The propaganda that accompanies the cutting, slashing and burning of government spending is all about “securing the fragile recovery”. It is used in every country from Iceland, Greece, Ireland, Spain, to the US and Britain – to justify what in effect adds up to crashing the economy.
But don’t get the idea that anything else can be done within the capitalist framework. After decades of credit-led expansion, the logic of capital now demands its opposite – ruthless contraction. It turns public pronouncements into lies, and politics inside out. Ireland’s government won’t be the last to find itself in trouble.
The economic trajectory of country after country, region after region confirms the slide from recession to depression. The Organisation for Economic Co-operation and Development last week cut its forecast of UK economic growth in 2011 from 2.5% to 1.7%. The Institute of Directors is forecasting UK growth of 1.2% next year. In real terms, these figures represent a decline in activity.
The eurozone, having pumped billions of euros into recovery measures, achieved relatively strong second-quarter growth of 1% to the surprise of the markets. But the “recovery” was short-lived. Despite the export of capital goods from Germany to China, growth slowed to 0.4% in the third quarter. Euro zone unemployment rose to 10.1% in September and it is forecast to go higher next year. In the United States, another round of “quantitative easing” – aka printing money – is under way in an increasingly desperate bid to boost economic activity.
The World Bank predicts that China’s growth will slow in 2011 from attempts to constrain the country’s uncontrollable credit boom. Lending by its vast, unregulated underground financial market is sending the prices of staple foods soaring and triggering social unrest. The average price of 18 staple vegetables is 62% higher than a year ago.
Inflation is eating away at incomes not only in China. Commodity speculators have driven up the price of food worldwide, while transport and energy prices in Britain are set to soar. The inexorable fall in consumer spending power – VAT is going up to 20% in January – can only deepen the contraction.
Desperate times lead to panic measures, as the so-called rescue plan for Ireland’s bankrupt banks shows. Ireland, however, is only an extreme example of the rotten core of the global financial system, which has been on state life support since 2008. All the talk of the dangers of “contagion” and the threat to the euro itself indicates that another crisis-point has been reached.
We are not the first to analyse the destructive side of capitalism. In 1848, Marx and Engels wrote in their Communist Manifesto:
Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells … In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed.
No amount of counter-propaganda against spending cuts can halt the inexorable contraction of the global economy. Avoiding the consequences means that the system must be replaced as a matter of urgency. Today’s general strike in Portugal against budget cuts and student actions in Britain against soaring tuition fees are only flashes of the struggles ahead. Going beyond resistance to putting an end to capitalism is the real challenge.
Gerry Gold
Economics editor
24 November 2010
reposted from www.aworldtowin.net
Showing posts with label capital. Show all posts
Showing posts with label capital. Show all posts
Wednesday, 24 November 2010
Wednesday, 6 October 2010
International currency war under way
The Bank of Japan’s decision yesterday to further reduce its close to zero interest rate looks suspiciously like one of the opening shots in an exchange rate war that will intensify the problems besieging the already weakened major economies.
In dropping below its lower limit of 0.1%, and looking at a small programme of quantitative easing (QE) (aka printing more money), Japan managed to get the yen to fall on currency markets. This has the effect of making its exports cheaper.
But Tokyo didn’t start it. They just followed Brazil’s finance minister who, on Monday, took measures to hold down the value of the real. Guido Mantega warned:
'We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.'
Both Japan and Brazil pre-empted the widely expected “return to QE2” – a sequel to the fading effects of the previous programme of money creation by the now struggling Obama administration. Washington wants the lower dollar to fall to give its exports an edge.
So the alarm bells are ringing at the International Monetary Fund, which is warning that the “recovery” has run out of steam. IMF head Dominique Strauss-Kahn told the Financial Times:
'There is clearly the idea beginning to circulate that currencies can be used as a policy weapon. Translated into action, such an idea would represent a very serious risk to the global recovery.'
It’s not long since world’s leaders in government, banking and finance came together to hammer out the agreements that enabled at least the semblance of a co-ordinated programme of measures designed to restart lending and bring about a return to growth.
Whilst the previous concerted action is credited with averting a financial and economic Armageddon, its effects are best described as a phony recovery. And that is now over. The optimism induced by unprecedented measures couldn’t and didn’t overcome the uncontrollable logic of the capitalist system of production.
The global crisis may have erupted in the financial system but its roots are elsewhere.
Throughout its short period of existence on the planet, the capitalist system has been racked by contradictory forces. Competitive pressures have obliged companies to invest in productivity enhancements which, whilst giving the front runners a temporary advantage, inevitably reduce costs, prices and profits for all.
To offset the tendency for profits to fall, greater volumes of every product have to be cranked out and sold, and the pressure for even more productivity accelerates and accentuates the growing economy.
This irresistible objective logic created the globalising corporations that came to dominate the world. And when the surging millions of cars, computers and mobile phones overwhelmed the market, a house of (credit) cards and mountains of debt were created so that consumers could buy them up. At least until we, and the rest of the economy found ourselves drowning in that very same debt.
Optimism is now being replaced with realism. Cuts in government spending to reduce the budget deficits they’ve accumulated over years of trying to keep growth on track are just one part of the story.
The phony recovery allowed manufacturers to restock their warehouses and showrooms, but there’s still not, and won’t be enough buyers. So the factories that restarted production after the 2008 collapse will go back onto short time and no time.
Competition for the remaining market will sharpen, and the intensification in the rate of exploitation will prove truly shocking, sparking social unrest to match. These are the objective laws which shape the decisions in the boardrooms and in government buildings.
Successful resistance will depend on individuals and communities creating new forms of democracy – People’s Assemblies with the power to terminate the web of contracts and property relationships that tie workers to capitalist employers and ensnare us all in debt. The system of profit-chasing growth must be torn up at its roots. Let’s compost capitalism!
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/
6 October 2010
In dropping below its lower limit of 0.1%, and looking at a small programme of quantitative easing (QE) (aka printing more money), Japan managed to get the yen to fall on currency markets. This has the effect of making its exports cheaper.
But Tokyo didn’t start it. They just followed Brazil’s finance minister who, on Monday, took measures to hold down the value of the real. Guido Mantega warned:
'We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.'
Both Japan and Brazil pre-empted the widely expected “return to QE2” – a sequel to the fading effects of the previous programme of money creation by the now struggling Obama administration. Washington wants the lower dollar to fall to give its exports an edge.
So the alarm bells are ringing at the International Monetary Fund, which is warning that the “recovery” has run out of steam. IMF head Dominique Strauss-Kahn told the Financial Times:
'There is clearly the idea beginning to circulate that currencies can be used as a policy weapon. Translated into action, such an idea would represent a very serious risk to the global recovery.'
It’s not long since world’s leaders in government, banking and finance came together to hammer out the agreements that enabled at least the semblance of a co-ordinated programme of measures designed to restart lending and bring about a return to growth.
Whilst the previous concerted action is credited with averting a financial and economic Armageddon, its effects are best described as a phony recovery. And that is now over. The optimism induced by unprecedented measures couldn’t and didn’t overcome the uncontrollable logic of the capitalist system of production.
The global crisis may have erupted in the financial system but its roots are elsewhere.
Throughout its short period of existence on the planet, the capitalist system has been racked by contradictory forces. Competitive pressures have obliged companies to invest in productivity enhancements which, whilst giving the front runners a temporary advantage, inevitably reduce costs, prices and profits for all.
To offset the tendency for profits to fall, greater volumes of every product have to be cranked out and sold, and the pressure for even more productivity accelerates and accentuates the growing economy.
This irresistible objective logic created the globalising corporations that came to dominate the world. And when the surging millions of cars, computers and mobile phones overwhelmed the market, a house of (credit) cards and mountains of debt were created so that consumers could buy them up. At least until we, and the rest of the economy found ourselves drowning in that very same debt.
Optimism is now being replaced with realism. Cuts in government spending to reduce the budget deficits they’ve accumulated over years of trying to keep growth on track are just one part of the story.
The phony recovery allowed manufacturers to restock their warehouses and showrooms, but there’s still not, and won’t be enough buyers. So the factories that restarted production after the 2008 collapse will go back onto short time and no time.
Competition for the remaining market will sharpen, and the intensification in the rate of exploitation will prove truly shocking, sparking social unrest to match. These are the objective laws which shape the decisions in the boardrooms and in government buildings.
Successful resistance will depend on individuals and communities creating new forms of democracy – People’s Assemblies with the power to terminate the web of contracts and property relationships that tie workers to capitalist employers and ensnare us all in debt. The system of profit-chasing growth must be torn up at its roots. Let’s compost capitalism!
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/
6 October 2010
Wednesday, 12 August 2009
Two years into the crisis and the human toll mounts
Two years ago this week, the global capitalist economy entered uncharted territory. It started with a crisis in the credit markets – the so-called “credit crunch” – and within a year it had led to a precipitate collapse in economic output in all sectors.
The collapse of inter-bank lending in August 2007 was bad enough to prompt senior, respected commentators to declare that “the system” – they only meant the unregulated system of institutions trading in credit-derived financial products – was broken beyond repair. These contagious sentiments expressed a mounting worldwide panic exemplified by the queues of customers outside Northern Rock in the middle of the following month.
Most of the attention then as now is focussed on the financial system. Attempts to prevent the financial crisis turning into a complete meltdown produced the second transformation in the role of the capitalist state since the 1970s.
The first transformation became known as globalisation. The irresistible need of capital for expansion resulted in transnational corporations dictating policy to national governments both directly and via global agencies like the International Monetary Fund and from 1995 the World Trade Organisation.
Lobbyists for corporate interests demanded that regulation and control on the movement of capital be eliminated for all practical purposes, accompanied by an assault on workers’ income and conditions. Civil war conditions were launched against British miners in 1984. The benchmark for wages was set by the transfer of much manufacturing to China where the rate was reduced to as little as a dollar a day. Profits soared.
A series of worsening crises from the mid-nineties onwards gave warning that the years of credit-led growth were reaching their limits and that overproduction was unsustainable. As we said in A House of Cards – from fantasy finance to global crash published in November 2007:
The effects on the real economy are more devastating. As the scale of the worsening crisis unfolds, millions more families are being driven from their repossessed homes, reclaimed by their owners, the banks and other mortgage lenders. Industry after industry is emulating the collapse of car-making worldwide because consumption has shrunk. Today will show that unemployment in the UK has soared to record levels, with young people making up more than a third of those without work.
This dramatic decline in the fortunes of capital changed the role of states once again, obliging them – those that aren’t yet bankrupt – and their central banks to launch a series of attempted rescue packages and the large-scale printing of money. The new bursts of credit designed to enable production to continue will have to repaid by as yet unborn generations of taxpayers, but the best that has been achieved is a temporary slowdown in the rate of deterioration.
The true cost of engineering a return to growth involves the elimination of not just failed banks, but huge swathes of no-longer profitable credit-dependent factories, farms and software houses. Workers facing the consequences will find the cost too great to bear. The system – the capitalist system of production – is broken and the cost of fixing it would be counted not just in closed factories, but in the elimination of rights, of human lives and an inhospitable planet.
This is the moment to prepare the ground for a revolutionary transformation to a society where property is held in common and goods and services are produced to satisfy needs not profits, according to priorities determined through a new democratic process.
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/index.html
The collapse of inter-bank lending in August 2007 was bad enough to prompt senior, respected commentators to declare that “the system” – they only meant the unregulated system of institutions trading in credit-derived financial products – was broken beyond repair. These contagious sentiments expressed a mounting worldwide panic exemplified by the queues of customers outside Northern Rock in the middle of the following month.
Most of the attention then as now is focussed on the financial system. Attempts to prevent the financial crisis turning into a complete meltdown produced the second transformation in the role of the capitalist state since the 1970s.
The first transformation became known as globalisation. The irresistible need of capital for expansion resulted in transnational corporations dictating policy to national governments both directly and via global agencies like the International Monetary Fund and from 1995 the World Trade Organisation.
Lobbyists for corporate interests demanded that regulation and control on the movement of capital be eliminated for all practical purposes, accompanied by an assault on workers’ income and conditions. Civil war conditions were launched against British miners in 1984. The benchmark for wages was set by the transfer of much manufacturing to China where the rate was reduced to as little as a dollar a day. Profits soared.
A series of worsening crises from the mid-nineties onwards gave warning that the years of credit-led growth were reaching their limits and that overproduction was unsustainable. As we said in A House of Cards – from fantasy finance to global crash published in November 2007:
Losses from the financial crisis alone are colossal. Bank write-downs and losses currently total more than $1,500bn. The IMF has predicted losses across the financial services industry could eventually total $4,000bn, or nearly one-third the annual value of US production.“Then on 9 August 2007, the long period of corporate-driven globalisation of the world economy came to an abrupt end. That Thursday, major banks suddenly refused to lend to each other and a ‘credit crunch’ hardened the arteries of the global financial system.”
(free download - http://www.aworldtowin.net/about/HouseOfCards.html)
The effects on the real economy are more devastating. As the scale of the worsening crisis unfolds, millions more families are being driven from their repossessed homes, reclaimed by their owners, the banks and other mortgage lenders. Industry after industry is emulating the collapse of car-making worldwide because consumption has shrunk. Today will show that unemployment in the UK has soared to record levels, with young people making up more than a third of those without work.
This dramatic decline in the fortunes of capital changed the role of states once again, obliging them – those that aren’t yet bankrupt – and their central banks to launch a series of attempted rescue packages and the large-scale printing of money. The new bursts of credit designed to enable production to continue will have to repaid by as yet unborn generations of taxpayers, but the best that has been achieved is a temporary slowdown in the rate of deterioration.
The true cost of engineering a return to growth involves the elimination of not just failed banks, but huge swathes of no-longer profitable credit-dependent factories, farms and software houses. Workers facing the consequences will find the cost too great to bear. The system – the capitalist system of production – is broken and the cost of fixing it would be counted not just in closed factories, but in the elimination of rights, of human lives and an inhospitable planet.
This is the moment to prepare the ground for a revolutionary transformation to a society where property is held in common and goods and services are produced to satisfy needs not profits, according to priorities determined through a new democratic process.
Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/index.html
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
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