Global production of cars is coming to a standstill. This is just the most dramatic and immediate result of a rapidly deteriorating crisis which has paralysed the global financial system and rapidly sent the world economy into recession.
Chrysler has halted production at all 30 of its factories for a month or maybe longer. The closures affect 46,000 workers directly, but, should the temporary closure become permanent, repercussions throughout the industry and the rest of the economy will affect millions in America and worldwide.
GM has suspended work on its $370m engine factory in Michigan, dashing hopes that climate change offers a route to a profitable future. It was planning to build a new small car engine, working towards fuel-efficient and all-electric cars, but the market for cars has disappeared along with all of the other things people used to buy, as unemployment rockets upwards.
The demand collapse is trashing all car manufacturers. GM said it was shutting down 30% of its North American production. Also on Wednesday, Ford announced it was to extend the normal two-week Christmas shut-down at 10 of its North American plants for an extra week. The Canadian car parts sector, which employed 120,000 people in 2006, expects to see its profits tumble by two-thirds next year, and employment levels plunge 20% by 2010. Almost 600,000 jobs in Canada would be at risk from a collapse of Chrysler, Ford and General Motors. It’s no different in the UK where car sales are in meltdown and manufacturers are closing their factories well into the New Year and even longer.
Bourgeois economists and analysts have been brainstorming solutions now that everything tried in the last year has failed. Their problem is they can’t see beyond the constraints of the system which depends on capital expansion to generate profits. And right now there’s not much profit-making going on.
The fewer goods people buy, the less the profit made in production can be realised, and as prices begin to drop everything just gets worse. Even the oil-producing nations’ plan to cut production hasn’t prevented the price from falling below $40 a barrel from its peak of around $140 earlier in the year.
With a downward spiral of deflation beginning, governments and central banks are now prepared to consider just about anything that will make us buy the products they employ us to make. Interest rates are dropping towards zero, already a strange enough concept that opens the door to new possibilities.
The one which is perhaps at the same time both easiest and hardest to understand is looking the most popular just now. Instead of pouring taxpayers’ money into banks which just hold on to it to rebuild their reserves, costing each of us many thousands of pounds in the future, the new big idea is that governments and central banks start issuing new money – just printing notes, creating the stuff out of thin air and giving it direct to us in the hope that we’ll go out and start spending it.
Must be the Christmas spirit, you say? No they really mean it. The really, really wonderful thing is that with zero interest rates, the cash bonanza would be a no-interest giveaway. Trouble is – there’s always a catch – printing money devalues the currency and eventually leads to runaway inflation. Higher prices are, in any case, bound to follow the uncontrolled slide in sterling – unmatched in size since 1931, when Labour prime minister Ramsay MacDonald took the pound off the gold standard. Devaluation on this scale could also lead to a flight of capital from Britain and a collapse of the currency, some are warning.
Whichever way you look at it then, the capitalist economy is well and truly broken. In 1908, Henry Ford gave the world the Model T and the production line for cars. A century later, it’s time for a revolutionary new model.
reposted from A WORLD TO WIN www.aworldtowin.net
Showing posts with label Great Depression. Show all posts
Showing posts with label Great Depression. Show all posts
Friday, 19 December 2008
Friday, 14 November 2008
Can we do it? Yes we must!
As the political leaders of 20 of the biggest economies gather in Washington to work out how to fix the global capitalist economy as, like a runaway train, it heads straight for the buffers, the range of "solutions" is piling up. None of them have a hope of taking off.
For outgoing US President George Bush, the oh-so-obvious answer is "sustained economic growth". He told a New York audience that "the answer is not to try to reinvent that system" but to "make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people around the world".
Others are into reinvention. Gordon Brown, who until recently thought globalised capitalism could not possibly be improved upon, is now for "creating a new global financial architecture" to replace the Bretton Woods monetary system (which actually collapsed 40 years ago!). The Germans want a "new balance between market and state" while the Canadian suggestion is that "dynamic new economic players ... must be full participants at the global table".
There’s another proposal aired by Bob Geldof. He is back banging the drum for Africa, which has been left out of the discussions. Bob wants to ensure that "900 million potential producers and consumers" are drawn into "the next round of globalisation". With the whole world diving into slump, Bob sees salvation for capitalism in Africa.
And on that he’s at one with Bush, who just yesterday received a major humanitarian award from Africare for his work in Africa. No really, it’s true.
According to Voice of America White House correspondent Paula Wolfson, Bush was honoured for his efforts throughout his administration to combat disease across the continent. Bush says America has an obligation to help the people of Africa. "It is in our national security interest that we defeat hopelessness. It is in our economic interest that we help economies grow."
The brutal truth is all these plans, pleas and proposals are non-starters. Why? Because they all look beyond the current disastrous disintegration of the global economy to a bright, newly refurbished, much more regulated, fairer, capitalist world. This is not how capitalist slumps work themselves out.
Fixing the real problem - an overhang of capacity as global production turns from recession to depression and slump - has only one solution as far as capitalism is concerned. In 1942 in the midst of the Second World War, economist Joseph Schumpeter, a critic of Keynes, but a big fan of credit-led investment, published his most famous work Capitalism, Socialism and Democracy. It was then, with the world at war, that he chose to develop his version of the concept of "creative destruction". That is already under way, with 10 million Americans already out of work and General Motors on the edge of bankruptcy.
Bush bemoaned the fact that critics were "equating the free enterprise system with greed, exploitation and failure" and objected to it. He is right to warn against the coming assault on the citadels of capitalism. There’ll be many demonstrations and protests against the G20 over the weekend and the election of Obama last week was itself a product of the anger millions of Americans who want action against bankers and corporations.
What is urgently needed is a concept of a society beyond the private ownership and control of capital, together with the leadership and organisation to make it a reality.
Can we do it? Yes we must!
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net
For outgoing US President George Bush, the oh-so-obvious answer is "sustained economic growth". He told a New York audience that "the answer is not to try to reinvent that system" but to "make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people around the world".
Others are into reinvention. Gordon Brown, who until recently thought globalised capitalism could not possibly be improved upon, is now for "creating a new global financial architecture" to replace the Bretton Woods monetary system (which actually collapsed 40 years ago!). The Germans want a "new balance between market and state" while the Canadian suggestion is that "dynamic new economic players ... must be full participants at the global table".
There’s another proposal aired by Bob Geldof. He is back banging the drum for Africa, which has been left out of the discussions. Bob wants to ensure that "900 million potential producers and consumers" are drawn into "the next round of globalisation". With the whole world diving into slump, Bob sees salvation for capitalism in Africa.
And on that he’s at one with Bush, who just yesterday received a major humanitarian award from Africare for his work in Africa. No really, it’s true.
According to Voice of America White House correspondent Paula Wolfson, Bush was honoured for his efforts throughout his administration to combat disease across the continent. Bush says America has an obligation to help the people of Africa. "It is in our national security interest that we defeat hopelessness. It is in our economic interest that we help economies grow."
The brutal truth is all these plans, pleas and proposals are non-starters. Why? Because they all look beyond the current disastrous disintegration of the global economy to a bright, newly refurbished, much more regulated, fairer, capitalist world. This is not how capitalist slumps work themselves out.
Fixing the real problem - an overhang of capacity as global production turns from recession to depression and slump - has only one solution as far as capitalism is concerned. In 1942 in the midst of the Second World War, economist Joseph Schumpeter, a critic of Keynes, but a big fan of credit-led investment, published his most famous work Capitalism, Socialism and Democracy. It was then, with the world at war, that he chose to develop his version of the concept of "creative destruction". That is already under way, with 10 million Americans already out of work and General Motors on the edge of bankruptcy.
Bush bemoaned the fact that critics were "equating the free enterprise system with greed, exploitation and failure" and objected to it. He is right to warn against the coming assault on the citadels of capitalism. There’ll be many demonstrations and protests against the G20 over the weekend and the election of Obama last week was itself a product of the anger millions of Americans who want action against bankers and corporations.
What is urgently needed is a concept of a society beyond the private ownership and control of capital, together with the leadership and organisation to make it a reality.
Can we do it? Yes we must!
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net
Friday, 17 October 2008
Time to cut the losses
In the last week, stock markets the world over have been showing the classic signs of bipolar disorder, but in the most concentrated form. Euphoric, manic, hysterical highs followed by the deepest depression. Much of it, say some of the commentators, is internally generated, the result of speculators feeding off each other’s panic.
But as everyone else knows, there are clear external causes. The soaring highs are the direct result of a renewed series of injections, by governments and central banks, of credit – the same stuff that the world’s financial system became addicted to and wholly dependent on during the “long boom”. It doesn’t help. Yesterday, the two largest Swiss banks UBS and Credit Suisse were obliged to seek new capital in a further attempt to prevent them turning into non-banks, ceasing to exist, becoming, as Monty Python had it, dead parrots. When the Swiss banks fall, there’s nowhere safe left for your money.
The stock market lows – a five-year retreat reached in the UK and back to the 1980s in Japan – are the result of an avalanche of indications that the recession is not only with us, but will last for years. Giant corporations are bankrupt, jobs falling off a cliff, house prices dropping like a stone. Even the price of oil has fallen back, as the speculators move their money elsewhere. China, which has powered the global economy, is cutting back and shutting down factories.
The Brown-led government, which has taken on the role of street-level pushers, are looking to raise the money that they are guaranteeing to the banks by issuing more debt to the investment markets. But there’s a limit to what can be raised. The rest will come from an assault on government spending, public services, the elimination of the legal guarantee for public sector pensions, and last but not least, any measures to deal with climate change – irrespective of Miliband the Younger’s pronouncement on an 80% emissions reduction by 2050.
Early signs of the brutal reality that will result came from the news that under Brown and Darling’s control, Northern Rock has been foreclosing, repossessing and evicting at double the rate of the rest of the industry, as detailed in Andrew's post on Wednesday. So much for the benefits of “nationalisation”.
Brown knows that the bankers’ bail-out won’t stop the rot, so he’s promoting a restructuring of the world’s economy, along the lines of the Bretton Woods arrangements that laid the basis for the post-war recovery and the boom years. The Financial Times says this is premature, adding:“Lest we forget, Mr Brown himself was in charge of the IMF’s ministerial steering committee for a large part of the past decade and yet signally failed to implement the ideas he is parading. During this time, it was repeatedly explained to him that every early warning system devised by the finest minds in international economics, including those at the fund, either predicts crises that never arrive or misses those that do.”
The paper of business is correct. The basis for restoring stability after a decade and a half of the Great Depression wasn’t Keynes’s proposals, but the massive destruction of surplus productive capacity and human lives during the second world war.
A much easier, less destructive way out of the mess would be to cut the losses, admit the capitalist system is bankrupt and make the transition to a new kind of economy altogether. One based on not-for-profit production, social ownership, self-management, planned production for need, distributed via an intelligent market informed by democratic processes and expressed preferences. That’s what we will be discussing tomorrow at the Stand Up for Your Rights festival. Be there!
adapted from www.aworldtowin.net
But as everyone else knows, there are clear external causes. The soaring highs are the direct result of a renewed series of injections, by governments and central banks, of credit – the same stuff that the world’s financial system became addicted to and wholly dependent on during the “long boom”. It doesn’t help. Yesterday, the two largest Swiss banks UBS and Credit Suisse were obliged to seek new capital in a further attempt to prevent them turning into non-banks, ceasing to exist, becoming, as Monty Python had it, dead parrots. When the Swiss banks fall, there’s nowhere safe left for your money.
The stock market lows – a five-year retreat reached in the UK and back to the 1980s in Japan – are the result of an avalanche of indications that the recession is not only with us, but will last for years. Giant corporations are bankrupt, jobs falling off a cliff, house prices dropping like a stone. Even the price of oil has fallen back, as the speculators move their money elsewhere. China, which has powered the global economy, is cutting back and shutting down factories.
The Brown-led government, which has taken on the role of street-level pushers, are looking to raise the money that they are guaranteeing to the banks by issuing more debt to the investment markets. But there’s a limit to what can be raised. The rest will come from an assault on government spending, public services, the elimination of the legal guarantee for public sector pensions, and last but not least, any measures to deal with climate change – irrespective of Miliband the Younger’s pronouncement on an 80% emissions reduction by 2050.
Early signs of the brutal reality that will result came from the news that under Brown and Darling’s control, Northern Rock has been foreclosing, repossessing and evicting at double the rate of the rest of the industry, as detailed in Andrew's post on Wednesday. So much for the benefits of “nationalisation”.
Brown knows that the bankers’ bail-out won’t stop the rot, so he’s promoting a restructuring of the world’s economy, along the lines of the Bretton Woods arrangements that laid the basis for the post-war recovery and the boom years. The Financial Times says this is premature, adding:“Lest we forget, Mr Brown himself was in charge of the IMF’s ministerial steering committee for a large part of the past decade and yet signally failed to implement the ideas he is parading. During this time, it was repeatedly explained to him that every early warning system devised by the finest minds in international economics, including those at the fund, either predicts crises that never arrive or misses those that do.”
The paper of business is correct. The basis for restoring stability after a decade and a half of the Great Depression wasn’t Keynes’s proposals, but the massive destruction of surplus productive capacity and human lives during the second world war.
A much easier, less destructive way out of the mess would be to cut the losses, admit the capitalist system is bankrupt and make the transition to a new kind of economy altogether. One based on not-for-profit production, social ownership, self-management, planned production for need, distributed via an intelligent market informed by democratic processes and expressed preferences. That’s what we will be discussing tomorrow at the Stand Up for Your Rights festival. Be there!
adapted from www.aworldtowin.net
Subscribe to:
Posts (Atom)