Link to this page: https://www.socialistparty.org.uk/issue/213/8615
Icy Blasts Of Recession
THE CHILL wind of a world economic recession is starting to blow across Britain's shores. Whilst recession has not yet hit the finance and service sectors, the crisis in manufacturing is deepening. Engineering and electronics, which initially escaped relatively unscathed, have now been hit.
Initially when the US economy, the engine of world growth, first went into crisis last year, most capitalists claimed confidently that the recession would be short-lived, and would not drag the rest of the world down with it. Now, as the crisis deepens and spreads worldwide, panic is starting to set in.
Far from being a brief crisis, all the factors in the US seem to point to a lengthening and deepening of the recession. Almost a million jobs have been lost since October. Productivity growth has slowed dramatically, dropping 1.2% in the first quarter of this year, the biggest drop since 1993.
First quarter profits for the US's biggest companies fell by 42%, the worst profits for a decade. Falling growth rates and profits have already had a dramatic effect on capitalism's confidence, as shown by the crisis in world banking. In the first six months of 2001 the mergers and acquisitions market (the banks' staple income stream) has fallen by $1.9 trillion, a drop of 42%.
With no end to the US recession in sight, the prospects for capitalism are bleak. As The Economist, the main magazine of finance capital, wrote this week: "Over the past couple of decades, a slump in the United States has usually been offset by a boom in Japan or Western Europe.
"It is alarming, therefore, that the three big economies should now be slipping at the same time... in the three months ending May, the total industrial output of America, the EU and Japan fell by 0.5% on a year earlier, compared with annual growth of more than 6% the previous year. This is the sharpest-ever dive for industrial growth rates within a 12-month span."
The catastrophic slumps in Turkey and Argentina are a warning of what will happen in any number of vulnerable, semi-developed economies as a result of a world recession. Internationally, it will be the working class and oppressed who will suffer the terrible consequences of the crisis. The working class in Britain will not escape.
The Socialist Party, on the basis of a Marxist analysis, has given clear warnings that this recession was looming. Increasingly, even capitalist commentators are seeing the relevance of Marxism. In the Guardian (2 July) Larry Elliott, the Keynesian economist, wonders what Marx would have made of the current crisis. He says:
"The chances are Karl would argue this is a crisis of capitalism amplified by being played out on a global scale. Over-investment and over-production are leading to falling profits, and the traditional remedy - cheaper money - is not working. The only way out will be for companies to boost earnings by cutting costs - either by mothballing capacity, sacking people or driving down wages...
"The Marxist interpretation of globalisation may yet be proved right. Its analysis of the events of the last few years has tended to be more coherent than the Panglossian guff emanating from those who believe that the world economy has never been in better shape."
While it's significant that in the capitalist press, under the impact of events, Marx's analysis of the nature of capitalism is coming into vogue, something far more important is happening among a layer of workers and young people.
Marx famously said that "philosophers have only interpreted the world" but "the point, however, is to change it". Growing numbers of people, although still a minority at this stage, have drawn the conclusion that capitalism doesn't work, and that an alternative system is needed. Under the impact of a world recession far more will reach these conclusions.
As socialists and Marxists we will be campaigning to popularise Marx's alternative to capitalism - a socialist society based on rational planning instead of the profit-driven anarchy of capitalism.
In The Socialist 6 July 2001: