Not a golden year
INTRODUCTION
SINCE mid-1990 the world economy has been immersed in a new phase of cyclical crisis which has now reached all the main capitalist countries with the inevitable effects on the
Third World and the countries of the former Soviet bloc.
International Viewpoint #244 April 1993
A LOOK at the current state of the world economy confirms the forecast we made a little over a year ago: "rather than collapsing dramatically, capital accumulation
The economics dossier, the first part of which is published in these pages (part two next month), deals with the problems encountered by the various governments and bourgeoion a world scale is becoming sies in their attempt to realize the dream of the New World Order born out of the Gulf War.
progressively more bogged
While the crisis has not yet taken the form of a generalized recession similar to that in down". The remarks that follow
1974-75 or in 1980-82, no lasting and stable recovery in on the horizon. For this reason, concentrate on an analysis of the the offensive against the working class will get ever fiercer, in an attempt to create the stagnation of the main capitalist conditions for a recovery in the rate of profit to a level qualitatively superior to that of the centres and do not deal with the
In the first quarter of this year we have witnessed a cascade of daily announcements of countries of the former Soviet layoffs, social security cutbacks and other anti-working measures at a time when, after bloc nor the Third World.
several years of paralysis, the working class is beginning to react including in some impe rialist countries, such as Italy, Germany, Spain and Britain as the loss of proper jobs — so commonplace in the dependent countries — has become a daily reality for them as well.
MAXIME DURAND -
Paris, March 20, 1993
World capitalism has reached a historically unprecedented level of internationalization and globalization and if the workers' response is to be effective it must be of the same type, based on international workers' solidarity. Such responses are beyond the horizon
19 another
92 was of the traditional leaders of the workers movement who are not even fully aware of the of weak scale of capitalist crisis. Even the first steps down this wide road require clear analysis, year growth, hardly better than the poor
It only remains to point out that the articles published here are the direct product of comresults of 1991.
mon reflection by comrades from different countries who met in 1991 and again at the
However, there was no generalized recesend of 1992. We hope to repeat the experience and, far more important, that its fruits are sion on the lines of 1980-82 in the sense useful for all those who believe that, despite present difficulties, it is possible to change that all the big countries did not see a this ever more unjust society. - Alfonso Moro * decline at the same time. The sharpest falls have been seen in the flagship countries of neo-liberalism and the balance sheet of the policies pursued in Britain and Canada is both economically very bad and socially catastrophic. The USA stabilized its economy after the decline of 1991, France and
Italy saw a small amount of growth while
Japan has encountered a sharp check and
Germany has slowed down (see table 1).
The overall slowdown has been accompanied by further rises in unemployment. The figures put out by the OECD recent years.
and these we hope to provide in this series. only give an imperfect picture of the deterioration of the labour market, which takes different forms in different countries — short-time working, temporary and insecure jobs, sub-contracting and so on. But the basic trend is clearly upwards with Europe being particularly hard hit. There are now 32 million unemployed in the OECD countries, and this figure will probably rise to 34 million this year.
This will probably lead to a steady shift to increasingly tough socio-economic policies. One of the new features in Europe is that the countries which seemed to be best resisting unemployment and were being put before us as models to be studied are now themselves plunging in. Sweden is a particularly striking case. The loss of power by the social democrats has seen a turn to "classical" policies which have brought on a very sharp rise in unemployment, which has risen from 1.5% to 5% between 1990 and 1992. The OECD forecast is a rate of 6.5% this year.
Even for Switzerland, where a short while ago unemployment was around
Table 1 - Growth of Gross Domestic Product (%)
1983-89
1990
USA
3.9
0.8
Japan
4.6
5.2
Germany
2.7
4.8
France
2.2
2.1
3.1
2.2
Italy
UK
3.5
0.5
OECD
3.7
2.4
*whole of Germany
1991 1992 1993 -1.2 1.8 2.4 4.4 1.8 2.3 3.7 1.4* 1.2* 1.2 1.9 1.6 1.4 1.2 0.8 -2.2 -1.0 1.3 0.8 1.5 1.9 source: OECD
0.5%, the forecast is of 3.8% in 1993 - a rise of 3% in less than three years.
However, it is the trend in Germany which will have the biggest effects. Previously, the power of German industry and the quality of its products have guaranteed a competitiveness which was not based on constant pressure on the wages and conditions of workers. German wages remain high and Germany was one of the countries which had best resisted unemployment. Indeed, the unions had been able to win steps towards a reduction in the working week. However unification with the
13
----- pull-quotes on this page -----
Table 2 — Profit and growth in seven main countries
International Viewpoint #244 April 1993
6.0-
5.5-
5.0-
3.5~
3.0-
-21
-20
- 19
-18
--17
-16 0
PROFIT
-14
--13
GROWTH
-12
(with perhaps the exception of Luxemburg) succeeded in meeting these targets in 1993. Even in France the budget deficit is sure to pass the set limit of 3% of GDP. The series of devaluations, meanwhile, have led to trade tensions in an uncontrollable chain reaction.
There has been ever more evidence of a rise in protectionism in recent months, including the deadlock in the GATT negotiations on world trade, the unilateral measures taken by Clinton, the new wave of industrial restructuring and transfers of plants which have been in the headlines recently. The cacophony of interest rates, which have started to fall in the US and Japan but are drawn upwards by the pull of the high interest rates in Germany adds another element to the apparent chaos.
Whatever the local vagaries, we have
2,57
PHASE / PHASE I 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 SOURCE: OECD former East Germany unleashed an economic and financial shock wave whose effects are now showing up in a change of approach by the employers. Massive layoffs have been announced in steel and are certain for the vehicle manufacture sector. The reduction in the working week is likely to be challenged and unemployment in the former East Germany will put pressure on employment and wages throughout the EEC.
Table 2 illustrates the specific characteristics of the present state of the world economy. The liberal decade of the 1980s saw a very sharp rise in the rate of profit in its first years. At the same time, growth picked up hesitantly before taking off in 1988-89. This led the OECD to crow triumphantly in words which merit repeating.
According to its Economic Perspectives for 1989:
"The economic situation of the OECD countries is now far more satisfying than at the start of the 1980s... The governments of the member countries can, for the coming ten years, draw support from these results — due both to the policies pursued during the 1980s and the strengthening of international cooperation - to promote lasting growth which will create jobs while holding inflation down at a low level"
It did not take ten years for this to turn out to be an optical illusion. Growth rates have slumped to very low levels - and this is the real result of the policies of the 1980s. This was perfectly foreseeable. At that time we produced a far more accurate forecast: "Insofar as the present recovery 14
-11 PHASELL is largely pulled along by investment, it will not be lasting. Quite soon, the rhythm of growth of the world economy will fall back to the level permitted by the rules of the capitalist game".! The main dimension of the present slowdown is in fact the lack of sufficient outlets provided by demand by wage-earners. This has meant the resurgence of a crisis of over-production producing an original combination of a relatively high rate of profit and inadequate demand. Such a situation cannot persist indefinitely: the weight of unused capacity will eventually press down on profits.
1993 was supposed to be a golden year for Europe, with the opening of the great market and the ratification of the Maastricht Treaty. In reality, the panorama is radically different. Europe is bogged down in unemployment and the road proposed for its unification has turned out to be a dead-end. The European Monetary System (EMS) is more than just in crisis; it has been smashed to pieces as the pound, the lira, the peseta and the escudo have burst out of the monetary corset and been
Only France and Germany and the latter's two satellites, Belgium and the Netherlands, retain the perspective of monetary union. But, even between France and Germany, the differences of economic performance are so significant that it is hard to see how an exchange rate that everyone regards as untenable, more for political than economic reasons, can be
The Maastricht Treaty set out norms that each signatory country must respect to ensure economic convergence. No country to see the basic cause. The conventional wisdom which leads most of the globe's countries to attempt to push down wages to be able sell more to others here reveals its limits and contradictions. It does not take a Nobel Prize-winner to understand that such policies, which seem reasonable for each country taken separately, must add up to an overall slowdown in growth.
This contradiction has emerged in a context marked by both a very high degree of internationalization and an absence of regulatory institutions. The much talked about globalization means that today there are ever fewer economic sectors which can escape competition from the furthest corners of the globe and that technical progress bears directly on economic activity.
Of course we should not over-estimate the potential to transfer economic activity to the former Soviet bloc or the Third World; low wages are not the only element in competitiveness, there is also a need for technically trained and equipped workforce. And there are even more weighty obstacles to the wholesale moving of industries, including social resistance and need to remain close to markets.
The rise in unemployment must, therefore, not mainly be laid at the door of competition from low-wage countries. It is in the first place the outcome of wage austerity policies pursued in the rich countries themselves.
Zones with different wage levels are being brought into contact in a completely anarchic way. Even if the pressure is marginal, the confrontation with low-priced products has a disintegrating effect wider than the immediate impact. And it creates
1. Maxime Durand, "La crise est un long fleuve tranquille" Critique Communiste, no. 82, February 1992.
----- photo credits and running heads -----
RATE OF GROWTH
International Viewpoint #244 April 1993 a situation in which everyone is the loser. If the developed countries attempt to push down wages to Third World levels this only means a further stifling of effective demand, from which in time the Third World taken as a whole will suffer. The ability of the developed countries to buy is limited and their imports do not provide an outlet sufficient for all the developing
Good sense would dictate that economic relations between zones of widely different productivity levels should not be regulated by the blind forces of the market but by planned exchange aimed at stabilizing relative prices so as to organize the international division of labour on a basis open to control. The aim would be to eliminate both "social dumping" and the setting up of protectionist barriers against the
The inherently competitive nature of capitalism, however, means that we are seeing both social dumping and protectionism at the same time. The contradiction is tending to iron itself out through the emergence of a tripolar structure of the world economy in which each of the centres (the USA, western Europe and Japan) organizes its chain of production in a hierarchical manner while trying to protect itself from competition from the other poles — the clearest example being south-east
However, this new order remains incomplete, lacks coherence in Europe, and does not in fact solve the basic problems. The former Soviet bloc, for example, is a black hole as far as its place in the scheme of things is concerned. The wobbly structure of the world economy leads to violent local and sectoral conflicts corresponding to the holes in the pattern. The fact that class conflicts and inter-imperialist wars have given way to conflicts stemming from the internal breakdowns of states also corresponds to the economic imbalances. The tendencies towards fragmentation will dominate the coming period.
In this recessionary context, we have to grasp the reasons which militate against the implementation of programmes to stimulate recovery. The two main reasons are the absence of any coordination of economic policy and the weight of public debt. Ten years of free market policies have failed to clean out public finances except in Japan, which has therefore been able to use public spending to stimulate growth. However, elsewhere, there are growing budget deficits. On this front, liberal policies have failed in one of their central objectives.
The reasons differ from country to country. In Germany, the key is clearly the costs of unification. Elsewhere, a number of contradictions work together. The slackening off of economic activity, deliberate or involuntary, inevitably means a disproportionate fall in tax incomes. The efforts to cut down the size of the state logically lead to the stagnation and even decline of tax income making it harder to meet budget commitments. Then there is the burden of very high interest rates, especially in
Financing the deficit requires an increase in public debt and thus of interest payments. In Italy the cumulative effects of this vicious spiral have led to what is in effect the bankruptcy of the state. But,above all, these tendencies show something positive - the existence of formidable social resistance to the undermining of the welfare state. It is true that almost everywhere state income has changed in a more inegalitarian direction, notably owing to competition over the drawing in of foreign capital, but nowhere has the size of the state significantly shrunk. Its financing is now one of the obstacles to any pro-recovery policy.
This side of things is a good illustration of the overall shape of the class struggle since the onset of the crisis. While the liberals have made clear their aggressive intentions, their offensive has not taken the form of a frontal attack but rather of a diffuse nibbling away which has not really done much to clean out the state finances.
On the contrary, at a more political level the resistance has resulted in renewed legitimation for public intervention, which the whole political and ideological project of the liberals was intended to erode. Clintonism is an expression of the new state of affairs: a desire to reactivate state intervention without the means to go very far with it. Similar reasons explain why the British government is unable to revive that country's floundering economy.
In the short term, it is not possible to predict a new generalized recession, defined as a sharp and simultaneous fall in production in all the industrialized countries. The US economy has been showing signs of life in recent months and may effectively prop up the international economy in 1993. The effects of the Japanese recovery programme will also be felt.
However, these are cyclical fluctuations which do not mean the end of the long period of slow growth. The same contradictions will continue to operate and the persistence of unemployment will mean a hardening of class conflicts. This is why, above and beyond the day-to-day changes, the months and years to come will be decisive for the prospects for the emergence of a social movement that holds out the possibility of a positive project. The alternative is quite clear: either resignation to unemployment and a fallback to illusions of local solutions (with the nationalist implications of this or the rise and coordination of the aspirations of the workers to make the economy work in a different way, around a central demand: for a big cut in the working week. *
15
----- photo credits and running heads -----
-M