Any lingering doubts that the global financial crisis of 2007 would presage a deep, worldwide recession evaporated as 2008 opened for business with a quick-fire salvo of bad news for the economy. US manufacturing slumped to its lowest since April 2003, and global manufacturing growth slipped closer to negative territory – contraction – adding to fears that the US recession is spreading.
Despite slowing growth, prices paid by factories worldwide for inputs to their production rose to a six-month high. And that was before the key input, oil, breached the psychological barrier of $100 for a barrel of crude as news of increased tension in Nigeria, a major producer, added to the pressure of increasing global consumption led by China and deepening concerns about the approaching global peak of production.
As the news piles up, house prices drop, food fuel and mortgage repayments rise, where can you go for some explanation, forecasting and even advice? Surely Larry Elliott, The Guardian’s economic's editor for 11 years must have a good handle on events? After all he spends his working life studying these things, no doubt with considerable help from the paper’s staffers.
In a long article uncertainly titled “Is this the Big One”, Elliot takes us on a dance through the contradictory views and opinions of a select group of politicians, accountants, business advisors, professors, bankers and sundry experts about the likelihood that current problems will coalesce into “a perfect storm” in 2008.
Elliott is either confused or he is hedging his bets. Maybe both. Nowhere in the article will you find a hint of his own analysis, if he has one. In the face of so much contradictory evidence and opinion it seems as though Elliott just hasn’t got a clue. Advice for the government? None. Suggestions to the Bank of England? None. Like most of those convinced by the argument that capitalism is the only game in town, he is left floundering when reality departs far from the theories of how it is supposed to work.
But just in case, Larry’s got some advice for us on “How to survive a recession”. And he’s trying to divert your attention from any new ideas for solutions we, or anyone else can come up with. He’s got a copy of A House of Cards. We sent it to him. But, so far, he’s ignored it. His ideas are, in comparison, disappointing. Its all about personal survival. He says: “You and I can't do much more about the economy than we can about the weather.” All we can do is live within our means, minimise our debts, spend less. Fat chance!
The Financial Times looking out through its rosy pink pages, is at least calling for more of the “financial liberalisation” – by which the paper means easy credit - that facilitated the globalisation process, after a survey of economists predicted a dire year for capitalism.
One thing anybody with half an eye on events can see is that the system’s broke and nobody seems to know how to fix it. Most kinds of regulation having been dismantled in the last half-century to remove barriers to corporate profitability. Governments and central banks can do little more than tinker with interest rates and move credit and debt around from one balance sheet to another. And the old medicine just seems to make things worse.
But help is at hand. Just as the previously “alternative” energy principles and technologies have become mainstream in the face of climate change, so our proposals for composting capitalism are beginning to make sense to a lot more people. Join us in London on January 24th for a discussion about creating sustainable alternatives to the market economy.
AWTW economics editor