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Toward an Understanding of Today's Economic Terms

By Ed Mead

We all hear so much about economic indicators these days, but do any of us really understand anything about them, or what they mean? How important are terms like the Consumer Price Index, Balance of Trade figures, Total Money Supply, Private Housing Units Started, Industrial Production, New Orders Durable Goods, the Prime Rate, Gross National Product, Unemployment statistics, and many other esoteric forms of financial jargon? Which of these terms are important, and which are merely smoke being thrown in our eyes by the government in an effort to conceal the actual state of the national economy? Today, while the economy is in such a mess, it is important for people to have some minimal grasp of existing economic realities. I do not claim to be an expert in these matters, although I can share with you some of the conclusions I've reached as a result my observations and experiences.

All of the terms mentioned above, while certainly of some minim al value, are basically useless when trying to get a firm grasp of the shifting trends in the nation's economic health. One of those figures or another may go up or down, but they do not tell us a whole lot about how things really are. There is one figure, however, that does better than all the rest, and it is one you seldom hear mentioned. The term is industrial or manufacturers' inventories. If you keep an eye on this figure, then you will have a good feel for the direction in which the economy is moving. This may at first sound overly simplistic, so let me explain it in a little more detail.

Strange as it may seem, one of the central problems of capitalism is that it is too efficient. It has developed the nation's productive capacity beyond the limits of the American people to consume all it produces. This problem is called "over production." Once domestic markets are saturated, manufacturers seek foreign markets, where they enter into conflict with capitalists from other industrialized nations who are experiencing the same difficulties and are seeking to capture these same foreign markets. What is. called competition on the domestic level becomes inter-imperialist rivalry when done on the international scene. It leads to war.

Anyway, getting back to the problem of over production, the factories are so efficient that they produce more than can be consumed. So inventories pile up, workers are laid off, factories close down, etc. Farmers bury truckloads of produce and dairy men dump milk into the ground rather than sell it at a loss, because there are too many of these items on the market. This is taking place while poor people are starving. They go hungry while there is too much. The crisis is one of over production, and it is endemic to the logic capitalism.

So the figure to watch is production inventories. If they are high, then idle productive capacity will also increase, as will unemployment. Things like new housing starts, the ups and downs of the stock market, the prime rate, and so on, do not go to the very heart of the problem. Figures on manufacturers' inventories do.

Where are inventories now? They are growing. The big three auto makers are laying off workers; their lots are filled with unsold cars - their inventories are high. Boeing is laying off thousands because there are too many airplanes. Pan American and TWA are just two of the major airlines who have recently went bankrupt. It is the same all over the country, all over the capitalist world.

The competition over auto sales is so intense that the U.S. ruling class has stooped to using racism against the Japanese in an effort to get Americans buying what many feel are inferior domestic cars. And there's a bill in Congress the would give U.S. citizens a two-thousand dollar tax break for buying an American rather than a foreign car. That's welfare for the rich, like awhile back when the government bailed out big companies like Penn Central Railroad and the Chrysler Corporation (not to mention some of the more recent and even more blatant examples, like the savings and loan bail-out your tax dollars are being made to pay for).

So watch those inventories, and from there you will have some measure of insight into the relative importance of other economic statistics, such as unemployment rates and the percent of utilization of the nation's productive capacity. Bourgeois economics can be better understood by simply learning to distinguish the forest from all those mystifying trees.

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