Tell Goldman Sachs to get lost

The cracks in the global economy are widening at a hard-to-grasp rate. Contraction is accelerating in Europe, and growth is slowing in the United States and China, the world’s two largest economies.

One of the key measures of the health of the capitalist economy – Markit’s purchasing managers’ index (PMI) for manufacturing in the eurozone – dipped to a four-month low of 46.5 in April. On this measure anything below 50 means contraction. The composite index for Germany, the eurozone’s largest economy, fell sharply to a six-month low.

Banco de Espana, Spain’s central bank estimates that its country’s GDP was 0.5% lower in the first quarter of 2013 than the same period in 2012. One of the consequences is that migration out of Spain is soaring as people desperate for work move to other parts of Europe.

Greece’s economy is expected to contract a further 5% this year, bringing the total since the crash to 25%. Optimists, with no evidence to support them, hope and pray that the decline will stop there.

Debt levels continue to mount. Overall, eurozone sovereign debt rose to 90.6% of economic output (GDP) last year, the highest on record. Of the four eurozone countries receiving bailout funds only Greece saw its debt levels decrease, from 170% of GDP in 2011 to 157%  – still the highest in the EU. Irish, Spanish and Portuguese debt levels all hit euro-era highs last year, with Portugal close to surpassing Italy as the second most indebted nation in the eurozone.  

Despite all the efforts to arrest the contraction by injecting monstrous amounts of fantasy finance they call “quantitative easing”, and imposing austerity budgets to deal with the debt mountains, some are indicating that the game is up. 

President of the European Commission José Manuel Barroso now believes that the assault on living standards through slashing cuts in government expenditure known as austerity “has reached its limits in many aspects”. Revolt throughout Europe has convinced him that “a policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.”

What his next step might be isn’t clear, apart from lowering the European Central Bank’s base interest rate from its current 0.75%, a move that’s been tried and failed in the US and the UK.

And elsewhere, in the world’s largest economies?

The PMI index for the US fell in April to its weakest level since last November. A similar measure for China dipped to a two-month low at a rate that’s just half a per-cent from contraction territory.

It’s no wonder that the world’s governments are impotent. There are powers greater than all of them. Some 97 of the top 100 multinational corporations pay no corporation tax. So when Goldman Sachs’ chairman and chief executive Lloyd Blankfein says the UK government has to stick to austerity or face the wrath of the markets, you know who actually decides the country’s economic policy.

Amidst the crisis, there’s the best ever opportunity to move to something much better. The capitalist “mode of production”, as Marx called it, has nurtured the social forces who, as he also wrote, have nothing to lose but a world to win. 

For the 99% the question is not how to bring about a recovery for the capitalist system. The best of the global elites have applied their minds to this task and have patently failed.

Instead, let’s look to co-operative, collectively-owned democratically-run productive enterprises like Mondragon in Spain, founded in 1956 and the brand new Vio.me in Northern Greece. These are models we can develop throughout the rest of the economy when we achieve the power to do so. We could begin by telling Goldman Sachs to take a running jump.

Gerry Gold

Economics editor