Is the crisis over?
THE STOCK MARKET CRASH of 1987 seemed to many to signal the onset of a serious recession. The recovery from the
USSR / GERMANY many by West Germany have on the concrete economic situation?
Analysts surprised by duration of upturn
From analysis of the cyclical develop ment of the FRG since 1948 we can draw
1987 shock has given the impression that in some way the crisis of the international capitalist economy is over, an impression further strengthened by comparisons with the disintegration of the "command planning" economies. The euphoria over the "victory of capitalism" currently finds its most concentrated expression in Germany. In the following article, first published in the German socialist weekly,
Sozialistische Zeitung of June 7, 1990, Winfried Wolf looks at the sources and limits of the prolonged period of growth.
WINFRIED WOLF
HE
CAPITALIST business
T cycle is not dead. We have this on the best authority - that of a
June 1989 study from the big business orientated Institut der Deutschen Wirtschaft (IW - Institute of Ger-
Economy). The report looked at man economic development since the 1960s and concluded: "It cannot be said that the business cycle has been overcome.
Overall economic development contin-
Continued from previous page the horizon. Alongside the economic and social problems, and because of them, the deepening of ethnic conflicts is undoubtedly arousing considerable anxiety. The most conservative and discredited sections of the apparatus but also other layers of the population) have looked for scapegoats among "outsiders" — Armenians for the Azeris, Meskhetian Turks for the Uzbeks, and in turn the Baltic and
Caucasian peoples and the Jews for the
Russians (the same phenomenon occurred with the resurgence of anti-semitism in
Poland in 1968 and 1981).
The result of this is general insecurity
Outside of the victims of actual pogroms
(who, for the moment, include no Jews, contrary to what Zionist propaganda would have us believe), no one can have any confidence in the future. Migrations to escape the first persecutions have given rise to new tensions where these people have gone to find refuge ("they will take our houses*) and new pogroms. The
Armenians have suffered most from this so far.
In the biggest republic and the one with the largest population, Russia, resort to anti-semitism has been common practice.
This is combined with a strong hostility to
12 all other peoples. The Baltic peoples.
International Viewpoint #189 • July 16, 1990 ues to take place through the classical sequence of upturn, boom, downturn and recession.
Nonetheless proponents of Marxist crisis theory are not quite out of the woods. There remain two specific questions put by the unbelievers and waverers. Firstly — where are we in fact now in the cycle? Where is the crisis, and why has it failed to appear? And secondly - what impact will the annexation of East Gerbecause they are supposed to be "rich." The Caucasians, because they are supposed to sell their flowers and vegetables at very high prices. Asians, because they
"swarthy." Why the Jews? Since 1939, they have had no weight in the Soviet apparatus (they were all removed, starting with Litvinov, the minister of foreign affairs in 1939, in order to foster the deal with Hitler), and from 1948 to 1952 they suffered a wave of persecution that was planned to culminate (after the "doctors' plot trial," which was stopped only after Stalin's death) in their deportation en masse.
Why portray the Jews, then, as Pamiat [the Russian far right organization] habitually does, as the shadowy plotters of all the regime's misdeeds? The reason is the same as the one that led Moczar in Poland in 1968 to present 10,000 Communists of Jewish origin, almost all of them very poor and hostile to the bureaucracy, as string pullers of a vast "Jewish plot."
The real reason that a crisis-ridden bureaucracy on the verge of bankruptcy uses this infamous resort is that antisemitisim corresponds to well-worn stereotypes rooted in the subconscious of the most backward and least politicized masses. This is why the unease that spread in the postwar period among Jews in the USSR (a country that for the first 20 years of its existence seemed to give a the conclusion that, on average, the cycles last about five years. Only the most recent cycle lasted longer — from 1976 to 1982/ 3. The present cycle also seems to be going on a long time - for seven year already, and now into its eighth. From a historical point of view there is nothing strange about this. In the last century then were a series of cycles that lasted more than 12 years. Nonetheless, the survival of this cycle into its eighth year has surprised almost all analysts. "2KR formula possible explanation: the There is a which in German stands for Credit, War, Armaments [Kredit, Krieg, Rüstung]. The general expansion of credit, that is the creation of artificia demand; the creation of special demand by the Iran/Iraq war; the fall in oil prices and worldwide rearmament, which also creates an exceptional demand — these three elements have played a crucial role in the prolongation of the cycle.
• The "Gulf War" between Iran and Iraq meant a new and specific type of recycling of petrodollars. The war, which lasted seven years, involved massive arms positive example of a solution to the Jewish question, even in the eyes of a writer and journalist like Joseph Roth) has led to panic at a time when all points of reference seem to be collapsing, and many signs seem to point to an uncontrolled explosion of inter-ethnic hatreds.
In view of this phenomenon, democrats face unavoidable tasks. First of all, following the example of the Palestinians in the occupied territories, they have to bring pressure to bear on Israel so as to end the forced deportation of Soviet Jews to that country. The latter must be able to choose freely the countries where they want to go. At the same time, it is necessary to bring pressure to bear on all Shamir's accomplices, notably the imperialist governments, to remove any restriction on immigration of Soviet Jews. Like any other people, from Senegal to Sri Lanka, from Morocco to the Sudan, Soviet Jews must have the right to go where they want when they are forced to leave their contry for economic reasons, or because of restrictions on their freedom.
These are necessary tasks. But they are insufficient to solve the problem at its source. There has to be a radicalization of the fight for democracy in the USSR, leading to a removal of the bureaucrats, who are trying to perpetuate their rule b fomenting hatred among the peoples. >
buying
- worth some $250 billion, above all in the West.
This sum does not include the rising purchases by the neighbouring countries, above all Saudi Arabia. At the same time, in order to finance the war, Iran and Iraq and the states supporting them were ready to boost crude oil production and sales to the limit.
This meant a massive fall in the price of crude oil. The OPEC cartel was rendered ineffective. Between 1982 and 1989 the leading OECD states (Japan, West
Europe, and USA/Canada) made more than $500 billion out of arms sales and savings due to the oil price fall. We have seen a special sort of anti-recession programme, paid for by the blood of hundreds of thousands of people. Firms such as Daimler, Saab or Volvo were selling to both sides in the conflict, and the same policy of even-handedness was followed by the US secret service. As far as the
West was concerned the war couldn't go on long enough. Anyway, now rearming both states on a big scale.
• In the 1980s, Western arms expenditure massively increased. Between 1981 and 1990 in the US it doubled (to $300 billion), whilst in West Germany there was a 50% rise. The economies were stimulated with vast sums. Thus in 1981-
89 precisely $1,100 billion more was spent on arms than in the previous decade.
This also is a type of anti-recession programme.
The state gives out vast and growing orders to a number of key firms in the heart of industry and to some extent transforms them into arms manufacturers
(General Motors, Ford, Daimler, now
BMW). The profits are guaranteed; there is no entrepreneurial risk.
These programmes are financed partly through taxation of the average wage- earners, and partly by the poor, through cuts in social expenditure. And also by credit.
• This brings us to the third element in the 2KR formula — the huge expansion of credit.
All the drivel about a "conservative economic policy" and
"savings" conceals the reality of a worldwide policy of using every possible form of indebtedness to moderate tendencies towards crisis and delay its outbreak. Thus the public debt in the USA has risen from
$914 billion in 1980 to a likely
$3000 billion by the end of
1990. In West Germany over the same period it rose from
$560 billion to $1,400 billion.
Over the past decade the
USA, the world's leading economic power has gone from being the planet's biggest creditor to its biggest debtor. In
1990 the USA's external debt reached some $400 billion (the record holder in the third world is Brazil with a debt of $120 billion). There are other countries where the state debt has reached a level that makes it a timebomb possibly implying state bankruptcythis is true in, for example, Italy and Greece.
All these three special factors cannot operate indefinitely. Credit carries interest and growing compound interest. Iran and Iraq are broke; arms spending will remain constant at the present level -he highest since World War 2 — for thi: reason as well, and not at all because of
Signs of recession in three imperialist countries
Does the end of the special factors mean the end of the boom? Yes and no. There are clear signs of the start of recession in three of the leading imperialist countries — the USA, Japan and Britain. There has been a massive fall in profits in the US between the first quarter of 1989 and the same period in 1990. This is especially true for the leading sector, the car industry, which has seen a real collapse this year. Similar signs are apparent in Britain, where they are interwoven with the crisis of the Thatcher regime.
Finally Japan; "Suddenly the whole world sees an uncertain future for Japan", according to the chief economist of the powerful Japanese Tokai Bank, quoted in Die Zeit. There are a series of material crisis tendencies at work. But the main accent in Japan, interestingly enough, is on general uncertainty which
GERMANY has a lot to do with the stock market.
The Tokyo market has risen more steeply than anywhere else. The sudden falls seen this year have thus had a more dramatic character than elsewhere. Between
January 1 and mid-May, 1990, the Tokyo stock market lost a quarter of its value. At the start of June it was still a fifth below the level at the end of 1989.
At the same time, the big business gurus on Wall Street and in London and Tokyo are voicing another fear: that the "reunification" of Germany will, after a short transitional phase, make the economy overwhelmingly powerful. This will mean a sharpening of competition. It will be Japan and the USA who will lose out, and perhaps also Britain. Other EC countries, such as France and the Benelux countries (as well as
Austria) may profit in the wake of the
We have often commented on the negative side of the annexation of the GDR at a human level. From the bourgeois economic point of view the conditions are
There will suddenly be between two and three million unemployed in the ex-GDR. Most of these will be well-trained workers.
This in turn will put pressure on the
West German working class to moderate their wage and social demands. Even skilled workers will not escape. Wage costs will fall, and profits rise. The GDR will also open up a relatively big additional market for capital and goods. While a large proportion of the accounts, wages and rents will be swopped 1:1 and while
East German goods are out of the running there will for a definite period of about a year be a supplementary market for West
German industry.
All this means that the Great
German Boom may last for means that, as in the 1960s, there will be a "divided" world economic cycle. In Britain, the
USA and Japan there will be recession, but in Germany and the surrounding countries the period of growth will continue.
But the bitter end may not be so far behind. If West German capital seizes on the GDR in a parasitic way and if investment is selective, then the prolongation of the West German boom will be nothing more than a straw fire.
The special stimulus provided by the 1:1 exchange of West for East German marks will lead to inflationary pressures.
State spending on structural investment in the ex-GDR is almost entirely financed by credit, which implies in the long term a rise in interest rates. Finally, the basic tenden-
13 cies towards crisis will find
July 16; 1990 • #189 International Viewpoint