By KENDALL GREGORY
The author is a member of Seattle Revolutionary Socialists and the Revolutionary Socialist Network.
At this point, most of the Left is occupied with activities around #BlackLivesMatter and police abolition activism in light of the murder of George Floyd in Minneapolis, and the most recent shooting of Jacob Blake in Kenosha, Wis. This is understandable, given the fact that the 2020 #BlackLivesMatter rebellion is the largest wave of U.S. working-class activism since the 1960s, and that the police are one of the most important obstacles to any positive political change in the U.S.
That said, the economic fallout from the current historic recession has not been addressed in any comprehensive or permanent way by the ruling class. The twin crises of mass unemployment and mass eviction have been met with piecemeal, inadequate, and temporary measures such as the extended unemployment benefits, stimulus check, various eviction moratoria, rent freezes, etc. While these have helped keep many working-class people afloat throughout the crisis, they are obviously not enough.
At this point it is clear even to the apologists of the status quo that, if the effects of the crisis were to be realized unmitigated, i.e,. if millions of people were to be unemployed, evicted, lose their income, etc., the result would be widespread immiseration and unrest on a scale even larger than what is being experienced right now.
The Left’s goal should be to build organization within the working-class, make political demands on the ruling class and their state, and hopefully, win. Doing so will require a political strategy and an understanding of the shape of the crisis.
Broad strokes: How bad is the current economic crisis?
The economic crisis we face now has no historical parallel, except perhaps the Great Depression. The recession began in February of this year, though it was already showing signs in the last quarter of 2019. In the first quarter of 2020, U.S. GDP fell by 4.8% on an annualized basis, and in the second 33%, compared to the maximum fall of 4.3% in 2008’s “Great Recession.”
Of course, as Marxists we understand that all capitalist economic crises ultimately result from the tendency of the rate of profit to fall. But it is important nonetheless to understand the specific historical factors that contributed to a particular crisis’ emergence. In this case, the signs were already present towards the end of 2019, with a slowdown in consumer spending, and the IMF reporting a “synchronized slowdown” in the economy.
Some other factors include: a preexisting corporate debt bubble; a Saudi-Russo oil price war, which left West Texas Intermediate oil (the U.S. standard for oil prices) at a low of -$37 a barrel; Trump’s trade war with China; and most visibly, the coronavirus lockdowns.
Some of the hardest hit industries include airlines, transportation, hospitality, entertainment, retail and restaurants. For example, in March of this year, U.S. airlines serviced 621,000 domestic flights; in April, they serviced 219,000, a drop of nearly 65%. On April 23, CNBC reported that Gap had stopped paying rent for its shuttered stores, amounting to $115 million in unpaid monthly rental expenses. The story was similar to many other retailers, restaurant owners, and hoteliers having trouble paying their rent, as their income had been eviscerated by the economic crisis.
Meanwhile, the concentration of wealth in the U.S. tech sector intensified during the economic crash. Amazon’s stock price hit $3000 for the first time; just a year prior, its stock price was $1800. Of course, it was not just limited to Amazon; a similar trend was felt throughout the industry, with the top five most important tech companies (Amazon, Apple, Alphabet, Microsoft, and Facebook) now comprising 20% of the stock market’s wealth.
National unemployment, by the numbers
Before we can discuss the current economic crisis’ effect on employment, we must discuss the conditions prior to the crash. Despite Trump’s rosy claims about the pre-COVID economy, all was not well. In November 2019, Cornell published a report exposing the marked decrease in job quality since the 1990s, and especially since the crash of 2008; the report ended by saying, “A republic that offers no better than this cannot long endure.” Real wages had remained stagnant throughout the economic recovery while the labor force participation rate continued to fall, meaning that the working-class’s total share of social wealth had continued to decline throughout the supposed “recovery.”
If all of this weren’t enough, life expectancy had begun to decline after 2014 in the U.S. for the first time in decades, mostly as a result of an increase in “deaths of despair,” such as alcoholism and suicide. In other words, the so-called “recovery” felt more like an extended recession for most average people in the U.S.
As usual with this recession, its resultant spike in unemployment is without equivalent. The BLS official unemployment rate skyrocketed from 3.5% in January to 14.7% in April, and the labor force participation rate fell to 60.2% in April from 63.4% in January. The spike in unemployment was so large that it overwhelmed many states’ unemployment insurance systems, leaving millions without unemployment benefits simply due to the backlog. As usual, people of color were disproportionately affected by the economic crisis, with Black unemployment peaking at 16.8% and Latinx unemployment peaking at 18.9% according to the BLS. The Human Rights Campaign, the largest LGBTQ advocacy group in the U.S., reported that LGBTQ workers’ hours had been cut disproportionately, with 30% saying they faced some kind of cut in their hours compared to 22% of the population at large.
The response from the ruling class has largely been insufficient to avert crisis. While during the initial stages of the crisis Congress passed the CARES Act, which gave a $600 a week boost to unemployment and cut $1200 checks to most Americans, these forms of help have ended and congressional negotiations over a second round of stimulus checks and unemployment help have stalled. Despite the Trump administration’s (and their attendant apologists’) insistence on a coming “V-shaped” recovery, the reality of permanent job losses is already apparent. The recovery is not coming any time soon, and indeed for the average person, may never come at all if recent history is any guide.
Evictions and foreclosures: How many people are at risk?
Again, prior to discussing how bad the housing crisis is after the recession, we must discuss the housing crisis prior to the economic crash. In September 2019, the White House’s council of economic advisers issued a report that counted the number of unhoused people in the U.S. at over 500,000 people. In June of 2019, CNBC reported that minimum wage could not afford a two-bedroom apartment anywhere in the U.S. Housing prices had hit an all time high in 2019, thanks to a shortage in supply over the years since the 2008 recession’s recovery began.
The housing shortage is a result of the drastic fall in investment into housing that took place after the recession of 2008. In the first quarter of 2006, investment into housing was 6.5% of GDP; by 2010, it had fallen to just 2.6%. It has slowly recovered to about 4% of GDP in the first quarter of 2020, still far below where it has been historically. The recovery in investment that has taken place has been in the sectors of least need, with surviving homebuilders remaining cautious about construction projects and largely producing housing at the more profitable, higher end of the market.
While the housing crisis is a nationwide issue, it is disproportionately concentrated in major metropolitan areas and the West Coast. For example, despite being 12% of U.S. population, California is home to an estimated 22% of the U.S. homeless population. San Francisco, Seattle, and Los Angeles have all declared a state of emergency over the number of unhoused people in their cities. California in particular has seen a dramatic increase in housing costs over the past decade when compared with other states. Finally, those who were unhoused or at risk of being unhoused were disproportionately people of color.
As we can see, housing was already in a state of crisis before this recession hit. What follows after the recession is not a new crisis but a deepening of an old one. That said, the scale of the crisis after the recession is particularly staggering from a statistical point of view, and without action from the federal government may become a significant source of unrest. To understand its scale, we must turn our attention to how each of the particular actors in the housing market are affected, and what their response is or may be.
We first turn our attention to homeowners, since their case in this crisis is simpler than that of the other actors in the housing market. As of June 16, 2020, about 4.6 million homeowners were in some form of nonpayment of their mortgages. Note that this number refers to the number of mortgages, not the number of people; assuming that a foreclosure displaces an average of three people, as many as 13.8 million people could be displaced. Many homeowners may be on some form of mortgage forbearance due to job or income uncertainty rather than an actual inability to pay, though we can assume that some of them are unable to make payments.
Some homeowners will be able to place as much as a year of missed payments at the end of their loan term, effectively increasing the their mortgage’s term. Others may have to make up lost payments over the next year, or will owe those payments in a “balloon payment” as soon as their forbearance ends. While the impact of this is still uncertain, ATTOM Data Solutions, a leading data analytics company in foreclosure data, expects foreclosures to double throughout the next year.
Renters are in a comparatively more vulnerable state. Whereas 4.6 million homeowners at most may face foreclosure, 12.6 to 17.3 million renter households (28.9 to 39.9 million people) face the possibility of eviction, comprising as much as 40% of all renter households. While homeowners have a few different options that permit them as much as a year to rectify their financial situation, renters have been protected by a patchwork of eviction moratoria, many of which have recently expired or provided only partial protection. While many of those evicted may be able to find housing through social connections or by moving somewhere cheaper, many renters will be rendered unhoused as a result of the crisis. Given the staggering numbers, it is not outside the realm of possibility that the number of unhoused people nationwide might double, triple or even more as a result of this catastrophic recession.
It is important to note the racial disparity in the populations of renters and homeowners. Homeowners are disproportionately white, and renters disproportionately people of color. The difference in response is not mere accident or just a result of property law, but the result of a systemically racist society. Even among renters, it is Black women in particular who stand out as most vulnerable, given their disproportionate rate of eviction when compared to population.
The ruling-class response has been to delay the full expression of the crisis for as long as possible with eviction moratoriums, hoping that somehow it will resolve itself on its own. This is delusional of course. U.S. renters owe $21.5 million in back rent, and in the current economy have little to no prospects of paying it; the landlords will not willingly forgive such a large amount of rent. Furthermore, the mortgage lenders will demand payment, the cities will demand their property taxes, etc. or the properties will be repossessed. A solution that acknowledges the scope and depth of the crisis is required, not a half-measure that simply pushes it down the road.
What can be done?
The good news is that the solution to this crisis does not require any new fancy theoretical developments in the field of economics or housing policy. Maintenance of eviction moratoriums, rent control, public housing, expanded unemployment benefits, etc. would all go a long way towards mitigating the worst aspects of the crisis. The bad news is that the ruling-class will never willingly agree to any of these measures, since they all have one thing in common: they impede profits.
However, this should not deter us. Somewhere between 15 million and 26 million Americans have participated in some form of protest during the #BlackLivesMatter rebellion, making it possibly the largest social movement in U.S. history. The unprecedented wave of working-class activism and militancy demonstrates that the working-class is willing to fight. In fact, protests in support of these demands have already taken place in Michigan, Texas, Florida, and elsewhere in the U.S.
Perhaps the most important demand to come out of the fight for economic justice during this historic recession is to cancel rent and mortgage debt. The beginnings of the movement around this demand, and the housing and racial justice that necessarily accompanies it, are already in place. For example, a measure allowing the cancellation of three months of rent has already been won in Ithaca, N.Y. Other campaigns to cancel rent and mortgage debt are already underway in California, Washington, and elsewhere. Without this debt cancellation, tenants and homeowners will face crushing debt burdens for years to come, for a crisis that they had no hand in making.
At this point, the most important action that the Left can take regarding these issues is to get involved in and support campaigns around these demands where they already exist, and raise these demands if they haven’t been already. While the depths of the crisis are worse than anything in recent memory, the moment presents us an opportunity to build a movement for lasting housing and racial justice. As Rosa Luxemburg’s famous quote goes, we are faced with a choice between barbarism and socialism. It seems barbarism is already upon us. It’s time we won socialism for a change.
Photo: Defender network.com