All Arguments for socialism subcategories:
World economy: 'biggest danger to capitalism is capitalism'
Redcar steel plant to close after a century of production, raw material prices collapsing, China's economy slowing, the ongoing euro crisis... Robin Clapp examines the world economy's deepening woes.
Eight years on from the crash that led to the great recession, the global monetary system remains unreformed and unstable. Recovery has been very weak by historical standards.
Yet, despite the euro crisis, worsening instability in the Middle East and now the emerging panic in developing economies as a result of China's slowdown, stock market prices have generally continued to rise.
The reason is simple. The world's main markets have been pumped full of stimulants in the form of quantitative easing (QE), money creation programmes adopted by central banks.
These, coupled with unprecedentedly low interest rates, have been the oxygen masks that have allowed the patient to imagine they are recovering. In reality they now threaten to become triggers for the next economic crisis.
There has been no attempt to redress the main structural problems of the past three decades. The top 10% of US households took almost all of the income gains when the US economy was recovering between 2009 and 2012. The other 90% saw their living standards fall.
Productivity growth in the UK remains chronic as evidenced in a recent damning speech by Bank of England deputy governor Jon Cunliffe: "In the ten years prior to the crisis, growth in the hours worked in the UK economy accounted for 23% of overall economic growth.
"The mainstay of economic growth, the other 77%, came from growth in productivity. Since 2013, only 9% of UK annual economic growth has come from productivity improvement. The remaining 91% has come from the increase in the total hours worked."
Now the IMF warns of an increased risk of a new global financial crash because of the worldwide impact of China's retrenchment and a dramatic decline in world trade which contracted by 8% in the first half of 2015.
It points to instability and recession hanging over economies including Brazil, Turkey, Australia and Malaysia that could knock 3% off global GDP (total output), downgrading its forecast for global growth in 2015 to 3.1% - the weakest performance for six years.
When the US eventually puts interest rates up, households and firms from Indonesia to Turkey that have borrowed trillions of dollars, face sharp rises in interest and repayment costs in terms of their local currencies.
Ominously, figures show that total net capital outflows from the 19 largest emerging market economies in the 13 months to July were almost double the net outflow during the nine months following the 2008 banking collapse.
The great crash of 2007-2009, the still unresolved euro crisis and now the nose-diving of developing economies as the Chinese economic juggernaut stutters, are all feeding off of each other and exposing capitalism's impasse.
These economic uncertainties have forced the US to postpone even a minute rise in interest rates at this stage, in recognition of the dangerous conjuncture of deflationary pressures, tit-for-tat currency devaluations and paralysis that stalk the world economy.
Rarely have so many central banks been so ill-equipped to manage another recession, with almost all having much less room for financial manoeuvre than in 2007.
US factory orders fell more than expected in August and last month business activity in New York contracted for the first time in eight months, evidence that weaknesses in the global economy are washing onto American shores.
This echoed the World Bank's warning that weak consumption, anaemic investment and low inflation could feed on each other in a deflationary spiral, leading to entrenched global stagnation.
No wonder the chief executive of Unilever has warned that "the biggest danger to capitalism is the operation of capitalism itself".
Production for profit can never deliver long term economic stability. Crises like this are not an exception for capitalism, it's the way the anarchic profit system operates.
The only way out is the socialist alternative. The economy can't be left in the hands of big business, which exists only to make a profit.
Instead, workers should own and control the wealth that they produce. Only democratic socialist planning can deliver a stable economy where production is geared to meet people's needs.
Chinese tiger looking mangy
China's slowdown fills the capitalists with dread. It is clear that the slump in the stock market reflects a broader economic tightening, with the official GDP growth rate halving to 7.4% since 2007.
Imports have fallen, while exports have also slowed, despite measures to stimulate growth. In August, activity in China's factories shrank at the fastest pace in almost seven years.
With $4 trillion of foreign currency reserves and interest rates still above 4%, Beijing possesses more economic room for manoeuvre than its western competitors.
But China's deceleration is causing mayhem across the world economy, given its previously insatiable appetite for raw materials which accounted for half the global demand for nickel, aluminium and copper.
The effects have been felt everywhere with the FTSE-Indexed Glencore mining company, which owns a vast array of mines from Chile to Norway, seeing its share price collapse by 40% since May.
Falling prices, caused by a slump in demand for oil and other commodities, have already had knock-on effects for oil and mineral-rich countries that rely on the income from commodity sales and this has been massively reinforced by the faltering performance of China.
Factory-gate prices have fallen across Asia, reflecting excess capacity in industry and making it harder for companies to service the debts they ran up in the boom years.
Recent International Monetary Fund (IMF) research has found that a quadrupling of corporate loans in emerging economies over the decade to 2014 was driven mainly by the flood of cheap QE money made available to quick profit-chasers by western central banks.
Money had flowed into fast-growing developing countries while western interest rates were at rock-bottom, but the possibility of an imminent US rate hike has seen those funds start to flow back out as investors look towards higher-yielding US assets, with the consequence that emerging markets are expected to suffer a net capital outflow this year for the first time since 1988.
Phone our national office on 020 8988 8777
Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206
Regional Socialist Party organisers:
Eastern: 079 8202 1969
East Mids: 077 3797 8057
London: 020 8988 8786
North East: 078 4114 4890
North West 079 5437 6096
South West: 077 5979 6478
Southern: 078 3368 1910
Wales: 079 3539 1947
West Mids: 024 7655 5620
Yorkshire: 077 0671 0041