Issue 255 of SOCIALIST REVIEW Published September 2001 Copyright © Socialist Review

The Walrus

Nothing but blue skies

The weightless economy is falling to earth in the US says The Walrus

Among the many interesting discoveries to have emerged since the world economy started to slip towards skid alley is that most leaders of the free world seem pretty much stumped as to what is going on. According to the New York office of the Financial Times, 'Companies that spent much of the 1990s boasting about "the vision thing" are suddenly complaining about a collective 'lack of visibility'...the number of companies that have blamed what used to be a weather condition...has exploded in the past six months.'

Our very own Tony Blair's uncanny response to this 'fog of uncertainty' has been to invite former line inspector at the BBC John Birt back on board to do a bit of 'blue skies' thinking, which he will presumably jot down on his clipboard. But it might take a bit more than even Birt's lofty presence to dispel the gloom. One of the market analysts in New York told the Financial Times that lack of visibility is not just an excuse. He couldn't think of anyone who had a clue where the economy was going, including the 'wizard behind the curtain', Alan Greenspan, chairman of the American Federal Reserve.

One sure sign of where it is heading, though, is that the first class passengers are halfway into the lifeboats before the rest of the company and crew have even heard of the iceberg up ahead. Everywhere you look, top company executives have been doing some very deft 'blue skies' thinking of their own to make sure that any risk they might be exposed to is kept to the bare minimum, cashing in gigantic share options and bonus payments regardless of the corporate plight.

At the same time as all this is going on, we find that 'July was a firecracker month for redundancies' in the US. In one month a record 205,975 jobs were cut, taking the total to almost 1 million for this year alone. A way above average share of these job losses has of course fallen to the former sunshine state of California, where the scale of cutbacks got so bad a couple of months back that the state authorities considered encouraging redundant workers to hitch up their wagons and head back east--away from the high-tech dustbowl that is Silicon Valley.

At the start of August, Silicon Valley paper the San Jose Mercury News reported that 'after five years of turbo-charged growth, the tech-dominated economy here is still plunging toward a bottom', and another observer reported that 'here in California, the engine of telecoms and technology, we are experiencing a forest fire of devaluations and write-offs of assets and equipment which apparently has no bearing on real life at all'. The kind of firms being affected are Hewlett-Packard, Cisco Systems, and JDS Uniphase, a major producer of optical circuitry for the internet.

The idea that none of this seems to have much bearing on real life is almost the identical flipside of the way most sensible souls regarded the mania of only a year or two back, when shedloads of moolah appeared to be available to any Tom, Dick or Harriet eager to set up a website. Most of this cash, by the way, came straight out of workers' pension funds--a scandal which the FT has now started to discuss in the same kind of category as the Dutch Tulip Mania of the 17th century and the South Sea Bubble of the 18th. The idea that this new economy was something unique and entirely divorced from the real economy was routinely and seriously discussed in terms of the 'weightless economy', an almost spookily convenient incarnation for the troupe of postmodernist tosspots who currently surround our very own prime minister.

What is coming out now is that, far from being 'weightless', the impact of the collapse of the new technology sector on economies and people around the globe is very heavy indeed, dragging all other sectors to the edge of the precipice virtually single-handedly. In the past year, for example, it is estimated that the combined losses clocked up by major telecoms companies in Europe are so enormous (around £750 billion) that they outmatch the assets of two national economies (Switzerland and Finland) put together.

And, as the Financial Times points out, for all the talk about a 'weightless economy', the information age requires an awful lot of infrastructure in the form of cables, networks, PCs, microchips and the like. In fact, it seems that one of the few times we ever hear workers being mentioned on the news or get to know anything about the factories they work in is when companies tell us that they are going to be shut down. The rather obvious result in Japan over the last few months has been wholesale cutbacks in semiconductor and microchip production by firms like Hitachi, Fujitsu and NEC, and the worst collapse of the Nikkei index since the one in December 1984.

Toshiba has been forced to shut down a semiconductor assembly line for the first time ever, at Yokkaichi in central Japan, as a direct result of which it has also needed to lift a supposed 'taboo' on sacking the entire workforce, regularly promoted in the west as one of the benefits of working in partnership with management. It is also widely predicted that, as a result of the closure at Yokkaichi, Toshiba's only US chip plant, at Manassas in Virginia, will also need to shut.

In the UK it has already fed through bigtime in the decision by the mobile phone company Motorola to cease production at one of its main Scottish plants, and by the American computer company Gateway to shut down all its operations in the UK and Ireland, including production plants and retail outlets.

A less obvious consequence has been the impact of the slowdown in semiconductors on a company like BOC, formerly British Oxygen. Apart from its usual job of supplying gases to manufacturing industry, it turns out that BOC also supplies vacuum equipment to the semiconductor plants. No doubt about the obvious solution though--about 1,500 workers would need to be sacked while the bosses waited on a recovery in the market, which the company executive, Tony Isaac, incidentally does not expect will happen until at least the second quarter of next year.

Tony Blair should know this bit first hand, because there was a picture of him in the papers at the start of his summer break in Mexico, shaking hands with workers at BOC's biggest factory in the country, no doubt on the invitation of the anti-capitalist works committee. Although it produces a lot of gas, just like Tony Blair, the BOC plant in Mexico isn't weightless either. It cost $1 billion to build, covers an area of 75 acres, and pipes an estimated 1 million cubic feet of pure nitrogen to the oilfields 50 miles away off the Gulf of Mexico. Naturally enough, it has been built slap-bang in the middle of a site of natural beauty.

The Walrus

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