70 years on - preventing a new apocalypse

Business editors are scouring the world for signs of a recovery. But, despite government intervention to stimulate the credit markets, including the temporary effects of car-scrappage schemes, latest figures show the UK capitalist economy facing its worst nightmare.

Business investment is dropping sharply and debt is being repaid faster than new loans are being issued.

In the second quarter of the year:

• Businesses slashed investment spending at the fastest pace since records began in 1966
• Fixed capital formation fell by 4.5 per cent.
• Business investment for the second quarter of 2009 is estimated to be 10.4 per cent lower than the previous quarter a much sharper decline than the 3.6 per cent expected by economists, and 18.4 per cent lower than the same period last year.

“The further sharp decline in business investment signals serious threats to Britain’s long-term recovery,” said David Kern, chief economist at the British Chamber of Commerce.

“Unless this trend can be reversed, the ... productive capacity of the economy will be damaged, and the country will lack the necessary capital stock to sustain a recovery.”

Business investment has dropped more sharply over the course of the recession than in the downturns of the 1970s, 1980s or 1990s.
Hopes that increased lending is working have been knocked sideways. Consumer spending fell by a further 0.7 per cent in the second quarter, following a 1.3 % drop in the first quarter, and the issue of new credit and debt has gone into reverse. For the first time since records began in 1993 debt is being repaid faster than it is being issued

Figures from the Bank of England show that outstanding loans to companies and individuals declined at a record pace in July. Private non-financial corporations – which form the backbone of the nation’s economy – paid back £8.4bn of debt during the month, a 1.7 per cent overall drop in their bank credit and the largest decline since records began in 1997.

The intertwined worlds of finance and production are locked in a downward spiral, and in the UK at least there is no sign of it ending. Nor can there be any until the credit-induced levels of overcapacity accumulated in the globalisation decades are eliminated. Capital values are deteriorating fast, but must be destroyed outright before there can be a return to profit-led accumulation.

Seventy years ago today the Great Depression of the 1930s turned into armed conflict, as the capitalist powers, aided and abetted by Stalinism, embarked upon an orgy of destruction on a scale unprecedented in history, World War II.

Today, the crisis facing humanity is immeasurably worse as climate change induced by capitalist overproduction threatens life on earth. Wildfires threaten to engulf Los Angeles, famine stalks Ethiopia and Kenya as crops fail, and sea-levels are rising as glacial ice melts.

Millions throughout the world must be mobilised to prevent a return to the demolition of productive resources, lives, cities. This requires the transfer of land, factories, offices and financial institutions into forms of democratically-controlled collective ownership, replacing for-profit production with producing for need in a way that is compatible with sustaining life on this planet.

Gerry Gold
Economics Editor