World Socialist Web Site

US stock market slide: a turning point in American and
world politics

By the Editorial Board
20 March 2001

US stock market investors suffered their greatest ever one-week losses during the week of March 12-16. The Dow Jones Industrial Average experienced three sharp declines in five days, includinga drop of over 400 points on Monday and a 227-point drop on Friday, with a total weekly decline of 821 points a loss of 7.70 percent. The S&P 500, a broader average of Wall Street stocks,showed a 7 percent decline, while the high tech-dominated NASDAQ index fell 8 percent.

The Dow Jones index fell below the 10,000 mark for the first time in six months, while the NASDAQ index plunged below 2,000 for the first time in three years. Since its March 2000 peak, the NASDAQ has fallen 63 percent, the biggest percentage drop in a major US stock index since the 1929 crash. Over the same period the Dow is down 16 percent and the S&P 500 down 25 percent.

Measured by the amount of paper value wiped out, the financial debacle in the American stock exchange is already among the worst in history, with no indication that a bottom has been reached. BusinessWeek magazine reported in its market watch column that there were hopes on
Wall Street that a support level for the NASDAQ would be found at about the 1,350 mark indicating a further 500-point decline in the high tech index was widely anticipated, whichwould bring the total plunge to 73 percent.

The combined losses on the NASDAQ and the New York Stock Exchange topped $4.6 trillion by the end of the week, nearly five times the losses from the October 1987 Wall Street crash. The NASDAQ by itself has fallen from $6.7 trillion in March 2000 to $2.7 trillion. The sheer magnitude
of this decline is staggering. The $4.6 trillion in losses is:

* Greater than the entire publicly held federal debt
* More than the combined Social Security and Medicare trust funds
* The equivalent of the world losing the economies of Japan and South Korea
* The equivalent of the United States scrapping its auto, steel, electrical machinery and oil industries, all at once
*The equivalent of the loss of the entire housing stock of the United States
* Two to three times the total value of Bush's proposed ten-year tax cut
* 1,000 times the amount that Bush would cut taxes this year, in the name of providing a stimulust o the economy and offsetting the threat of a recession.

So rapid was the collapse in share values during 2000 that US household wealth saw its first net decline since the federal government began keeping such figures in 1945. Every postwar recession has only slowed the rate of increase in household wealth. But with more than 60 percent of US household assets now accounted for by the stock market, the NASDAQ-led slump produced a 2 percent drop in 2000.

The high-tech bubble

The driving force of the financial crisis has been the collapse of the speculative boom in high technology stocks, mainly those related to the Internet, computers and telecommunications.

According to one study, nine of the eleven industrial sectors that make up the S&P 500 actually saw at least a modest rise in stock prices over the past year. But the two sectors that lost ground, high tech and telecommunications, were enough to push the overall index lower by 25

Another analysis, published in the New York Times March 18, gauged the high-tech collapse by calculating how long it would take selected stocks to regain their peak prices if they enjoyed annual increases of 15 percent well above traditional rates of return. By this measure, Intel
would take seven years to regain its top price, Cisco Systems would require 10 years, Microsoft six years, Oracle and Sun Microsystems nine years and Yahoo! no less than 20 years.

The financial deterioration of Yahoo! a company with enviable name recognition, a huge Internet audience, and $1.7 billion in cash on hand demonstrates how rapidly the crisis has developed and how deep is its impact. The company's market capitalization has fallen from $150
billion a year ago to under $10 billion, as its stock price has plunged from $250 a share to $17.

Three months ago Yahoo! management forecast first quarter revenues of $320 million. Now they are estimated at $170 million to $180 million, of which $117 million was already committed before the quarter began. The Internet portal thus obtained only $63 million in new sales. While Yahoo!
took in $459 million in sales from other dot-coms in 2000, this is expected to fall to only $111 million in 2001.

Two weeks ago, company chairman Timothy Koogle resigned as CEO, with no replacement immediately named. In the wake of his resignation, the financial press carried reports that Yahoo!, Cisco Systems, Intel and other NASDAQ stalwarts had engaged in a practice known as
"pro forma" reporting of financial results, in which the figures released to the public arbitrarily exclude certain obligations. In the case of Yahoo! and Cisco, the companies did not report the payroll taxes due for their employees a huge expense that would have made their balance
sheets much worse.

Even now Yahoo! may be grossly overvalued, since its stock was still selling at 140 times earnings. All the companies on the NASDAQ index combined were selling at 172 times earnings. If their stock prices fell to the typical historical level of 20 times earnings, the NASDAQ index
would fall to about 170 compared to 5,048 in March 2000.

The impact on working people

It is hard to overstate the implications of this colossal financial liquidation for the American working class and middle class. Of the $4.6 trillion already vaporized and trillions more which
are at risk much of it constitutes the life savings of tens of million of working people. Millions are discovering that their 401(k) plans, which have become a widespread substitute for guaranteed pensions, will no longer sustain them in a decent retirement. Three-quarters of the
funds held by 401(k) plans, about $1.7 trillion, are invested in the stock market. Other people have lost savings set aside to buy a new home, finance their children's college education, or protect against the threat of a major illness.

TIAA-CREF, the teachers' pension fund, which is the largest institutional investor in the stock market, reported a 21 percent gain in its holdings in the fiscal year that ended March 31, 2000. When TIAA-CREF closes the books on the current fiscal year, some 250,000 retired teachers,
college instructors and other professionals will experience a sharp movement in the opposite direction.

In 1999, as the bull market reached its zenith, the net worth of American households rose 14.1 percent. Douglas R. Cliggott, a strategist at J. P. Morgan Chase, told the New York Times: "It influenced the size of the homes we live in, the type of cars we drive, how we go on vacation.
Because of the extraordinary improvement in the average American's net worth, it made us feel comfortable carrying what by historic standards would have been an extraordinary amount of debt."

It is a paradox that explains much of the political character of the 1990s that, side by side with soaring paper values on the stock market and rising corporate profits, both consumer and corporate debt increased astronomically. The 1990s boom was fueled by a borrowing binge that
leaves the entire financial structure of the country poised on the edge of a precipice.

Consumer debt has doubled since 1990, to $7.5 trillion more than $50,000 per household, over $25,000 for every man, woman and child in America. Much of this has involved homeowners taking out home equity loans to finance consumption, pay other debts, or gamble in the stock
market. In 1982 homeowners owed lenders 30 percent of the market value of their residences. By 1999 this figure was up to 46 percent.
During the 1990s, the ratio of household debt, including mortgages, to disposable income rose by almost 25 percent. The average American family now has debts that exceed its average after-tax income. This debt is unequally distributed in a manner diametrically opposite the
distribution of wealth. The top ten percent of the population own over 70 percent of the national wealth, while the bottom 90 percent of the population, with less than 30 percent of the wealth, owe 70 percent of the consumer debt.

In corporate America as well, the 1990s has been an era of growing debt topping $10.6 trillion by the end of 1999. By and large, companies have been unwilling or unable to finance expansion and new investment by issuing new stock, for fear that this would dilute the holdings of
shareholders and cause a decline in the price. Rather, corporations have gone into debt, even borrowing money on the financial markets to buy up their own stock and boost its price.

The result is that instead of the traditional trade-off of equity and debt, with debt decreasing during a boom and swelling during a downturn, most companies have seen their debts increase during the stock market boom. The present financial crisis, let alone any severe and prolonged
recession, will mean corporate bankruptcies on a vast scale with predictable effects on jobs, benefits, pensions and living standards generally.

A global slowdown

The financial crisis in the United States has incalculable consequences for the world economy. This year marks the first time in a quarter century that all three of the main centers of world capitalism the United States, Japan and Western Europe are simultaneously experiencing an economic slowdown. In the case of Japan, stagnation has been protracted throughout the 1990s, since the collapse of the "bubble economy" in 1989-90. This financial debacle, triggered by the collapse of inflated real estate values, is now being widely compared to the puncturing of
inflated stock values in the US. 

A Washington Post editorial last week pondered whether the US
economic decline would be V-shaped, U-shaped, or "a Japanese-style L."
The US and Japanese crises are intertwined, since Japanese banks and corporations are heavily invested in the US securities and bond markets, as well as dependent on the United States as their leading export market. Japanese concerns own $350 billion in US Treasury bills, and even
larger amounts of corporate stocks and bonds, as well as $150 billion in direct investments, more than any other country except Great Britain. There have been reports of Japanese banks unloading billions in US stocks in order to improve their balance sheets before the Japanese
fiscal year ends on March 31.

A Japanese sell-off of American assets, sparked either by declining US stock prices or financial pressures within Japan itself, would depress stock prices even further. It would also depress the value of the dollar, since Japanese companies would have to convert dollar-denominated assets
into yen in order to repatriate them. A falling dollar would undermine the ability of the Federal Reserve to cut US interest rates, or even force it to raise rates to prevent investor flight from the US currency.

Economic growth in the European Union is now estimated at 2.8 percent for 2001, down from previous projections of 3.3 percent, as the slowdown in the US and Japan takes its toll, and Germany, the most powerful component of the European economy, experiences both an acceleration of inflation and a fall in its real growth rate. Auto sales in Germany fell 12 percent.
Eight of the nine largest European stock exchanges have seen lower prices since the beginning of the year, with most of them down over 10 percent.

Social and political consequences

The onset of a sharp financial crisis in the United States, and a more general global economic slowdown, will inevitably have the most profound consequences for the social and political stability of the major capitalist nations. The series of announcements of major layoffs in the US
has already shaken consumer confidence, demonstrating once again that job security is a thing of the past for even the most skilled and highly paid workers.

Any significant increase in the US unemployment rate will confront millions with the consequences of the policy changes of the past two decades, in which social programs that once cushioned the impact of the capitalist business cycle have been abolished or largely gutted. Millions of people, especially the masses of low-paid service and contingent workers, will be thrown on the economic scrap heap with no social safety net and no personal resources to fall back on.

Equal to the material impact of the financial crisis will be the shattering of illusions so assiduously promoted by the media and ruling class opinion makers over the past 20 years, and especially in the decade since the collapse of the Soviet Union. The American people have been
told incessantly that capitalism is the only credible form of economic organization, and that the unrestrained domination of giant corporations and the "market," backed by central bankers like Fed Chairman Alan Greenspan, would guarantee an ever-rising level of prosperity.

Now capitalism is revealing its ugly face, in the gross misallocation of resources and the sheer irrationality of a system that piles up trillions for the corporate elite, while wiping out the retirement savings of millions, bankrupting small businesses, and depriving countless workers
of their livelihood. As the crisis deepens, working people will inevitably reject the claims that all concern for social justice and equality must be subordinated to the imperatives of the market.

Growing numbers will look for an alternative to the profit system and turn to the development of a mass political movement directed against it.


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Zimbabwe's white farmers call for urgent dialogue with government

Business Report -

March 21 2001 at 08:17PM

Harare - Zimbabwe's white farmers banded together Wednesday and pledged to
work with the government to resolve the nation's land reform crisis, after
an apparent split within their ranks over the violence-wracked scheme.

The farmers reaffirmed their support for their union's current leadership,
expressed their "absolute commitment" to negotiating with the government,
and pledged to work to find a solution to the land reform crisis.

"We walked in there apparently divided," said Malcolm Vowles, spokesman
for the mostly white Commercial Farmers' Union (CFU).

"It was just a realization that they (farmers) have a lot more common
ground than in the media hype," he said of the meeting's outcome.

The special CFU congress came after more than a year of bloodshed in
Zimbabwe's countryside linked to the forcible invasions of hundreds of
white-owned farms by self-styled veterans of the nation's liberation war.

More than 34 people died in political violence last year in Zimbabwe,
while thousands more were beaten, raped or intimidated.

In hopes of ending the violence, former CFU president Nick Swanepoel ran
advertisements in local papers last week urging farmers to drop all
opposition to the scheme to resettle poor blacks on five million hectares
(12 million acres) of white-owned land.

His plan called for dropping all legal action against the government and
immediately moving 20,000 families on to plots of two to five hectares (five
to 12 acres) each, providing them with free tillage, fertilizer and seeds.

He has also suggested changing the CFU's name and voting in a black
president to lead the group.

After their meeting, the CFU remained silent about its new proposals for
ending the crisis, but adopted none of Swanepoel's recommendations publicly.

The union did ask Swanepoel to work with a team of negotiators in dealing
with President Robert Mugabe's government, of which Swanepoel is considered
a supporter.

"Commercial farmers re-confirmed their absolute commitment to urgent
dialogue with government, without preconditions, and to assisting in the
successful, orderly implementation of land reforms," said a statement
released at the end of the meeting.

"Delegates strongly endorsed new proposals, expressing unity of purpose
and support for the CFU pragmatic new thinking and vision," the statement

Farming officials declined to elaborate on the new proposals, but
participants in the meeting said they were reluctant to adopt all of
Swanepoel's plan, especially his call for abandoning their legal struggle.

"We farmers are not willing to waive our legal rights on the hopes of
getting better relations with the government," one farmer said. "We believe
that our legal rights are the strongest ground we can stand on."

Most farmers were willing to speak only on condition of anonymity, for
fear of reprisals from war vets if their comments are viewed as

The farmers have already won a Supreme Court ruling declaring Mugabe's
land reform plan unconstitutional and ordering the squatters' eviction.

But rather than following the court's order, Mugabe's government has
heaped pressure on the judges who handed down the decision and cracked down
on the independent press.

Despite the union's statement in favor of dialogue, the government has
already said it is not willing to negotiate with the farmers.

Farming officials said they could not predict how Mugabe's government
would react to the outcome of their latest offer to negotiate.

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Railroad to Jail in Terrell...Part II
March 21, 2001
Dr. Ridgely A. Mu’min Muhammad

Nelson Bogans was sentenced today in Dawson, Ga. for 15 years on the
charge of burglary and is to serve 2 years in jail and the remaining term on
probation. He must also pay the court $3,500 and pay Snook Rainey $385 in damages. And this is how we “milk our cows” in Terrell County Georgia. In light of the moneys being generated through the court system for this one case, I wonder how much of the total county’s budget is coming from “railroading”?

Oh by the way, Mrs. Bogans has paid the defense lawyer $4500 and now must spend
between $5,000 and $8,000 for another lawyer to appeal this case of an innocent man
being railroaded. Can we afford to stay out of jail in Terrell? For more on his story see:

and poem at:


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Gun Shots heard outside Sumter Hospital

March 20, 2001

By Dr. Ridgely A. Mu’min Muhammad  (

Why are some so-called white people so angry? Why do Black people have to live their lives in constant fear of violence? Why can’t Black people protest quietly and peacefully without being accosted and threatened?

Protesters lined up starting at 9:00 A. M. today, Tuesday, to protest the expulsion of Dr. John Marshall from Sumter Regional Hospital. To get an overview of the circumstances of his case see: . A rally was held at Bethesda Baptist Church on Monday where the announcement was made by the Concerned Citizens of Americus and Ministerial Alliance that "this boycott is on."

Mr. Fred Walker said, "Being in that hospital 17 years and working there one night a week, I can say that he has not mad one mistake about the racism there. He is getting too close to the truth."

Rev. A. C. Wilson stated that, "I have a problem when a lawyer can say that there is no racism in Americus, Ga."

It seems that Rev. Wilson was correct in his concerns about racism in the "All American City" of Americus. Carrying signs with slogans like, "There is racism behind those walls", "Stay out of Sumter Hospital", "Marshall in and Adams out", and "Poisoned with racism" peaceful protesters numbering between 8 and 17 walked back and forth on the sidewalks of Mayo and Oglethorpe streets. Oglethorpe is the "main drag" through downtown Americus, which has marketed itself as a tourist attraction due to its proximity to the home of former President Jimmy Carter and is the headquarters for "Habitats for Humanity".

Numerous vehicles passed with occupants given a thumbs up or honking in approval. However, a few "angry" white people gave "the finger" and some hurled insults and curses at the men and women who braved the rain and cold to express their love for a black doctor.

A middle aged white man in a four wheeled pickup truck with a rebel flag on the front was heard to say after being told that he protest was over a black doctor being expelled from the hospital, "Let him go back to barber school and learn to cut some hair."

These insults took on a more ominous tone, however, at around 2:45 P.M. when according to Mr. John Cole Vodicka a red pickup truck had passed and he heard two shots fired. He could not say whether the shots were fired from that truck or form elsewhere. No one was hurt and the protests continued.

It seems that Rev. Ferrell-Malone’s words were prophetic when he said on Monday night, "When you raise the flag, you will get some attention. It seems Americus and Sumter Regional Hospital may get some unwanted attention as a result of protests and calls for a boycotts until Dr. Marshall is reinstated.

For pictures of the rally and marchers go to: Protest March at Sumter Regional Hospital on March 20

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USA: FDA investigates StarLink allergic reactions in humans
20 Mar 2001
Source: editorial team 

Despite widespread concern over a possibility that genetically engineered crops could cause human health problems, there has been little evidence that this has occurred. But in a move that could have severe ramifications for the biotech industry, the US Food and Drug Administration (FDA) is investigating several cases of allergic reactions to StarLink corn in humans. 

The health complaints about the biotech corn are the first lodged by consumers against an engineered food. The cases emerged after several people reported reactions to tacos shells and most recently in corn dogs. 

The genetically modified corn had only been approved for animal consumption because of concerns it might trigger dangerous allergic reactions in people, but the corn was inadvertently mixed with corn destined for the human food supply. At that time federal and industry officials emphasized that no significant health hazard was involved to humans from the corn.

Aventis CropScience,which markets the corn, argues that that StarLink could not cause severe, or even minor, allergic reactions, and that the corn is safe. The company says that the quantities of StarLink in processed food are too small to cause allergic reactions and that its research showed that the Cry9C protein was destroyed during the production process for food such as tacos. The company has been pushing for its approval for human use despite recalls of food containing the StarLink corn last year.

The FDA is currently testing blood samples from people who have suffered an allergic reaction to the corn, but researchers have warned that the test will not give a definitive answer. If the test is negative it will provide a boost to the biotech industry as it may prove that genetically engineered food is safe to eat. 

Karl Klontz, a medical officer with the FDA's Center for Food Safety and Applied Nutrition, said the test would determine whether the people had produced antibodies to the genetically modified protein in StarLink corn, called Cry9C, which protects plants against the European corn borer. 

"The presence of the antibody would suggest the possibility of an allergic phenomenon, and the lack of the antibody would go a long way to reassure that there is no allergic issue," said Klontz. 

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USA: Industry watchers concerned over food poisoning incidence increase
19 Mar 2001
Source: editorial team 

Despite the myriad of technological advances that claim to have make food safer and that have practically eradicated incidence of tapeworm and botulism, the Centers for Disease Control and Prevention believe that the average American is now more likely to contract food poisoning today than they were fifty years ago. 

According to the agency's figures, incidences of serious gastrointestinal illness have increased by 34% since 1948 and now the US records that food poisoning is responsible for 5,000 deaths, 325,000 hospitalizations and 76 million illnesses
every year. Disease researchers have also expressed concern that while cases of less serious bacteria such as salmonella are on the decline, more damaging illnesses caused by, for example, E coli infection, have doubled since 1996.

Food variety brings new bacteria

The increasing cases can be attributed in part to better reporting by sufferers, but the reasons for this plethora of poisonings is manifold, say experts. Improper handling of food may be a problem, but one major reason concerns what we eat. Increasing consumption of fresh fruit and vegetables can bring with it increasing exposure to bacteria or viruses. Many assume that meat and poultry are the major culprits of food poisoning incidents, but these products are generally well policed by the USDA and The General Accounting Office estimates that 85% of food poisoning comes from the
popular US dietary staples: fruits, vegetables, seafood and cheeses. Precooked food also harbors more bacteria than more traditional home cooking.

Consumers often first to test product safety 

The variety of foods has increased beyond the regulatory scope of the national food safety watchdog, the Food and Drug Administration. More food is subject to post-retail recalls now than in any time over the last ten years, and officials
admit that they simply don't have the time or resources to inspect every food item.

Since 1997, the body of 113 federal inspectors that deal with food imports has increased by just three employees. Foreign food items meanwhile have increased by 50% in a similar time scheme. Little surprise then that the FDA can only actually inspect less than 1% of all imported foods. 

Onus on industry for self-regulation

Indeed, the entire FDA employees less than a tenth of the food safety inspectors under the umbrella of the USDA, and the onus is falling increasingly on food manufacturers to keep products safe. Currently, just over 400 FDA inspectors police over 57,000 food processing plants across the US, leaving the average plant subject to inspection once every eight years. 

The industry is adamant that things are safer than they have ever been, with better surveillance and traceability speeding up the process of finding the cause of any poisoning outbreak. Smaller companies cannot always afford to run safety
tests themselves however, and some maintain that FDA checks are essential. Furthermore, as waves of consolidation turn the smaller companies into giant corporations, the reach of contaminated food is spreading.

Not every scientist agrees that food poisoning has increased since the immediate post war years, but as technological systems improve, any food related illnesses are becoming less excusable.

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