'Green shoots' fantasy world

From international speculator George Soros, to the Organisation for Economic Co-operation and Development (OECD), to global stock markets, there is a concerted attempt to declare that the worst of the economic crisis is over. That’ll be no comfort for 244,000 in the UK who have joined the ranks of the unemployed and the thousands of school and university leavers this summer, whose job prospects are the worst for a generation.

The unemployment rate reached 7.1% by the end of March, rising from 6.3% at the end of December, the Office of National Statistics has reported. Unemployment in the first quarter of 2009 rose by the biggest amount since 1981 and the total of 2.22 million without work is the highest since 1996, the year before Labour came to power and will pass 3 million within a year.

One in six 18- to 24-year-olds is now out of work. At 676,000 (16.1% ) the level of youth unemployment is as high as in the mid-1990s. It is up almost one-third on last year; 227,000 under-25s have been without work for over six months. Professor John Philpott, the chief economist at the Chartered Institute of Personnel and Development (CIPD), described the data as "truly appalling". He said: "Youth employment prospects are crumbling. With the toll of job losses falling most heavily on the under-25s it will be a bleak summer and autumn for this year's crop of young talent."

So what is this “green shoots of recovery” nonsense all about? Actually, says the OECD, “the pace of the deterioration is easing” and “severe declines in economic output across the world are moderating”. In plain English, the crisis in the major economies is deepening – but at a slower pace!

Not in China, the world’s third largest economy, however. Exports continue to collapse, while imports of raw materials are in steep decline. Hao Daming, analyst at Galaxy Securities in Beijing weighed in with this: “The trade figures are worse than we expected. We will see exports dropping by at least 20% for the rest of 2009 as uncertain world demand will remain a drag.”

The slump in exports and imports, which has been mirrored across Asia, underscores the dramatic downturn in Western consumer demand. Chinese officials estimate 23 million migrant workers have lost their jobs because of the closure of thousands of export-oriented factories, undermining the hope that domestic demand can reverse the downward trend.

The real story is that the global capitalist economy is on a state-funded life support system. Central Banks in the United States, Europe and Britain are printing money like there is no tomorrow in a desperate bid to keep the financial system alive. With untold sums in toxic, worthless assets still overhanging the financial system, there is still no sign of an end to the credit freeze, however.

Only last week, the Bank of England announced another £50 billion injection in freshly printed money, leading some analysts to suggest that a third wave of bank crashes was on the horizon. A number of mutual building societies are also said to be in trouble because of falling house prices and repossessions.

Meanwhile, large sections of industrial capacity are being wiped out throughout the world, from the Corus steelworks on Teesside to car factories in Detroit as demand melts away. All talk of the “green shoots of recovery” is strictly for the birds and a further indication that capitalist policy makers and politicians inhabit a fantasy world all of their own.

Gerry Gold
Economics editor