Why such a fuss about the dollar?

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Staff: Paul Colvin, May May Gong, David Kirschner, Hayden Perry, Socialist Action (ISSN 0747-4237) is published monthly for $8 per year Francisco, CA 94110. Second-class postage is paid at San Francisco, Calif.

POSTMASTER: Send address changes to Socialist Action, 3435 Army RATES: For one year (12 issues)—U.S. 2nd Class: $8, Ist Class: $12; Canada and Mexico 2nd Class: $12, 1st Class: $15; All other countries 2nd Class: $15, 1st Class: $30. (Canada money orders or checks should be in 2 SOCIALIST ACTION DECEMBER 1988 What is the great to-do about the dollar? To most of us, the almighty dollar is something we spend, and we get precious little for it at that. A dollar can get us a gallon of gas, a ride on the subway, or a glass of beer—if we're lucky.

But to the big banks and investment houses, the dollar is something that they buy and sell. Like all commodities, it has a price. Last month, more dollars were generally being sold than before, and the price of the dollar (expressed as its exchange value against other currencies) dived.

The falling dollar reflects the move of capital away from investments in U.S. production and government bonds into short-term speculative ventures and stronger economies overseas. In July and August, for example, Japanese investors placed only 24.3 percent of their net-equity purchases into dollar-dominated assets-down from a high of 69.6 percent in 1987.

Why are the Japanese and others investing their capital elsewhere? Economist David Hale notes in the Nov. 21 issue of Business Week, "Falling U.S. profits are lessening the attractiveness of dollar investments vis-a-vis foreign alternatives.

Lazy workers?

The bosses charge that profits are falling off because American workers don't work hard enough. They point out that productivity (output per hours worked) in both Britain and Germany exceeded the U.S. rate by almost double last year. Japan had almost triple the rate. Those countries can thus sell more and better-quality products at a lower cost than the United States.

But the low rate of productivity is not because American workers are lazy. It's derived largely from the fact that the government and the capitalist class are spending much less than in previous years to renew this country's plants and resources —and to educate people to design and operate new equipment.

During the last six years, for example, some $700 billion was taken out of equity (factories, real estate, etc.) and put into corporate debt (i.e., for company buyouts).

Self-mutilation

The world's bankers and traders have little confidence that American capitalism will soon pull out of its self-mutilating course. Investors will continue to put their money into corporate takeovers and foreign stocks and bonds-and U.S. exports will remain uncompetitive in the marketplace.

The U.S. government, unable to raise sufficient revenue from the sluggish U.S. economy, will have to continue to borrow vast sums of money-expanding the budget deficit and raising inflation.

Ultimately, interest rates could be forced up. While bondholders would get a windfall, the profit margin in manufacturing would decline even SOCiALiSt Editor: ALAN BENJAMIN Asst. Editors: MICHAEL SCHREIBER JOE RYAN Kwame M.A. Somburu, Sylvia Weinstein.

Business Manager: KATHY SANDS St., No. 308, San Francisco, CA 94110.

U.S. dollars.)

Signed articles do not necessarily These are expressed in editorials.

more, and a recession could be hastened. The capitalists are scar Many of them are running like rats leaving a sinking ship. The dollar is crumbling in their wake.

Closing date:

Nov. 25, 1988 represent