Analysts are at work trying to minimise the damage to the profitability of the capitalist system from the disaster in Japan. Never mind the towns and villages cut off from all contact without access to food or medical supplies or facing radiation poisoning - the bottom line is the priority.
Big business and the markets are asking what will be the net effect on the oil price if revolution erupts in Saudi Arabia, cutting its production, but demand in Japan falls? And what will that do to the prospects of a global double-dip recession?
In Japan, ports, airports, highways and most manufacturing plants have closed, and the government has predicted “considerable impact on a wide range of our country’s economic activities”.
The damage to nuclear reactors is beyond the worst of the worst case predictions. Eleven reactors are shut down, at least four are broken beyond repair. Swathes of economic activity are at a standstill, and more will follow. Oil imports are bound to soar, adding to the country’s crisis.
Japan is the world’s third largest national economy, having slipped behind China after two decades of unremitting recession. Throughout the period production by world famous brands like Sony, Mitsubishi, Toyota has been kept afloat on an ocean of debt.
After a series of failed attempts to kick start a return to growth, its accumulated national debt was already by far the world’s highest at 225% of gross domestic product. Government income from taxes covers less than half the budget, and pension funds are becoming net sellers of bonds to meet payouts to the elderly.
The Bank of Japan has made 21.8 trillion yen ($US265 billion) available to financial institutions and doubled its asset-buying program to 10 trillion yen, but it hasn’t been enough to stop a global collapse of share values. Japan’s banks are now vulnerable because of the subsequent fall in the value of their equity assets.
As the Financial Times reported: “Economists generally welcomed the central bank’s move as a measure to quell potential panic over access to funds in the wake of a major disaster. But some said the liquidity injection was not likely to be enough to counter the negative impact of the quake and tsunami on the Japanese economy, already weakened by a strong yen and deflationary pressures.”
As the tragedy unfolds, those who operate in the financial markets are weighing their options. Their only concerns are for how money can be made out of the destruction. Reconstruction will need to be funded from somewhere, and that means a big expansion of credit –at a price.
The cost of further borrowing is already on the rise as lenders pile the pressure on the distressed country, just as they are doing in Portugal (whose debt was downgraded last night), Ireland (desperately seeking to renegotiate its bail-out) Greece (paying a staggering 13% to borrow on the bond markets) and Spain (which needs an estimated €130 billion to recapitalise its banks).
The movement of the earth’s crust, hidden from view, has brought two things into even sharper relief:
- continued pursuit of a for-profit system of growth fuelled by oil and nuclear power is simply not sustainable.
- the historic necessity of creating a not-for-profit society in which people produce what they need in a way which repairs the damage to the planet’s eco-system resulting from decades of corporate exploitation.
Today’s unemployment figures in Britain, showing a 17-year high at over 2.5 million, add to the urgency to create an alternative path for humanity in every country.