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Recession Hits The Capitalist System
NOT LONG ago, Chancellor Gordon Brown suggested that Britain could be isolated from the problems of the world economy. Now he's saying the opposite and using the economy as a stick to beat the firefighters and to prepare other workers for attacks on pay and working conditions.
Twice last week, Brown warned that all's not right with the world economy. "Of the 20 of the world's biggest economies that are or have been in recession", he told Parliament, "the US was in recession for three quarters of 2001, Germany... for three quarters of that year, Japan... for most of the past year".
Because a recession slows down economic activity, governments' tax receipts fall. "As a result", Brown continued, "the world is seeing the largest increases in government deficits around the world since... the 1970s".
Pundits predict that Brown's own forecasts will be out by at least £5 billion, leading to a budget deficit this financial year of £16-£20 billion. Brown will now have to increase government borrowing.
He told the Financial Times: "We've had the sharpest slowdown in world growth since 1974; we've got the fastest deceleration in world trade for more than 20 years... the combination of risks and uncertainties is more numerous than probably at any time in recent economic history".
Capitalism is in an economic crisis; Brown says the biggest since 1974, some others say the biggest since the Great Depression of the 1930s.
The 'irrational exuberance' which boosted capitalist economies in the 1990s, when huge amounts were invested in unproven businesses, leading to huge rises in share prices, is now deep pessimism as much of that money has been lost in calamitous ventures and corporate scandals.
Capitalism exists to make profits, and many of these ventures made only huge losses. Stock markets have fallen dramatically around the world, and where share ownership is closely tied to income growth, particularly in the USA, consumer spending has begun to be reined in.
Alternative forms of funding consumer expenditure, particularly borrowing against the value of homes, has extended this boom a little longer, but not by enough to prevent a capitalist recession and storing up worse problems in the future.
Now, the economic commentators are worrying about a 'double-dip' recession and/or a period of extended low growth and depression in the USA and the rest of the leading world economies.
Globalisation won't help them. The Economist recently pointed out: "The very forces of global integration are likely to synchronise economic cycles more closely, so that downturns in different countries reinforce one another.
"America's economy now looks awfully like Japan's in the early 1990s, when Japanese investment fell but consumer spending and productivity growth remained robust for a couple of years. Deflation did not appear until 1995. America may yet face further troubles".
The bosses' only solution is to make the working class pay for their crisis. But we say make the bosses pay. Fight for a system that puts the interests of the majority before the profits of the few.
In The Socialist 29 November 2002: