Across the core of the capitalist system, economies are either slowing, stagnating or contracting. In the United States, the rebound from the crisis was already the weakest on record, hovering at around two percent annual growth. But this has weakened further, slipping to 1.7 percent in the latest set of GDP figures. This is despite four years of $1 trillion plus government deficits and huge injections of cash into the economy by the Federal Reserve, the central bank, on top of that. And it could get worse. In a few months time, the US economy is currently set to head over a “fiscal cliff” – with a series of tax hikes and spending cuts due to commence at the start of 2013. The Congressional Budget Office estimates the impact will be to drive the US economy into recession next year.
Such methods are already being tested to destruction in Europe, where austerity is intensifying, rather than alleviating, the debt crisis. After six months of zero growth, the eurozone economy is now shrinking with Greece, Italy, Spain and Finland all contracting sharply in recent months.
And, of course, the UK has also re-entered recession. Even in Europe’s economic powerhouse, Germany, the signs aren’t promising, as engineering and manufacturing companies, as well as port operators (sensitive to the fortunes of Germany’s export-orientated economy) all reported falling profits over the summer. Investment in machinery and equipment has also been falling.
The key engine of global growth since 2009 has been China. China’s official growth rates still sound impressive with an annualised rate of 6.9 percent between April and June. But this is down sharply from over nine percent last year. The reality may well be even worse, with widespread reports of unsold goods piling up at suppliers and retailers. Keith Bradsher in the New York Times has told how, “After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses. The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown.”
Slower growth in China will have repercussions across the globe, from Australia, whose mineral-rich economy has been riding high from a Chinese-led resources boom, to Brazil which has supplied China with everything from iron ore to soya beans and whose economy has slowed sharply since 2010.
The problems in Europe, the US and China are all feeding into each other as export markets dry up. Japan, the world’s third largest economy, is also being hit hard. It recorded its biggest trade deficit since 1979 in July after exports to the EU plummeted and the Japanese economy is now shrinking.
The huge bailouts of the banks and the economic stimulus packages implemented by major advanced economies in 2008-9 stopped the implosion of the financial system and put a floor under plunging output and global trade. But it hasn’t been able to return the system to dynamism. This is because the root cause of the crisis is one of profitability. Big business has used the crisis to launch attacks on workers and on the whole has built up big cash piles. But they aren’t investing and another round of quantitative easing by central banks (the process by which they pump money into the system) isn’t likely to change that picture any time soon.
All of this means that we can expect more tensions between the major ruling classes as they look for ways to shift the burden of the crisis onto their rivals as well as their own workforces. Already there are fears of price wars in global markets as exporters look to shift unsold goods.
It will also put weaker ruling classes around the world under renewed pressure, especially as the slowing global economy coincides with rising food prices partly driven by speculation, just as happened in 2010. Everywhere from Eastern Europe to Greece or Egypt (whose trade deficit has worsened for five consecutive months) will feel the impact. This will put further pressure on already weakened political structures and open up the prospect of more upheavals and revolts from below.
This was always going to be a protracted crisis, rather than just an unpleasant, but brief event, and we may be heading for another acute phase.
In November of last year, there was a brief moment of light amid the darkness that was 2020. Scotland became the first country in the world to make period products free for all. Just as the weekend and the eight-hour-day are now regarded by many as a given, future generations may be in disbelief that...
On 4 November last year, when many of us were watching the aftermath of the American presidential election, the US formally left the Paris Climate Agreement. Written in 2015 at the United Nations’ COP21 climate conference in Paris, the agreement is often considered to be the most significant document of international climate cooperation. Back then,...
To say 2020 was dramatic would be an understatement. The world situation has been completely transformed by the Covid-19 pandemic and the inadequacy of governmental and state responses. As we head into 2021 it feels like we are entering uncharted territory. To make specific predictions would be unwise. But the Covid-19 crisis raises fundamental questions...