Yet again, in its latest world economic outlook the International Monetary Fund has been forced to cut its forecast for growth worldwide. Even as it casts around for signs of optimism in
Japan and the UK, there is no hiding the profound
corrosion of the global capitalist economy.
As Greek workers take to the streets again protesting against the latest round of slashing cuts in public sector jobs, Athens-based IOBE think tank is predicting that the country’s economy could shrink by as much as another 5% this year.
The Greek economy is now in its sixth year of deepening recession, shrinking 6.4% last year. "Fiscal consolidation and improved competitiveness have not been coupled with successful implementation of the structural reforms programme," said IOBE.
In plain language, it means that cuts in public sector spending, jobs, wages, pensions and working conditions actually have to deepen. They have already reached a point where millions have fallen into deep poverty. Unemployment is set to rise again, from 26.8% at the lat count to nearly 28%.
"As long as the recession persists, the economy isn't only burning fat but also productive tissue," said Nikos Vettas, the new head of IOBE.
But it’s not just
Greece. The ongoing contraction in
the eurozone is worsening. The forecast for the US economy is for it to slow –
especially as the effects of its version of cutting government spending, known
as sequestration, is magnified by the slowing down in the central bank’s credit
expansion programme. This is expected to begin in September and global markets
are already jittery about the consequences.
In summing up its review of country by country and region by region differences Olivier Blanchard, the IMF’s chief economist concludes:
“But you wonder whether there is not something behind. I think behind this is a slowdown in underlying growth – not the cyclical component but just the average rate,” said Blanchard. “It’s clear that these countries [
Brazil, China and Russia] are not going to grow as
fast as they did before the crisis.
“A permanently slower growth rate in big developing countries is likely to have profound repercussions for the world economy and translate into weaker growth for advanced countries as well.”
Blanchard’s concern about
China, in particular, is well
founded. The country’s banks are said to be veering out of control. Bank
exposure to corporate debt has reached $4,200bn. It is rising at a 30% rate,
even as profits contract at a 35% rate.
Ratings agency Fitch says China's public debt may be as high
as 50%-70% of GDP when "correctly counted" and it is unsure whether
the authorities can absorb the looming financial crisis.
So we can be sure that a continuation of the existing world disorder will have disastrous consequences for the majority. For the 99%, who have nothing invested in the capitalist way of doing things, and nothing to lose from its replacement, another model, another way of organising society is certain to prove attractive.
Into the breach, with steps the steps the New Economic Foundation ‘economics as if people and the planet mattered’, which says: “In our model growth is driven by the existence of a gap between the current income levels of firms and their future expenditure plans. Private banks are the only agents capable of filling this gap through the creation of new credit. A confident banking system, willing to grant credit to firms for productive investments, is thus a necessary prerequisite for the economy to prosper.”
But the NEF’s “new model” is the same old credit-and debt fuelled model of capital expansion that opened up the world to rule by global corporations and led to the crash.
What can we learn from the last four decades? Capitalist for-profit production has drawn the world together in an interdependent global network oriented to accumulation and dependent on growth for the benefit of shareholders. By switching to a democratically controlled not-for-profit model of production and distribution we can further develop that interdependence for the benefit of all.