'WE'VE had a good run. Enjoy it while it lasts because you cannot always expect it to be as good.' So warned Eddie George, governor of the Bank of England, just before the new year. He spoke as a mood of deep gloom was spreading among the world's capitalists at the thought that the US boom of recent years might be collapsing. The Financial Times reported:
'The curtain came down yesterday on the worst year in a decade for world stock markets. In London, the FTSE 100 index closed 10 percent lower on the year. The last time it fell more sharply was in 1990. The Dow Jones Industrial Average has fallen 6 percent. In Frankfurt, Germany's benchmark Xetra Dax index is 20 percent off its March peak. Tokyo's benchmark index, the Nikkei 22G average, had its worst year of the decade, falling more than 27 percent. Seoul has halved over 12 months. Hong Kong is still down 12 percent. It is all a long way away from the buoyant mood with which the year began.'
Rupert Murdoch's Sunday Times was even more pessimistic. Its business section on Christmas Eve warned, 'Fears of a hard landing for the US economy, with serious consequences for Britain and the rest of the world, have heightened.'
It went on to quote John Makin of the Washington-based American Enterprise Institute, who argued, 'The recession has already started. Over $2.5 trillion (£1,700 billion) has already disappeared in the US since March. 'The US economy is on a dynamically unstable downward path.'
Stephen King, global chief economist at the HSBC bank, was nearly as miserable: 'By the second half of 2001 the US will be in 'true' recession.' The editorial writers of the Financial Times tried to put a cheerful face on things. The US economy was not yet in recession, they insisted, and even if one materialised it might not be that serious:
'If the 'soft' landing turns bumpy, there is still a good chance that it will not end in a crash. Developed economies are equipped with better shock absorbers than in previous crises.'
But even they could not avoid a tone very different to that of 12 months ago. At that time pro-capitalist economists, with only a handful of exceptions, were extolling a 'new economy'. Technologies based on the microchip and the internet were raising productivity to an unparalleled degree, and recessions were a thing of the past. The US economy had gone through a record eight years of economic expansion and would continue to do so.
Few of them bothered to mention that the expansion in output had all gone to profits, while average US workers were working 160 hours a year more (that is a full month longer) than a quarter of a century ago, for lower real earnings. Few noticed either that share prices were based on the cloud cuckoo land assumption that profits could keep rising at breakneck speed.
They were like men running through a forest in a deep fog. They assumed that because they had not bumped into any obstacles so far there were none there. Now they have begun to bump into obstacles. The microchip firms have not proved capable of defying the law of gravity, and oil price rises have hit the profits of some giant firms.
Giant companies have discovered that the all-round cut in real wages that raised profits now means they have difficulties in selling all the goods they turn out. Stunned, many of them have moved virtually overnight from blind optimism to the deepest pessimism. No doubt if by some accident they avoid bumping into obstacles for a couple of months they will be blindly optimistic again.
This, after all, is what happened when the Asian crisis of three years ago 'only' spread to Latin America and the former USSR, leaving the US untouched. The same people who in papers like the Financial Times talked of the possible 'meltdown' of their system were just a couple of months later telling us it was safe forever.
None of them know in reality what is going to happen next. The very absurdity of the capitalist system, based as it is on the mad pursuit of profits by thousands of rival companies, makes that impossible. But whatever happens they will try to protect themselves by increasing the burden on the rest of us.
Many big US firms ended last year by announcing wholesale cuts in their workforce. General Motors, for instance, announced 15,000 job cuts, and the telecommunications manufacturer Lucent Engineering 10,000. British-based motor, steel and textile firms are doing the same. They hope that the fear of mass job losses will so demoralise people so that no one challenges the absurdity of a system that causes such things. It is up to organised workers to prove them wrong.