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.
Gerry Gold
Economics editor
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