Global capitalism's weak revival
Maxime Durand reviews the development of the world economy in the 1990s
THE CONJUNCTURE AT THE BEGINNING OF 1996 was characterised by signs of a slackening off of economic growth in the United States and Europe. The economic perspectives of the OECD, published in December 1995. are already obsolete, at least for the French and German economies, which will only grow 1-1.5% in 1996. If the OECD is to be believed, growth rates in the advanced imperialist countries will converge from 1997 onwards, settling at about 2.7%! (See table
Even this rosy picture of growth is not sufficient to bring down unemployment in the big countries. The OECD estimates that 32.5 people are currently unemployed, 18.3 million of them in the European Union. Mass unemployment is here to stay (see table two. The European Commission's White Book affirming that it was possible to half creation of 15 million jobs, have been
But, because unemployment is costly, the OECD - proclaiming aloud what the governments are probably quietly thinking — is proposing a downward revision of unemployment incentives. As if unemployment stemmed from a lack of enthusiasm among the job
This stifling of the upturn should be put in perspective, through a review of the different phases of the conjuncture in Europe and, in a slightly different way, for the United States
After the recession at the beginning of the 1980s, there was an upturn in developed countries. increased regularly until
This period of upturn seemed to mark the triumph of the orthodox economists.
Table One
GDP Growth
Germany -1.2
Source: OECD liberal recipes seemed to have worked in the end, and growth could be expected to resume. Their euphoria was all the greater because the financial crash of 1987 did not result in the recession that everybody expected. On the contrary, it had encouraged growth. In this unemployment fell a little everywhere.
The shift came in 1990. It had something to do with the Iraqi crisis and the Gulf War. The situation deteriorated continuously through 1991 and 1992. It became a recession, and a very deep one, in most countries deeper than those of 1974-75 or 1981-82. Unemployment began to grow again. The results were particularly brutal in those European Sweden and Switzerland, which were traditionally best protected unemployment. Capital's ideologues began to have doubts, and to talk of a "cyclical decline."
right. The upturn began in 1994, with great dynamism; growth recommenced as quickly as production had fallen. Capitalism's ideologues still speak of a cycle, but dare to hope that this cycle will be more of an upward spiral, bringing sustainable and durable growth. But then an unforeseen phenomenon intervened, namely a new dip in the cycle, after only 18 months of upturn. This is where we are today.
Faced with this disappointing situation, the official discourse remains curiously optimistic. "At the global level, inflation is at its lowest for thirty International Monetary Fund wrote in Le Monde on January 18th. "Growth continues [and] the major currencies have turned their trajectories towards more credible levels." In
"if economists were to concern questions alone, they would have some
The same serenity was evident at the G7 finance ministers meeting in Paris; "despite a temporary downturn in activity in most of our countries in recent months," they announced necessary for a sustained upturn appear present". French President Jacques Chirac, who has expressed his confidence in "growth that will resume on a durable basis, in any case for a cycle of 20 or 30 years".
wrong to attribute this discourse to pure ideological conviction. The
World economy * reason why the situation appeared "fundamentally satisfying" to the OECD and to those who run it, is that the reasoning of "those at the top" is not based on the same criteria as the humble reasoning of "those at the bottom". The principal criteria of official economic science are not unemployment and the conditions of existence of the workers, but the rate of interest, inflation and profitability. And indeed, from this strict point of view, it can honestly be said that things are not going all that badly.
World capitalism disposes of "vigorous fundamentals on the supply side." In other words, profits are high and inflation is low. The European Commission's economic forecasts clearly advance this formula; "on the supply side, the fundamentals are then ready to respond to a resumption of demand" Arguing as if supply and demand were two separate entities, as if a healthy supply side could not have as its counterpart an intrinsic weakness of demand. Moreover, the "favourable financial and monetary conditions" are reflected by a lowering of interest rates, particularly on long term deposits. (Economie europeenne supp. A no 12 December 1995)
The great gap between the good health of the economy in general and the concrete situation of the people in particular is well illustrated by the graph opposite, which depicts the evolution of profit and that of growth for the seven richest countries. Here we can note the regular tendency towards an increase in the rates of profit since the entry into the neoliberal phase. It has now returned to its pre-crisis level (with the exception of
September 1996 #280 31
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To respect this timetable, it will be necessary to rein back the public deficit to 3% of GDP. For the European Union as a whole, the deficit was 6.3% in 1993. Officially, the 1996 level was 3.9%, which would allow nearly all countries, with the undoubted exception of Italy, to fulfil this Maastricht condition. In reality, the schema is out of kilter, for a reason that is fairly easy to understand. By cutting tax receipts, austerity policies have increased, rather than reduce public deficits. Because the essential source of these deficits is not an excessive growth of expenditure, but losses in tax resulting from austerity, in particular the systematic policies of exemption of non wage
Reluctant capital incomes, governfervent partisans of the "Euro" no longer believe in it. Either the "single" currency will be implemented around a French FrancGerman Mark core, or the deadlines will be pushed back. This uncertainty has not yet led to a new round of financial speculation, since the financial markets have already burned their fingers in aborted and costly attempts to break the franc-mark axis. The preceding speculative episode had led to an explosion of the European monetary system. The British Pound, Italian Lira and Spanish Peseta all devalued by 20%.
Two years later, the balance-sheet of these competitive devaluations is that, far from having suffered, the bad pupils have won market share thanks to their cheaper exports.
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Japan). Even the recession at the beginning of the 90s only temporarily reined in its
The Place of Marxism in History
Ernest Mandel
On the other hand, the growth figures
2 The Chinese Revolution (Part One)
show very broad fluctuations without any
Pierre Rousset signs of return to a more durable level. This
3. The Chinese Revolution (Part Two)
gap sums up the regressive character of
Pierre Rousset contemporary capitalism
Revolutionary Strategy Today meeting of its criteria of efficiency in no way
Daniel Bensaid imply a better satisfaction of social needs.
Class Struggle and Technological Change in
The reality gap
Japan since 1945
Muto Ichiyo
In France and Germany, the scaling down
[Out of Print] Populism in Latin America (A. Gilly)
of expectations is very clear. It is difficult to agree with the European Commission's claim
Market, Plan and Democracy: The Experience of that "the economic perspectives for the the so-called Socialist Countries
Community remains largely favourable"
Catherine Samary
Even if the member states remained firm on
The Formative Years of the Fourth the principles of budgetary rigour (and
International perhaps above all if they do so, the conjuncture in Europe is not favourable to the
Marxism and Liberation Theology fulfilling of the Maastricht timetable. Here
Michael Löwy again, there is an astonishing gap between the
11/12. The Bourgeois Revolutions official discourse and economic reality. The best illustration of this has been given by the
13. The Spanish Civil War in Euskadi and connoisseurs, those businessmen who meet each year at Davos. 65% of them think that
Catalonia 1936-39 the implementation of the Maastricht treaty will be postponed, and 16% go so far as to say
The Gulf War & the New World Order that the single currency will never happen.
André Gunder Frank and Saleh Jaber
Only 17% believe in the proclaimed
Italy: From the PCI to the PDS
Livio Maitan
Do the Workers have a Country?
José Iriarte "Bikila"
Table Two
17/18. October 1917: Coup d'état or Social
Unemployment
Ernest Mandel
*96
*97
'93 '94
*95
19/20. The Fragmentation of Yugoslavia
Germany 8.9
9.6 9.3
9.3
9.1
Catherine Samary
France
11.3 11.0
11.7 12.211.5
Factory Committees and Workers' control in
Britain
10.2
9.2 8.4
8.2
8.0
Petrograd in 1917
11.1 11.5 11.1 10.8 10.5
EU
David Mandel
5.7
5.9
USA
6.8
6.1
5.6
Women's Lives in the New Global Economy
Japan
2.5
2.9 3.1
3.4
3.4
P. Duggan & H. Dashner (editors)
Lean Production: a capitalist Utopia?
OECD
8.07.87.776
8.0
Tony Smith
24/25. IMF/World Bank/WTO: The Free Market
Eric Toussaint (editor)
Maastricht calendar, which envisages that the final decision will be taken at the beginning of
1998, on the basis of the performances of
1997, and that the single currency will enter into force on January 1, 1999.
32 International Viewpoint ments have been obliged to borrow from those who receive them, and this at
1 real rates of interest higher than the rates of growth.
This has generated a snowball effect. It is necessary to borrow a little more, to pay the in-
4.
loans... a little like the in-
5.
countries of the
OECD has to admit that, in such a context, the
6.
negative effects of the cur-
7/8.
rent climate of uncertainty
"will be also amplified by of the new measures
9.
budgetary rigour beyond of those currently envisaged which would be required in a certain number of countries".
"present a threat to the prediction made by the secretariat of the OECD of
Europe, which relies on ption expenses". Others are more optimistic and attribute a key role to the invest more. According to
Alain Vernholes in Le
Monde, this scenario,
22.
"at least a explains has
50% chance of hap-
23.
pening." But there is one little condition; that countries are "ready to pay the
Fiasco price, particularly where employment and minimum cerned"
All these difficulties mean that even the most
£2.00 £2.00 £2.50 £2.00 £2.50 £3.00 £2.50 £2.00 £4.00 £2.50 £3.50 £2.50 £2.50 £4.00 £5.00 £3.50 £3.50 £3.50 £5.00
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And they have not fallen into the inflationary swamp that Maastricht fanatics predicted. The ultimate contradiction to the Maastricht message is that Britain may satisfy the Maastricht criteria in 1996 and 1997, thanks to a devaluation that enabled it to win than the rise of mass poverty, which also affects those who are in work (the "working poor"). The widening of the current trade deficit ($170 billion) is disconcerting at a time when the Japanese surplus is in decline and
World economy * obliged to underline the risks that are engendered by the liberalisation of financial markets and by the badly controlled development of the "emergent markets". The organisation appeals for "changes in macroreduce the deficit unemployment.
Regional growth
Auf wiedersein, social market!
At the same time, the Swedish and
German models are in crisis. These shop windows of tempered capitalism seem unable the increasingly nar-
Reaganite model of
1989-94 94 *95
'96
97-02
L. America
3.0 4.6
2.3 3.8
4.4 to resist the hammer blows of globalisation. In M.East/N.Africa
December 1995 unemployment reached Sub-Saharan Africa
8.6% in Germany and 9.7 % in Sweden, Asia: Four "Tigers"
compared to 5.6% and 1.6% (respectively) in
1989. German employers are particularly Asia: other countries pessimistic, envisaging quasi-stagnation in
1996. These poor results are related to the Central/Eastern Europe poor export performance of the German which has been losing both competitiveness and market shares. In 1995.
German exports increased compared to 6.2% for France. This poor pertormance challenges the German model. If it continues, it may even threaten the unchallenged supremacy of the Mark.
Europe's weak growth and high unemployment is often contrasted with the situation in Japan and the USA, the other great poles of the world economy. Apart from the fact that these comparisons have been falsified by differing definitions of unemployment, a number of things are changing. This is very clear in the case of Japan, which was able to "roll" with the recession of 1980-82 and maintain annual growth rates of 4-5% for several years afterwards. Since 1992, average growth has been only 0.4% per year. This is not just a recession, but a profound challenge to key components of the Japanese model, notably the existence of a stable, relatively well-paid and motivated core employees, and the strong (overvalued) Yen. Today, a deep financial crisis throws doubts on Japan's capacity to continue financing the USA's loan-based growth.
After three good years, with average growth rates of 3.5%, the United States economy ran out of breath at the end of 1995 One can speak of Europeanisation, to the extent that the increase in profits (+ 20% in 1995) has been achieved through high counterpart a blockage of wages and a tighter management of the workforce. Ultimately, this can only reduce the growth of the internal market and thus smother the growth of the economy. This movement is largely underway, and growth is now sustained largely thanks to the dynamism of employment, (which increased by 30% between 1979 to 1995, compared to only 9% in the European Union) and redistribution of income in favour of the liberal professions and surplus value. Meanwhile, the purchasing power of the average US wage-earner has fallen almost continuously since the beginning of the Reagan era.
Thus it would seem that the conditions underlying the US' growth rate can not be reproduced eternally. The lowering of the rate of savings and the growing debts of households cannot continue indefinitely, any more
"The world indicators show a discernible slackening up of activity. The advance indicators of the United States of a slowdown". A December
15 European Com-
Source: OFCE mission Note speaks of a "new darkening of the conjunctural climate". But the subtle dialectic already signalled allows the dissipation of worries: "Nonetheless, so far as the future is concerned, optimistic anticipations are valid at the world level". This optimism is based on a projected amelioration of the performances of countries outside the
OECD, in other words the East and the South.
Here, the picture is indeed less sombre than in the last decade, at least if we confine ourselves to official GDP figures, without raising the question of internal social
Table three reveals the paradoxical state of the world economy.
We seem to be witnessing a certain resumption of
America (with the major exception of
Mexico), sub-Saharan Africa and the
Middle East; the maintenance of the global dynamism of Asia; and the end of Eastern Europe's free fall
Between 1989 and 1994, growth in the industrialised countries - superior to the global performance
(1.8% against 1%). But in 1997-2002 the industrialised countries expected to grow by only 2.2% per annum, compared to a global average of 3.2%. In other words, the countries of the South and east could play a locomotive role in the years to come, thanks to higher growth rates than those of the countries of the North.
This hardly seems compatible with the neoliberal model dominant throughout the world, which gives priority to exports to the detriment of the internal market, places the countries of the South in competition with each other, and compels them to open their frontiers so as to enlarge the north's market openings. This iron logic, imposed and codified by the World Trade Organisation
(WTO), cannot lead to a positive dynamic on the world scale. The Mexican example helps us understand why: this model is fundamentally a source of external disequilibria and results in financial crisis. Even the OECD is
3.7 0.7 2.9 4.7 4.0 2.1 1.9 5.1 4.5 4.0 6.9 7.2 4.5 3.8 5.3 7.3 8.6 7.6 7.6 7.5 ex-USSR -12.6-16.0 -5.6 3.2 42
-9.7 32 43 50 52
OECD 1.8 29 28 26 22
World 1.1 25 30 32 32 economic management and in financial institutions, so as to avoid economic difficulties that could, in extreme cases, lead ao the disorganisation of the world financial system". As it is hard to see from where such changes could emerge, it is difficuit as situare the official optimism.
This rapid overview reveals the hasic contradiction which confronts contemporary capitalism. All is well from the point of vie of the logic of profit, but this is not sufficien to assure sustained growth and a renewed ability of the system to respond increasingly ignored social needs. The mass of wages on a world scale, is blocked by neoliberal policies. The contradiction that has become so evident in Europe will in creasingly be expressed on a world scale: what is healthy for profits has as its counter part a restriction on wages that affects marker openings and the dynamic of capicalism There can be exceptions, in time or space, hur capitalist globalisation rests on the univers imposition of this model, which unemployment and poverty. It is mcn than ever too expect solution problems from within this model.
September 1996 *280 33