Socialist Worker

Bosses fear double dip or ‘Japanisation'

by Charlie Kimber
Issue No. 2217

As politicians, bankers and bosses return from their holidays, they will find plenty of evidence that crucial parts of the global economy are on the slide.

Far from getting better over the summer, the edge of the precipice once again looms close—even before the effects of the synchronised policy of austerity hits home.

The most compelling figures come from the US, where the crisis broke in 2008.

The housing market is spiralling downwards. Sales of new homes are down 12 percent from the month before—and at the lowest levels since records began in 1963.

But sales of existing houses were down over 27 percent. There were attempts to blame this on the effect of the Deepwater Horizon oil disaster.

But more detailed statistics then revealed that, while sales did fall sharply in the Southern states—by over 22 percent—they dropped even more in the Mid-West, the North-East and the West.

The truth is that swathes of US workers are facing a desperate struggle to survive, let alone buy a new home. Over 5.8 million have now been unemployed for too long to get the normal state benefits and rely on special emergency payments.

Over half of 16-24 year olds do not have jobs. The NPR radio programme “All Things Considered” reported recently that fewer than 14 in 100 young black men have a job.

Some of those in the US ruling class are scared enough that the economy is seizing up that they are contemplating another injection of cash to try and persuade the bosses to start investing.

Ben Bernanke, chairman of the Federal Reserve (the US equivalent of the Bank of England), says help may be needed soon.

However, as Alan Blinder, a former Federal Reserve official, said, “The bad news is that the Fed has already spent its most powerful ammunition, only the weak stuff is left.”

So like in Britain, the main policy to deal with the recession is cuts.


As the Observer reported recently, “In Colorado Springs more than a third of street lights have been switched off to cut the municipal electricity bill. The city has also sold off its police helicopters.

“In Hawaii schoolchildren were told to stay at home for 17 Fridays to save costs. In a suburb of Atlanta local bus routes were closed, at a stroke wiping out public transport for thousands of people who relied on it to get to precious jobs.”

Further data last week emphasised that the recovery in the British economy is also fragile and the chances of a renewed slowdown are large.

Economic growth rates for the second quarter of the year were not disastrous, but this was based on expansion due to public spending. Now the cuts are coming.

“The huge scale of the retrenchment that the government wants to implement, will inevitably increase dangers of double-dip recession,” said David Kern, economist at the businessmen’s British Chamber of Commerce.

“In spite of the relatively strong recent UK performance in the second quarter, the recovery is still fragile and risks of a relapse are high.”

The question is not just whether technically there will be a “double dip”—two successive quarters of negative growth. The other prospect according to many analysts is “Japanisation”—the grindingly low growth and stagnation seen in Japan since the 1990s. This will produce a slow and jobless “recovery”.

Mike Dicks, managing director of economics and strategy at Barclays Wealth, said, “There are echoes of Japan when you think of what the impact of fiscal tightening might be in countries introducing such measures.

“Double dip is now on everyone’s mind. ‘Japanisation’, or a long hard slog, as I prefer to call it, is the worry.”

Have no doubt about it—the patient was already ailing before David Cameron and his cabinet of true believers prepared to administer their quack remedies.

By the time they have finished draining off blood and hacking away limbs there may be precious little left.

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Tue 31 Aug 2010, 16:50 BST
Issue No. 2217
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