 1% vs the 99% becomes less a catchphrase and more of a reality. Before 2008 it was closer to the 15% vs the 85%. After 2008 it was closer to the 10% vs the 90%. After 2020 it will be worse as the greatest upward transfer of wealth, possibly in human history, is carried out.
Who knows if today’s small business tyrants will learn anything as their wealth is syphoned off and their dreams scrapped for parts. Who knows if the 20 something Reddit Rand disciples whose retail jobs are never coming back will learn a damn thing. Is it possible that today’s pain will become tomorrow’s potential?
Really, in all of this there’s only one guarantee. The rich will become richer, and those with real power more powerful. Anything and everything else is contingent. Personally, I think we could organize one hell of a contingency.
Jean Krill is is the co-editor and co-founder of Zero Balance. His writing navigates the many disparate visions of a radically better future.