Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: https://www.socialistparty.org.uk/issue/643/10451

From The Socialist newspaper, 20 October 2010

World economy heading for 'double-dip' recession

THE WORLD economy grew by only 2.8% in 2008 and shrank, for the first time for over 65 years, by 0.6% in 2009, while the economies of the advanced capitalist countries shrank by 3.2% on average.

Per-Åke Westerlund, Rättvisepartiet Socialisterna (CWI in Sweden)

Only the biggest ever rescue packages prevented the crisis from becoming as serious as the Great Depression of the 1930s. The International Monetary Fund (IMF) has instead named it the "Great Recession", underlining its difference to other recessions.

Capitalism has come back from a near-death experience. In the US the longest recession since 1929 did not end until June of this year. However, what is now clear is that the stimulus package was too limited to be sustainable and governments, now conducting massive austerity programmes, are deepening the crisis.

Before the recent IMF and World Bank summit in Washington, with finance ministers and central bank bosses from 187 countries, the IMF presented an updated World Economic Outlook (WEO) saying "downside risks remain elevated". The recovery in the advanced capitalist countries is at "a low rate considering that they are emerging from the deepest recessions since World War Two". Global output is still below the level of 2008.

Growth during 2010 has been dependent on stimulus measures and on capitalists restocking industry. But overcapacity is still widespread, investments low and unemployment very high. The IMF estimates global unemployment at 210 million, 30 million higher than three years ago.

The WEO prognosis is that global growth will slow down next year. For the advanced economies (the US, Western Europe, Japan and a few more) from 2.7% this year to 2.2% next year. For the emerging countries, with China in the lead, from 7.1% to 6.4%. The latter countries have considerably higher growth but the IMF warns of their high dependence on exports.

Growth in the US fell in the second quarter to 1.6%, and will most likely be 1% or lower in the second half of this year. State subsidies - 'cash for clunkers', investment support, environment bonuses, etc - have ceased. The housing sector in the US is already in a 'double-dip' recession, with house sales close to all-time low.

Most economists are predicting long-term weak economic growth in the US and a growing number say a new downturn is most likely.

Bankers saved

Most of the western governments' 'savings packages' since 2008 have aimed to save the banks. They are now the world's leading 'state aid addicts', a description neoliberals use for pensioners or the unemployed. Bonuses and profits on Wall Street, and in the City of London etc, have been financed by state deficits.

The European Central Bank (ECB) has a 24/7 emergency offer of liquidity for banks and has bought state bonds to a value of €63.5 billion. In Ireland, the government is guaranteeing the capital of all "savers" and "investors", including foreign and domestic speculators while cutting public sector wages by 15%.

The IMF calculates that loans worth $4,000 billion are to be renewed in the coming two years and points to European banks as particularly in danger. The banks, according to the IMF, need to write off loans worth $2,200 billion.

Who should pay?

Governments in Greece, Portugal, Spain and Ireland have been pressurised to adopt brutal crisis programmes by those international capitalists who speculated in these countries in order to make enormous profits. Wages, pensions, child benefits, public expenditure and jobs have been slaughtered. But the capitalists have tasted blood; they aggressively see the crisis as a golden opportunity to attack the conditions of the working class.

The IMF concludes the advanced economies "need to strengthen household balance sheets, stabilise and subsequently reduce high public debt, and repair and reform their financial sectors". But to cut both the debts and stimulate growth is an impossible task, like driving forward and reversing at the same time.

In practice, the line of the capitalists and their IMF means stimulus for banks and big business, but cuts and neoliberal 'reforms' for the rest.

However, even the IMF has to admit that austerity hits the economy. This is the main reason the economies of Spain, Ireland, Portugal and the Baltic states are shrinking. And if more states cut their budgets, it increases the depressing effect on the world economy.

Unorthodox measures

What should governments do, when interest rates are already zero and stimulus packages are ending but demand, as well as growth, remains weak? The IMF is now expecting the US central bank, the Federal Reserve, to start a second round of 'unconventional measures', or 'quantitative easing'. This means the Fed will grant itself billions of dollars to buy state bonds (IOUs).

This is hocus pocus on a high scale. "No one is sure whether or how quantitative easing and other unorthodox monetary policies work", the Financial Times concluded on 6 October. The IMF has a similar position: "Relatively little is known about the effectiveness of unconventional monetary easing measures and fiscal tightening". The most likely result is that both interest rates and the dollar will drop, benefitting US exports. Whether it will increase demand in the US is more doubtful, since crisis measures tend to make both households and companies more careful.

Rebalancing?

Most economists link their hopes for a real recovery in the world economy to a changed balance between the states. Countries with high savings - firstly China, Germany and Japan - should consume more. China's big surplus against the rest of the world is pointed to, as a culprit for global imbalances.

There are, however, two driving forces behind the imbalance - China's investments, production and exports as well as the credit-driven deficits of the US. The fact that big business in the US and Europe has moved production to China and that imported consumer products in the West have become cheaper, are important parts in this symbiosis.

But changing this imbalance is not easy. The IMF admits: "Over the medium term, however, domestic demand [in emerging economies] is unlikely to be strong enough to offset weaker demand in advanced economies, and global rebalancing is therefore projected to stall".

To change the balance in the world economy would, in other words, require slow growth in China, India and other countries with the strongest growth in 2010.

Capitalist economists seemingly agree that this crisis lacks parallels; that the recovery is very vulnerable, and it's the working class who should pay the bill. For socialists, the task is to explain that there is no capitalist way out - the system has to be replaced through a conscious and organised workers' movement. The crisis and exploitation of capitalism has to be replaced with democratic socialism.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 20 October 2010:


Anti-cuts campaign

Fight all cuts in jobs and services

Build coordinated action to stop cuts

Workers under attack


Socialist Party news and analysis

NHS: Not safe in Con-Dem hands

Coventry jobs slaughter - unions must fight back

Government slams door shut on social housing

Osborne mugs poor to pay for rich

Cambridge Uni to go private?


Socialist Students

Mass action needed to defeat fees and cuts

Warwick university - students condemn escalation of fees

Leeds university - protest following Browne review


Socialist Party workplace news

Huge demo against passport office closure in Newport

RMT executive election: Support Lewis Peacock

Fighting the anti-union laws

Police try to stifle Trade Unionist and Socialist Coalition protest

Strike forces concessions at Tyneside Safety Glass

Workplace news in brief


International socialist news and analysis

Protest, strike, fightback! French workers and youth challenge cuts

World economy heading for 'double-dip' recession


Socialism 2010

Socialism 2010: ideas to fight the cuts


Socialist Party reviews

Days of Hope by Jim Allen, reviewed by Leigh Cartwright

Enter Shikari - Common Dreads (album 2009)


Sport

Liverpool FC: "They don't care about fans!"


 

Home   |   The Socialist 20 October 2010   |   Join the Socialist Party

Subscribe   |   Donate  




Related links:

World economy:

triangleBuilding workers' struggle and the forces of international socialism

triangleBuild 100 days of resistance to Trump's agenda!

triangleSocialist Party national congress 2016

Recession:

triangleSocialist Students launched in USA

Economy:

triangleTory infighting escalates - workers' action can oust them

triangleAmber warning lights flash on British economy

trianglePowerful picture of the Port Talbot steel workers' struggle

IMF:

triangleZimbabwe: Mugabe gone - but his regime remains in power

triangleIMF helps cause inequality it slams

US:

triangleThe Socialist inbox

China:

triangleMay's silence is a green light for Chinese repression

Banks:

triangleCapita in crisis: bring all outsourcers back in-house

Capitalist:

triangle90 feared dead after migrant boat capsizes

News and socialist analysis

News and socialist analysis

19/2/18

Election

Usdaw victory - Socialist Party member Amy Murphy wins presidential election

14/2/18

Tamil Solidarity

Tamil youth march for justice

14/2/18

Foreign Aid

Oxfam scandal: we need democratic aid and working class solidarity

14/2/18

TUSC

Building support for Corbyn's anti-cuts policies in the local elections

14/2/18

EU

What we saw: Tory-Blairite EU love-in

14/2/18

Rents

Rent doubles in a decade: cap rents, build council homes!

14/2/18

Public ownership

McDonnell says Labour would put services 'irreversibly' in workers' hands

14/2/18

NHS

We can win the fight for the NHS

7/2/18

Labour

NHS - build the fightback

7/2/18

Labour

Corbyn's left must seize the advantage in Labour's civil war

7/2/18

Haringey

Haringey: now's our chance for a no-cuts council

7/2/18

Refugees

90 feared dead after migrant boat capsizes

7/2/18

Outsourcing

Capita in crisis: bring all outsourcers back in-house

7/2/18

Trump

Trump v NHS

31/1/18

NHS

NHS: use the 3 February protests as a launch pad for a mass movement

triangleMore News and socialist analysis articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party
Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

LATEST POSTS

CONTACT US

Phone our national office on 020 8988 8777

Email: info@socialistparty.org.uk

Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206

Regional Socialist Party organisers:

Eastern: 0798 202 1969

East Mids: 0773 797 8057

London: 020 8988 8786

North East: 0191 421 6230

North West 07769 611 320

South East: 020 8988 8777

South West: 07759 796 478

Southern: 07833 681910

Wales: 07935 391 947

West Mids: 02476 555 620

Yorkshire: 0114 264 6551

ABOUT US

ARCHIVE

Alphabetical listing


February 2018

January 2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999