Is this as good as it's going to be?
IT IS two years since financial chaos ricocheted around the world, bringing economic hardship to East Asia, Latin America and, most notably, Russia. It has become fashionable for commentators to write off that crisis as a blip. The world is now supposedly basking in the "new economy" symbolised by the US. Two pieces of news last month cast doubt on such claims.
Japan suffered its worst one day stock market fall since the early 1990s when share prices more than halved over a two hour period. The trigger for the recent turmoil was the resignation of the man the government had brought in to root out malpractice in the banking industry.
He went after he had to admit that between 1983 and 1996 he received 2 million in undisclosed benefits from the giant Mitsubishi corporation and from a major construction company.
The problems run far deeper than the misdeeds of one official and the panicky gyrations of the stock market. Japan is the second largest economy in the world and has stagnated or been in recession for a decade.
Over the last few months there have been some signs that the economy might be recovering modestly. But even that limited growth is running into problems.
Banks are still suffering from an enormous overhang of bad debt. That is even after the government pumped in 600 billion and nationalised banks that went bust.
The bad debt built up in the boom years of the 1980s. A frenzy of speculation led companies and middle class families to borrow vast amounts of money and gamble it on shares and property. Foreign speculators poured in money in the hope of cashing in. The rest of the world was told to follow the Japanese model.
Then the bubble burst. Speculators were left with pieces of paper (shares in companies) worth a fraction of what they had paid for them. The economy sank into a protracted crisis which it is struggling to escape from ten years on.
The second piece of news concerned Germany, the key economy in the European Union. A report from the respected Ifo forecasting institute found that the German economy was slowing down just months after Chancellor Gerhard Schrder hailed the onset of a long awaited recovery.
The European Central Bank, responsible for setting interest rates across those countries that have signed up to the European single currency, faces a dilemma. It could cut interest rates to encourage companies and households to borrow money and spend it, so boosting economic growth.
But doing that risks stoking inflation as big firms take advantage of greater spending power to increase the prices of their goods. No one knows how the pressures inside the European and Japanese economies will play out.
It is clear, however, that the misery unleashed in the recession of the early 1990s is continuing. In Germany about one in ten are officially unemployed. In the east the figure is almost twice the national average.
Over half the young male population of many housing estates in eastern Germany are unemployed. These are the people Nazi groups have tried to attract. When Germany reunified ten years ago, I remember commentators debating whether it would take three, four or five years for the East to rise to the living standards of the West.
There is no sign of the gap closing. The German magazine Der Spiegel ran a front page last week about Gerhard Schrder's 11-day tour of eastern Germany's cities to oppose racist violence. The headline read: "Journey Into An Unknown Land".
Of course, to this suffering must be added the devastation capitalism is wreaking across Africa, Asia and Latin America. What then of the booming US? It has grown significantly since the recession of the early 1990s. But that has depended on an enormous attack on workers' conditions and a Japanese-style speculative frenzy.
The US capitalist class hopes it is possible to slow the economy without the bubble bursting. The chances are slim. Whatever happens the message from those who preach the glories of capitalism is clear-this is about as good as it gets.