Unsold goods pile up as crash takes its toll

In the wake of the Olympics, countless millions of pairs of trainers lie unsold in warehouses. Thousands of Chinese companies from property developers to car manufacturers sit atop mountains of products surplus to a hoped-for demand that never materialised.

China became the low-wage manufacturing centre of choice for corporations during the credit-induced 30-year frenzy of growth that preceded the crash. The belief that its burgeoning internal market would absorb an ever increasing volume of production added multiple stories to the house of cards that now lies in ruins.

With the global slump worsening and austerity economics stalking the globe, real incomes are dropping fast, so few are spending and consumers are hard to find. The unsold mountains of electronics and white goods are Himalayan in scale.

Earlier this month, China’s main retailers descended into a competitive price war, when online trader 360buy.com announced that it would sell home appliances at a zero profit margin. For capitalist companies zero profit is the end of the line. Clearly only the strongest will survive.

The global economy is spinning out of control tearing apart political and social relations with an unstoppable power that is only equalled by the severe climatic events that are devastating the Midwest and Gulf of America, Myanmar, the Niger, Japan and Korea.

These may appear as random acts of nature but they too are intimately connected to the frenzy of commodity production that has been the feature of the intense, carbon-driven globalisation of the world economy.

Meanwhile, weak demand in the United States and Europe has hit exports of IT services and manufactured goods from India. The credit ratings agencies Fitch and Standard & Poor's have threatened to downgrade the country’s sovereign debt to junk

The European Union, formed as an economic defence against American and Asian competition is now wracked with multiple crises that are tearing it apart. The collapse of unsustainable debt has set a centrifugal force at work between the central richer countries with Germany in the forefront and the poorer peripheral neighbours including Greece, Spain and Portugal and Ireland. 

It is also at work within the sovereign countries themselves. Catalonia is the second of the 17 autonomous communities calling for a bail-out from the central government. Spain’s economy is shrinking fast – at an annual rate of 3.9% in the second quarter. Its banks are seeing a flight of capital, losing €1 out of every €20 deposited with them in July alone as savers see the writing on the wall..

Whilst the countries bankrupted by bailing out the banks are forced to borrow from the money markets at impossibly high rates, cash rich are investors moving their money to the relatively safe havens of Germany, Finland, Denmark, Switzerland, Austria and the Netherlands. But they have to accept negative interest rates and watch the value of their investments fall.

The retreating tide of the global capitalist economy reveals not just mountains of unsellable products, but millions upon millions of workers, now also surplus to requirements.

Employment in Spain rose 4.6% percent over the 12 months that ended June 30, representing the loss of more than 800,000 jobs, taking unemployment to 25%; the speed at which jobs are being destroyed quickened in the second quarter.

As the economic conditions become impossible, many in the country are turning to alternative, social-money projects according to Peter North, a senior lecturer at the University of Liverpool.

“Instead of just being a desperate way for people to survive a horrible economic crisis, this is part of the cooperatives, credit unions, community banks, organic farms and recovering factories — the alternate economy — that the Occupy movement is groping towards.”

There are now more than 325 time banks and alternative currency systems in Spain involving tens of thousands of citizens. Collectively, these projects represent one of the largest experiments in social money in modern times. Harnessing their power and momentum to speed a democratic transformation of political economy along not-for-profit lines would be a tremendous, revolutionary step forward, and not only for Spain.

Gerry Gold
Economics editor