Some economists are saying that the recession is officially over. Well, we know these same “experts” were caught with their trousers down before last autumn’s meltdown, (being re-enacted on television tonight) even while lesser mortals like A World to Win were warning about the collapse of the financial house of cards.
And, evidence has emerged about how near things came to within a squeak of complete financial breakdown. According to insider Hector Sants, chief executive of the Financial Services Authority, the FSA was ready to close RBS and HBOS cash machines and stop the banks taking deposits or allowing withdrawals.
But what about now - is it true that “the UK economy is on course for positive growth”? Here is the reasoning advanced by the National Institute for Economic Research, for example and other so-called experts.
• Manufacturing output has risen. But this is boosted by government subsidies to people who trade in their old bangers, and it cannot last.
• Big mergers and acquisitions in the City. Well, yes, some people in the boardrooms may be happy, but mergers are inevitably followed by huge job losses and they are a sign of weakening markets.
• The housing market “has stabilised”. That’s no comfort to those who can’t keep up their mortgage payments because they have lost their jobs and young people who can’t find an affordable home.
Underneath the small rises in output and spending is a massive black hole of debt and soaring unemployment. The UK budget deficit will reach £175 billion by this March, the biggest shortfall since World War II and among the worst in the developed economies.
Moody’s the financial ratings agency, has spelled out the need for a “severe adjustment of fiscal policies” if the government is to be able to continue to borrow on the money markets without punitive interest rates. In plain English, this is a call for massive cuts in public services, and government spending of all kinds. Which will affect the poor, the young, the elderly and the vulnerable most of all.
The underlying economic conditions which lay behind the financial meltdown have in no way improved. The manufacturing powerhouse of the global economy, China, has already cut back dramatically resulting in huge job losses and political unrest.
It used to be said that if America catches a cold, Europe comes down with pneumonia. Well, nowadays, it’s China which has a fever and the rest of the global economy goes into depression. And the UK is worst positioned for recovery, due to its emphasis on the financial sector and service industries
The political consequences? They are being spelled out behind the scenes at the exclusive Ambrosetti forum, the Italian version of the Davos club of businessmen and political leaders. The meeting is held annually in a luxury villa on the shores of the beautiful Lake Como. Some participants didn’t mince their words:
“Rising unemployment, the return of bankers’ bonuses public spending cuts, could provoke an ugly political backlash next year 2010 – we risk a real revolt on the part of our people”, said one participant.
Conservative leader David Cameron is busy fastening on widespread popular contempt for Parliament by trumpeting Tory plans for real cuts in major services, which will provoke the resistance that the gathering on Lake Como is concerned about.
It is this scenario which lies behind New Labour effectively throwing in the towel and will let the Tories romp back into government. We have been warned and better get ready for the tumultuous, unstable political and social landscape that is certain to emerge in Britain and other countries.
Corinna Lotz
A World to Win secretary
For revolutionary solutions to create a sustainable, not-for-profit economy in place of global capital alongside a real democracy based on People’s Assemblies. Visit our web site at www.aworldtowin.net
Showing posts with label green shoots. Show all posts
Showing posts with label green shoots. Show all posts
Wednesday, September 09, 2009
Wednesday, May 27, 2009
Lies, damned lies and statistics
Apparently the number of people imagining that there will be more jobs available in the next six months in the United States has increased. This measure of “confidence” sent markets soaring yesterday. But these are the kinds of reports that sustain the now-fading springtime images of economic green shoots. Those who believe them should be warned about too much optimism.
The real story can be found in a variety of statistics and stark lines charting the continuing relentless descent of every part of the global economy. The latest chapter in the slow, drawn-out death of the US car industry sees Chrysler already officially bankrupt, and GM in its last days. The Union of Auto Workers is busy signing cost-cutting deals they hope will save some jobs. Canadian GM employees have accepted pay cuts of 30% in an attempt to keep plants open in Ontario.
With falling incomes for those in work and increasing unemployment there won’t be much spare cash around to sustain spending in North America. Japanese parts and machine tool suppliers are getting worried. According to Ikuo Mori, CEO of Fuji Heavy Industries. “Whatever happens to GM, the impact on the overall (U.S.) economy is going to be huge and it's going to hurt demand."
Standard and Poor’s Case-Shiller index of US home prices since the peak in 2006 – when the effects of the crisis first began to be felt – shows that the deterioration is accelerating. US home prices fell a record 19.1% in the first three months of this year. From the peak, they are down 32.2%. "We see no evidence that that a recovery in home prices has begun," said David Blitzer, chairman of the committee which compiles the index.
No green shoots there, then.
How about Japan and Germany? These two countries hosting major manufacturing corporations became heavily dependent on exports to the rest of the world as a consequence of globalisation. This chart shows Japan’s production, domestic consumption and exports since 2004. It’s been pretty much downhill all the way, and catastrophically so since the end of 2007.
The next one zooms in on Japan’s exports and capital investment over the last year, quarter by quarter.
Note the steady decline in capital investment approaching -40% as exports shrink by more than 70%. Measured by the market value of all final goods and services, Japan was the world’s second biggest producer in 2008 after the US and China, so it’s very important as an indicator of the health of the global economy.
Green shoots? Where? Germany, perhaps? The rest of Europe?
Germany was in fourth position in 2008. In the first quarter of this year, German exports and investment were in free fall, dropping by 9.7 per cent and 7.9 per cent compared with the previous three months. Industrial orders in the Eurozone in March were almost 27 per cent lower than a year before.
These are all quantitative indicators of a deepening crisis with no bottom in sight. At a certain point, quantitative limits are reached and qualitative changes must occur. This is a universal law of nature.
There are two possibilities contained within the contradictory, fast approaching historical moment. In its strange, insane way, retaining capitalist production as the organising principle of society requires the destruction of productive capacity on a scale to match the surplus built up by decades of ballooning credit-led investment.
The other choice is for social ownership and democratic control of the world’s productive resources, creating the things we need to survive in a sustainable way that protects the environment. When you think about it, the choice is obvious.
Gerry Gold
Economics editor
The real story can be found in a variety of statistics and stark lines charting the continuing relentless descent of every part of the global economy. The latest chapter in the slow, drawn-out death of the US car industry sees Chrysler already officially bankrupt, and GM in its last days. The Union of Auto Workers is busy signing cost-cutting deals they hope will save some jobs. Canadian GM employees have accepted pay cuts of 30% in an attempt to keep plants open in Ontario.
With falling incomes for those in work and increasing unemployment there won’t be much spare cash around to sustain spending in North America. Japanese parts and machine tool suppliers are getting worried. According to Ikuo Mori, CEO of Fuji Heavy Industries. “Whatever happens to GM, the impact on the overall (U.S.) economy is going to be huge and it's going to hurt demand."
Standard and Poor’s Case-Shiller index of US home prices since the peak in 2006 – when the effects of the crisis first began to be felt – shows that the deterioration is accelerating. US home prices fell a record 19.1% in the first three months of this year. From the peak, they are down 32.2%. "We see no evidence that that a recovery in home prices has begun," said David Blitzer, chairman of the committee which compiles the index.
No green shoots there, then.
How about Japan and Germany? These two countries hosting major manufacturing corporations became heavily dependent on exports to the rest of the world as a consequence of globalisation. This chart shows Japan’s production, domestic consumption and exports since 2004. It’s been pretty much downhill all the way, and catastrophically so since the end of 2007.
The next one zooms in on Japan’s exports and capital investment over the last year, quarter by quarter.
Note the steady decline in capital investment approaching -40% as exports shrink by more than 70%. Measured by the market value of all final goods and services, Japan was the world’s second biggest producer in 2008 after the US and China, so it’s very important as an indicator of the health of the global economy.
Green shoots? Where? Germany, perhaps? The rest of Europe?
Germany was in fourth position in 2008. In the first quarter of this year, German exports and investment were in free fall, dropping by 9.7 per cent and 7.9 per cent compared with the previous three months. Industrial orders in the Eurozone in March were almost 27 per cent lower than a year before.
These are all quantitative indicators of a deepening crisis with no bottom in sight. At a certain point, quantitative limits are reached and qualitative changes must occur. This is a universal law of nature.
There are two possibilities contained within the contradictory, fast approaching historical moment. In its strange, insane way, retaining capitalist production as the organising principle of society requires the destruction of productive capacity on a scale to match the surplus built up by decades of ballooning credit-led investment.
The other choice is for social ownership and democratic control of the world’s productive resources, creating the things we need to survive in a sustainable way that protects the environment. When you think about it, the choice is obvious.
Gerry Gold
Economics editor
Wednesday, May 13, 2009
'Green shoots' fantasy world
From international speculator George Soros, to the Organisation for Economic Co-operation and Development (OECD), to global stock markets, there is a concerted attempt to declare that the worst of the economic crisis is over. That’ll be no comfort for 244,000 in the UK who have joined the ranks of the unemployed and the thousands of school and university leavers this summer, whose job prospects are the worst for a generation.
The unemployment rate reached 7.1% by the end of March, rising from 6.3% at the end of December, the Office of National Statistics has reported. Unemployment in the first quarter of 2009 rose by the biggest amount since 1981 and the total of 2.22 million without work is the highest since 1996, the year before Labour came to power and will pass 3 million within a year.
One in six 18- to 24-year-olds is now out of work. At 676,000 (16.1% ) the level of youth unemployment is as high as in the mid-1990s. It is up almost one-third on last year; 227,000 under-25s have been without work for over six months. Professor John Philpott, the chief economist at the Chartered Institute of Personnel and Development (CIPD), described the data as "truly appalling". He said: "Youth employment prospects are crumbling. With the toll of job losses falling most heavily on the under-25s it will be a bleak summer and autumn for this year's crop of young talent."
So what is this “green shoots of recovery” nonsense all about? Actually, says the OECD, “the pace of the deterioration is easing” and “severe declines in economic output across the world are moderating”. In plain English, the crisis in the major economies is deepening – but at a slower pace!
Not in China, the world’s third largest economy, however. Exports continue to collapse, while imports of raw materials are in steep decline. Hao Daming, analyst at Galaxy Securities in Beijing weighed in with this: “The trade figures are worse than we expected. We will see exports dropping by at least 20% for the rest of 2009 as uncertain world demand will remain a drag.”
The slump in exports and imports, which has been mirrored across Asia, underscores the dramatic downturn in Western consumer demand. Chinese officials estimate 23 million migrant workers have lost their jobs because of the closure of thousands of export-oriented factories, undermining the hope that domestic demand can reverse the downward trend.
The real story is that the global capitalist economy is on a state-funded life support system. Central Banks in the United States, Europe and Britain are printing money like there is no tomorrow in a desperate bid to keep the financial system alive. With untold sums in toxic, worthless assets still overhanging the financial system, there is still no sign of an end to the credit freeze, however.
Only last week, the Bank of England announced another £50 billion injection in freshly printed money, leading some analysts to suggest that a third wave of bank crashes was on the horizon. A number of mutual building societies are also said to be in trouble because of falling house prices and repossessions.
Meanwhile, large sections of industrial capacity are being wiped out throughout the world, from the Corus steelworks on Teesside to car factories in Detroit as demand melts away. All talk of the “green shoots of recovery” is strictly for the birds and a further indication that capitalist policy makers and politicians inhabit a fantasy world all of their own.
Gerry Gold
Economics editor
The unemployment rate reached 7.1% by the end of March, rising from 6.3% at the end of December, the Office of National Statistics has reported. Unemployment in the first quarter of 2009 rose by the biggest amount since 1981 and the total of 2.22 million without work is the highest since 1996, the year before Labour came to power and will pass 3 million within a year.
One in six 18- to 24-year-olds is now out of work. At 676,000 (16.1% ) the level of youth unemployment is as high as in the mid-1990s. It is up almost one-third on last year; 227,000 under-25s have been without work for over six months. Professor John Philpott, the chief economist at the Chartered Institute of Personnel and Development (CIPD), described the data as "truly appalling". He said: "Youth employment prospects are crumbling. With the toll of job losses falling most heavily on the under-25s it will be a bleak summer and autumn for this year's crop of young talent."
So what is this “green shoots of recovery” nonsense all about? Actually, says the OECD, “the pace of the deterioration is easing” and “severe declines in economic output across the world are moderating”. In plain English, the crisis in the major economies is deepening – but at a slower pace!
Not in China, the world’s third largest economy, however. Exports continue to collapse, while imports of raw materials are in steep decline. Hao Daming, analyst at Galaxy Securities in Beijing weighed in with this: “The trade figures are worse than we expected. We will see exports dropping by at least 20% for the rest of 2009 as uncertain world demand will remain a drag.”
The slump in exports and imports, which has been mirrored across Asia, underscores the dramatic downturn in Western consumer demand. Chinese officials estimate 23 million migrant workers have lost their jobs because of the closure of thousands of export-oriented factories, undermining the hope that domestic demand can reverse the downward trend.
The real story is that the global capitalist economy is on a state-funded life support system. Central Banks in the United States, Europe and Britain are printing money like there is no tomorrow in a desperate bid to keep the financial system alive. With untold sums in toxic, worthless assets still overhanging the financial system, there is still no sign of an end to the credit freeze, however.
Only last week, the Bank of England announced another £50 billion injection in freshly printed money, leading some analysts to suggest that a third wave of bank crashes was on the horizon. A number of mutual building societies are also said to be in trouble because of falling house prices and repossessions.
Meanwhile, large sections of industrial capacity are being wiped out throughout the world, from the Corus steelworks on Teesside to car factories in Detroit as demand melts away. All talk of the “green shoots of recovery” is strictly for the birds and a further indication that capitalist policy makers and politicians inhabit a fantasy world all of their own.
Gerry Gold
Economics editor
Wednesday, April 15, 2009
Green shoots in Finaghy
Governments and central banks throughout the world have been struggling with a myriad of unco-ordinated measures to deal with the global financial crisis that has triggered a precipitate fall in output and rising unemployment.
They are trying to lubricate seized-up markets while pouring trillions of their various currencies into the banks to prevent a systemic collapse.
New bursts of credit have been issued to stimulate demand for consumer goods which has all but collapsed. Every announcement of a new rescue package places the price to be paid by future generations further beyond calculation.
The spin is that this is beginning to work and that if you examine the economy for signs of life, you will see “green shoots of recovery”.
But reality has a disturbing habit of disappointing the hopeful. Yesterday, on the same day as Barack Obama’s headlining claim that US government action on the economy was starting to bear fruit, figures were released on consumer spending for March.
Retail sales in the US were much weaker than forecast, falling 1.1%per cent, rather than rising the predicted 0.3 per cent. This takes the decline to 9.4 per cent in a year. Not much sign of an improvement there.
Obama understands, or at least acts as though he understands, that without continuous increases in the volume of credit relative to the value of production, the social system built to service the inbuilt self-expansion of capital would have seized up decades ago.
With a pattern of thought informed by pragmatism, the American version of English empiricism, the argument goes: it - new and expanded forms of credit - worked before to dig us out of the, albeit accelerating reoccurrence of crises towards and after the end of the 20th century, and it’ll work again.
It has to, they say. It always has, always will.
Anticipating the self-created dream of capital’s recovery to profitability, and in the wake of the empty rhetoric from the G20, Willem Buiter, one of the Financial Times’ more forthright, upfront writers had already put it like this a week ago: “The green shoots are weeds growing through the rubble in the ruins of the global economy.”
But even this is hope built upon hope. The potential is for greater damage than the state bankruptcy in the US and the UK that Buiter considers possible. It happened for both countries during the Great Depression of the 1930s, he says, and it could happen again.
Buiter’s analysis too is based on historical precedent, but the last 30 years of credit-led capitalist exploitation of people and the planet have created a deeper and more profoundly damaging, global impasse.
There are a set of inter-related, self-feeding and mutually conditioning crises that are eating away at the ecological, social, political, economic and financial systems and processes of the world.
For example, at the same time as the world’s major banks have actually become insolvent, without the assets to meet their obligations, climate change has already reached a tipping point.
The scale of the current planetary emergency is beyond the capacity of existing measures. Totting up the total overhang of accumulated credit, or even the geometrically accelerating causes and effects of climate change get nowhere near it.
So are there grounds for optimism? Yes there are, but not for Obama or Brown, nor for any of the political or executive representatives of unsustainable capital.
The green shoots can be seen in the wave of occupations that will no doubt follow the example set by Visteon car part workers in the former Ford plants in Enfield, Basildon and on the Finaghy Road, in Belfast.
One Belfast trade unionist, commenting on the ordinariness of where things begin, is reported to have said, “Who’d have thought the revolution would begin in Finaghy… !?”
Gerry Gold
Economics editor
They are trying to lubricate seized-up markets while pouring trillions of their various currencies into the banks to prevent a systemic collapse.
New bursts of credit have been issued to stimulate demand for consumer goods which has all but collapsed. Every announcement of a new rescue package places the price to be paid by future generations further beyond calculation.
The spin is that this is beginning to work and that if you examine the economy for signs of life, you will see “green shoots of recovery”.
But reality has a disturbing habit of disappointing the hopeful. Yesterday, on the same day as Barack Obama’s headlining claim that US government action on the economy was starting to bear fruit, figures were released on consumer spending for March.
Retail sales in the US were much weaker than forecast, falling 1.1%per cent, rather than rising the predicted 0.3 per cent. This takes the decline to 9.4 per cent in a year. Not much sign of an improvement there.
Obama understands, or at least acts as though he understands, that without continuous increases in the volume of credit relative to the value of production, the social system built to service the inbuilt self-expansion of capital would have seized up decades ago.
With a pattern of thought informed by pragmatism, the American version of English empiricism, the argument goes: it - new and expanded forms of credit - worked before to dig us out of the, albeit accelerating reoccurrence of crises towards and after the end of the 20th century, and it’ll work again.
It has to, they say. It always has, always will.
Anticipating the self-created dream of capital’s recovery to profitability, and in the wake of the empty rhetoric from the G20, Willem Buiter, one of the Financial Times’ more forthright, upfront writers had already put it like this a week ago: “The green shoots are weeds growing through the rubble in the ruins of the global economy.”
But even this is hope built upon hope. The potential is for greater damage than the state bankruptcy in the US and the UK that Buiter considers possible. It happened for both countries during the Great Depression of the 1930s, he says, and it could happen again.
Buiter’s analysis too is based on historical precedent, but the last 30 years of credit-led capitalist exploitation of people and the planet have created a deeper and more profoundly damaging, global impasse.
There are a set of inter-related, self-feeding and mutually conditioning crises that are eating away at the ecological, social, political, economic and financial systems and processes of the world.
For example, at the same time as the world’s major banks have actually become insolvent, without the assets to meet their obligations, climate change has already reached a tipping point.
The scale of the current planetary emergency is beyond the capacity of existing measures. Totting up the total overhang of accumulated credit, or even the geometrically accelerating causes and effects of climate change get nowhere near it.
So are there grounds for optimism? Yes there are, but not for Obama or Brown, nor for any of the political or executive representatives of unsustainable capital.
The green shoots can be seen in the wave of occupations that will no doubt follow the example set by Visteon car part workers in the former Ford plants in Enfield, Basildon and on the Finaghy Road, in Belfast.
One Belfast trade unionist, commenting on the ordinariness of where things begin, is reported to have said, “Who’d have thought the revolution would begin in Finaghy… !?”
Gerry Gold
Economics editor
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