GENERAL CRISIS STILL HAUNTING GLOBAL CAPITALISM - M.K. Pandhe

The champions of globalization and market economy have been trying to depict the picture that the recent general economic crisis in the world was not due to the capitalist system but due to selfish greed of some handful Chief Executives. The meltdown of the economy according to them was due to sub-prime loans given in the housing sector. It was also characterized as mortgage loan crisis due to some wrong policies or ineffective check-up mechanism by the Government. They even advocated that market economy had a mechanism to correct aberrations and with some stimulus packages the economy would be able to overcome the recessionary period.

The imperialist sponsored globalization through the agencies of World Bank and the IMF have made structural adjustment in the capitalist society in favour of the monopoly capital which adversely affected the living standards of the working people all over the world. The main features which have been clearly visible all over the world are as follows:-

1) Globalization has resulted in further concentration of capital through the process of merger and acquisition of big industrial units in a cut throat competition for capturing larger share of the market round the globe.

2) Advanced capitalist countries through WTO mechanism could capture large share of the market of developing countries while through trade blocks they could restrict the entry of goods from developing countries into their economies. They could also make the terms of trade more unfavourable to the developing country. Only exception was China.

3) Inequality both at the national and international levels had increased phenomenally. Twenty per cent of the population in advanced countries could control over 85 per cent of the global income. The bottom 20 per cent of the poorest population having only 0.3 per cent share of the global income!

4) Privatization of state owned undertakings at throw away prices to private sector companies adding to their profitability. Role of Government in economic matters was drastically reduced systematically.

5) Downsizing of manpower in all the undertakings was a keyword in the policy of globalization. Reckless retrenchment drive was undertaken adding to the reserve army of the unemployed persons in the society.

6) In the name of cutting cost and becoming competitive in the global market, attack on working and living conditions of the workers was undertaken in all directions. Regular jobs were converted into casual and contractual jobs. Outsourcing of jobs to ancillary units was massively undertaken adding to the surplus value generated by the capitalist.

7) Deregulation of economy was undertaken by all the Governments accepting the policies of globalization. Monopoly capital was given full freedom to intensify the exploitation of the working class and the poor people. Tax burden on the industries in the budget was heavily reduced to help the process of accumulation of wealth by handful of monopolists.

8) In the name of labour market flexibility labour laws were changed to enshrine the right of hire and fire for the employers. Non-implementation of the welfare laws became rampant while new draconian laws were enacted to suppress the trade union rights of the workers.

9) With stagnation in productive forces in the social system speculative activities were resorted to make quick profits without any addition to the production. Casino economy or the bubble economy became dominant and monopoly capital could use it to add to their ill-gotten profits.

10) The monopoly capital resorted to economic blockade economic sanctions, overthrow of progressive regimes through intervention in a clandestine manner, open armed intervention against governments challenging the supremacy of monopoly capital to help control over the world market.

11) Development of armament industry and weapons of mass destruction as a source of profit. Militarization of economy threatening the global peace.

12) Use the development of technology not for improving the standard of living of the society and elimination of poverty but for only augmenting then profitability. Use of Patent Rights or Intellectual Property Rights was extensively used to add to the coffers of the monopoly capital.

The last two decades of global experience has shown that the general crisis which began in USA has spread in other capitalist countries since the crisis was due to system itself and so long capitalism is operating in the world the occurrence of the crisis cannot be averted. Billions of dollars have been spend by the capitalist Governments at the cost of public money to save the monopoly giants from bankruptcy and utter collapse of the burden ultimately will fall on the common people who suffered most though they were not responsible for the general crisis. The so called stimulants was nothing but a daylight robbery of the common peoples wealth all over the world.

Vigorous attempts are being made by several spokepersons of capitalist globalization that the worst in the crisis of capitalism is over and a path of recovery would soon start all over the world.

However, Paul Kurgman, a Nobel Lauriette in his Column in New York Times wrote “unfortunately it is not true. This is not a recovery in any sense that matters.” He further noted, “we need about 2.5 per cent growth just to keep unemployment from rising and much faster growth to bring it significantly down. Yet growth is currently running somewhere between one and two per cent, with good chance that it will slow down further in the month ahead”.

The Hindu, English Daily reported on 28 August, “compounding heightened security on the prospect of a double dip recession, the U.S. Commerce Department on Friday (27 August) released a gloomy second quarter report that showed economic growth had remained flat at 1.6 per cent.”

The report further noted, “The rate was significantly lower than the 2.4 per cent that a majority of surveyed economists had expected, and combined with an unemployment rate stuck stubbornly at 9.5 per cent, it has cast serious doubts upon the prospects of a sustained recovery under the Obama administration”.
Ben Bernanke Chairman of the Federal Reserve admitted on the same day that the data on labour market remained “disappointing”.

BANKRUPTCY OF GENERAL MOTORS

When some of the U.S. economists started talking about overcoming of the recessionary phase of economy, the hundred year old topmost car manufacturing company General Motors filed for bankruptcy putting an end to all the talk of commencement of recovery. Several ancillary units of the company also faced the brunt of the crisis. However, the worst suffers were the workers employed in the company. The Government offered bailout package for the General Motors but no relief whatsoever was made available to the employees of the company.

Some forecasters believe that American disappointing GDP growth in the second quarter” observes Economist in its issue dated 14th August “ could be the start of a slide towards a second recession”.

On the plea of tackling the problem of high unemployment in USA Obama administration has passed a bill providing for enhancing visa fee for Indian applying for business visa from $2300 (Rs. One lakh eight thousand) to $4300 (Rs. Two lakh two thousand) as a deterrent to Indian technicians going to USA. The total enhancement for Indian IT companies is stated to be $200 million. India has 8766 software developing IT firms and 6493 firm dealing with IT enable services.

In U.S. Congress, these Indian companies were called “chop shop” a term used in USA for sheds where stolen cars are broken down and parts sold in the market.

Union Commerce and Industry Minister reacted to the enhancement of visa has for India as it would have “an adverse impact on the competitiveness and commercial interests of Indian companies sending professionals to undertake projects locally for American companies in the U.S.”

The enhancement of visa fees is a part of the U.S. policy to pass on the burden of the crisis on developing countries.

The Government of India is already giving liberal tax concession to IT sector companies despite their huge profitability. This industry has created several crorepatis and abjapatis in India. The industry is advocating for continuation of the concessions given to them. It is already known that these IT companies do not observe Labour Laws and do not allow formation of trade union in these firms.

THREAT OF DOUBLE – DIP RECESSION IN EUROPE

The British economy expanded last year by 1.7 per cent which indicated growth rate highest since 2001. However, as reported in Economic Times on 28th August “Britain’s growth pick-up may deepen the divide among policy makers as the Bank of England considers whether the economy faces a greater threat from inflation or needs more stimulus to avert a further recession”.

The journal further pointed out, “….a debt crisis threatens the recovery in the euro region, the UK’s largest trading partner, and there are sings the global recovery is cooling”.

The London Economist noted, “Some banks have been locked out of international borrowing markets, reflecting worries that they could be brought down by the woes of Southern Europe and the suspicion that they are sitting on sour loans from the boom years. The fear of contagion has raised debt costs for other banks. Unless faith is restored, the continents banking system, heavily reliant on wholesale borrowing, faces a funding crunch. That would force banks to lean even more heavily on central banks and governments to roll over their debts. It could also on a double dip recession (July 17, 2010).

Ed Balls, a candidate for the leadership of the UK’s opposition Labour party said that the government’s plans to cut the budget deficit immediately risk pushing Britain back into recession.

The situation in Greece has blown up the myth of capitalist recovery. The Economist in its issue dated 7th August noted, “Things will get worse. The economy is set to shrink by 4% this year and another 2.5% in 2011…… Unemployment already in double digits, is set to soar to 20%, say some trade unions.” The Economist further noted.

“The next round of reform will bring pubic sector job losses for the first time in living memory. Tens of thousands of contract workers are being sacked. Local banks are refusing to tend to the loss making state railways and the Athens transport system. Both will shed jobs in a restructuring that cannot be postponed. Several thousand posts in local government will disappear when municipalities are merged at the end of this year. Employers are skeptical of the governments promise to find other position for redundant public sector workers”.

NEGATIVE GROWTH OF GDP

The General crisis has been responsible for the negative growth of the GDP in the country. The UN statistics about the rate of GDP growth in 2009 shows a grim picture of the situation.

The following data clearly indicate the global situation of general decline of GDP in major capitalist countries.

Belgium -3.1%

Canada-2.5%

European Union-4%

France-2.2%

Germany-5%

Greece-2%

Italy -4.8%

Japan-5.3%

Russia -7.9%

Spain-3.6%

Switzerland -1.5%

United Kingdom-4.8%

United States-2.4%


As a result of pouring of trillions of dollars in the coffers of the capitalist undertaking which become bankrupt due to the crisis during the first quarter of 2010 some improvement in the performance of the economy was visible. It does not mean that the crisis was over. It only changed the character of the crisis. In Europe the economies of Portugal, Ireland, Italy, Greece and Spain are in douldrums and without support from other European countries the economic situation is likely to become extremely vulnerable. These countries have acquired the name PIIGS in Europe and resorting to several austerity measures which affect the living standards of the working class. Several agitations are emerging in these countries. In Greece alone 6 general strike have been organize during 2010.

The public debt of the Government’s in major capitalist countries has grown alarmingly indicating prosperity of some of the country depends on borrowed money. The Government spending in the name of bail out package has added to the public debt of several Governments whose burden will ultimately fall on the common man of the country. A large part of the national budget involved in repayment liabilities which will further bring down the developmental expenditure of the Governments.

GROWING PUBLIC DEBT

The public debt of major capitalist countries as a percentage of GDP gives us the following picture:

Japan 194.4%

Italy 105.6%

Belgium 86.1%

Greece 81.7%

France 66.6%

Portugal
65.8%

Germany
65.3%

Switzerland 50.2%

United Kingdom 43.3%

United States 36.8%

Spain 35.7%


This high public indebtedness of the country can trigger another crisis in the economy. Several economists have already expressed concern about this aspect of the present crisis. The high public debts are likely to result in various capitalist governments in the name of austerity measure would try to take measures that would hit hard the working and living conditions of the common people.

HIGH RATE OF UNEMPLOYMENT

The global capitalist economy, with the help of huge bailout packages has been able to help the big giant corporates to avoid total collapse and bankruptcy. However, high rate of unemployment continues to dog the economy facing to threaten the so called recovery of capitalism. The ILO in its recent study has noted that the high rate of unemployment in major capitalist countries continue to be a major phenomenon which is going to be more severe than the 1930 general crisis of capitalism. The ILO predicted that the high rate of unemployment continue to adversely affect the social development for quite some time. The millennium century goal projected by the World Summit are now not likely to be fulfilled by 2012 and poverty and destitute levels in the world are bound to adversely affect the growth rate projected by the World Bank and the IMF.

The latest available date on the rate of unemployment in the major capitalist countries gives us the following picture.

USA 9.30%

Greece 9.50%

France 9.10%

Canada 8.30%

Italy 7.70%

Germany 7.50%

Japan 5.10%

Australia 5.60%

Austria 4.80%

Denmark 4.30%

Growing inequality in the U.S. Society has added to the problem of unemployment Robert Reich former Secretary of Labour in Clinton Administration in a recent article published in New York times noted “The national economy is not escaping the gravitational pull of the Great Depression”. Elaborating his point he continued, “In the late 1970s the richest one percent of American families took in about 9 per cent of the nation’s total income by 2007 the top one per cent took 23.7 per cent of total income.”

“The rich spend a much smaller proportion of their incomes than rest of us “Reich pointed out “so when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs”. He therefore concluded, “we are left instead with a long and seemingly endless Great Job Recession”. (Published in India Express dated 4th September 2010)

The UPA Government in India is not prepared to learn from the experience of the global crisis and is continuing to pursue the policy of globalization with more determination. Higher GDP growth only reflects the increase in the capital accumulation by big business houses. While the smaller capitalist continue to suffer from stagnation and decline, the army of poorest of the poor continues to swell faster while the destitution of the farmers goes on unabated while the high prices of essential commodities is drastically reducing the standards of living of the common people. The liberal concessions given to MNCs continue to strengthen their grip over the Indian Economy. The drive towards privatization of public sector is augmenting the profitability of big business houses. The high level of corruption is enabling the capitalists to get away with whatever they want while the funds provided for welfare schemes is frittering huge resources and people are deprived of the intended benefit. Modern capitalism has miserably failed in solving the problems of the common people.

The toiling people in India as well as all over the world have no other alternative but to resist these policies and strive for alternative pro-people polices which alone will save them from further deterioration in their working and living conditions.

Source: www.citucentre.org