Stunning Economic Implosion

The inability of the outdated capitalist economic system to provide for the needs of the people and to sustain itself has been exposed repeatedly throughout history.

However, 2020 is revealing just how grave and profound the failures and dangers of this exhausted system of advanced commodity production are. Even mainstream news sources cannot prettify the numbers.

On May 15, 2020 the Financial Times reported that, “U.S. industrial production contracted by the most in more than a century.”1 Retail sales also fell by the most on record. In addition, the month of May saw the most large U.S. bankruptcy filings in 11 years.2

Further, while capacity utilization reached an all time high of 89 percent in 1967, it hit a record low of 65 percent in April 2020.3 Nearly a 25 percent drop in 53 years. Capacity utilization is an important economic measure that refers to the extent to which a capitalist firm uses its productive capacity. In other words, many enterprises are not operating anywhere near 100% capacity.

Pending home sales have also fallen dramatically in the recent period. In a recent Press Release titled “Pending Home Sales Slump 21.8% in April,” the National Association of Realtors (NAR) stated that, “Every major region experienced a drop in month-over-month contract activity and a decline in year-over-year pending home sales transactions.”4 The NAR explains that:

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 21.8% to 69.0 in April. Year-over-year, contract signings shrank 33.8%. An index of 100 is equal to the level of contract activity in 2001.

On top of these grim figures:

The ratio of workers to total population fell 8.7 percentage points, the largest drop ever recorded, to 51.3%, the lowest level on record. The all-important labor-force participation rate, which measures the number of people working or actively looking for work, fell to 60.2%, the lowest rate in 47 years.5

From these and other tragic developments it is clear that the existing economic system is unable to develop in a smooth, balanced, stable, and self-reliant manner that brings security, peace, and prosperity to society and its members. It is obvious that the “free market” routinely wreaks havoc on the economy, society, and people.

It is absurd that today humanity lives in an advanced mass industrial society that uses the most advanced scientific-technical knowledge, is able to meet the needs of all ten times over, yet still fails to provide for billions worldwide.

The economy must be controlled by those who actually produce the wealth of society, not those who live off the labor of others and drain the economy of needed investments.

People should reject disinformation about the economy promoted constantly by the financial oligarchy. The aim of this disinformation is to hide the real context of what is going on so as to divert, confuse, and undermine people and their struggles for a better future. The problems and crises inherent to the capitalist economic system are not going to go away with some policy changes or new regulations. A new direction, motivation, and organization of the economy is required. Without a new pro-social direction and aim for the economy the rich will continue to get richer and problems will keep multiplying.

  1. Peter Wells. Plunge in US industrial and retail activity in April laid bare, Financial Times, May 15, 2020. []
  2. Gary Gordon. “Irrational Stock Prices Meet Exuberant Investors“, Seeking Alpha, June 3, 2020. []
  3. Trading Economics. “United States Capacity Utilization”, 1967-2020 Data. []
  4. National Association of Realtors.  Pending home sales slump 21.8% in April, May 28, 2020. []
  5. Jon Healey.  “Commentary: Unemployment rate may be even worse than it looks,” Akron Beacon Journal. May 12, 2020. []
Shawgi Tell is author of the book Charter School Report Card. He can be reached at stell5@naz.edu.. Read other articles by Shawgi.