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Confronting a decrepit imperialist monster

Talk at the International Conference for Human Rights and Peace in the Philippines

Director, IBON International

PANEL 1. Economic, political and social crisis globally and in the Philippines, and implications on peace and human rights in the Philippines

Quezon City, Philippines
19 July 2013

Three years since the declaration by international economic institutions such as the IMF and the OECD that global recession in 2008 has ended in 2010, the absence of recovery has befuddled imperialist apologists and economists alike. So-called “post-recession” recovery by industrialized countries like US, UK and Japan remains very weak, seemingly teetering on the brink of another recession despite spending hundreds of billions of dollars to bail out banking and other financial institutions and various efforts at pump priming to fund recovery.

The creeping effect of this “non-recession” has now spread further to the economic heartland of Europe, as countries like France and Germany now face the threat of recession. On the other hand, many Eurozone countries such as Greece and Spain continue to bear the brunt of depression, as their sovereign debts crises remain unsolved and now threaten to infect even major industrial powers like Italy.

The so-called rise of emerging economies is imperialist hype to cover up the sorry state of developed countries reeling from crisis with the illusion of a “rebalancing” world economy. It also feeds into the strategy of monopoly capital to intensify the extraction of superprofits from the developing countries through various means, including through financial speculation riding on the so-called emerging economies.

This crisis is akin to the Great Depression of the 1930’s in its intensity but unlike it altogether. First, the scale of trade and financial integration through the policy of neoliberal globalization both feeds on and intensifies the crisis. Second, the possibility accorded by financial liberalization for further multiplying super-profit taking through financial speculation has created a new phenomenon of intensifying the effects of the crisis on the real economy. Third, the overweening power of the financial oligarchy over capital, both public and private, allows it to engineer autonomous opportunities for financial and commodity market growth, with its own speculative busts.

This is another depression, a lingering protracted depression, is fed by financial speculation seeking its end but also exacerbating it.

Continuing factors for depression, threats of new bubble bursting

This creeping, protracted depression affecting world monopoly capital has not seen its end.

Ghost recovery, continuing features of depression

The so-called economic recovery since 2011 remains sluggish and unclear. A growing number of countries have fallen back into double-dip recession, while US recovery has been feeble. There has been no recovery in productive sectors such as manufacturing and other industries. The jobs that were lost from 2008 onwards have not been recovered, and unemployment remains severe—thus the term “jobless growth.” Financial crashes remain continual phenomena.

By end-2012, the UN World Economic Situation and Prospects 2013 report had already presented dire economic forecasts about the risk of what it called “synchronized economic downturn” across many developed and developing countries.

The UN WESP 2013 report said that based on a set of assumptions in the UN baseline forecast, growth of world gross product (WGP) is expected to reach 2.2% in 2012 and is forecast to remain well below potential at 2.4% in 2013 and 3.2% in 2014. (See chart below) “At this moderate pace, many economies will continue to operate below potential and will not recover the jobs lost during the Great Recession.” 1

Six months later, this risk of “synchronized economic downturn” remains. In the latest World Economic Outlook (WEO) update dated 9 July 2013, the IMF acknowledged that global growth is “projected to remain subdued” at 3.1% in 2013, about the same as in 2012 and less than the 3.3% forecast in April 2013 WEO.2 The chart below, taken from the IMF WEO for July 2013, shows global GDP growth (projected figures on gray background) up to Q3 2013.

At this point (end-June 2013), the Eurozone is now in its longest recession since the end of World War II, with economic activity across its 17 countries falling for the seventh quarter in a row from Q4 2011 to Q2 2013. The economies of France, Spain, Italy and the Netherlands have generally shrunk. The growth in Germany, the region’s strongest economy, just eked out a 0.1% growth on a quarterly basis, but also shrunk by 0.2% year-on-year. Ten-year data on year-on-year GDP growth of Europe’s biggest economies—Germany, France, and Italy—are graphically shown below, superimposed on equivalent data for the whole Eurozone.3

While a slight improvement shown in Q2 2013 led Eurozone officials to expect some sort of uptick in the second half of 2013, other economists remain guarded since no real growth drivers have clearly emerged.4

The U.S. economy appeared to fare better compared to Europe (see graph below)5, but in fact its own recovery remains ephemeral. The reason is that the U.S. economy is being turbo-propped by an unsustainable printing of dollars, with the Federal Reserve issuing $85 billion every month. The irony is that, instead of stimulating the real economy, more than 80% of the Fed’s excess reserves remain idle in private banks. These idle reserves have turned into yet another form of financial speculation, likened by some economists to a ticking time bomb. Outside of the US, other Central Banks have adopted similar “quantitative easing” remedies to open investment markets.6

The IMF has also recently acknowledged that the so-called emerging economies are growing more slowly than previously projected. The factors for this includes reduced US and European demand for exports from Brazil and Russia; China readjusting its priorities towards domestic consumer spending; and other emerging markets weakened by the pullout of foreign direct investments. A recent ILO report also showed that the new recession conditions in Europe have been spilling over globally.7

New bubbles threatening to burst amid threats of default, bailouts

As many economists have noted, indicators of economic recovery merely show the same old up-and-down economic and financial cycles in transitory periods of uptick. They are now warning of new bubbles threatening to burst. [See note]

[Start of note]

Global strategist Kit Juckes of Société Générale is actually calling the post-2008 signs of recovery as “the bubble with no name (yet)”. See his explanation below, describing the pattern behind “three significant financial bubbles of the last 30 years” with an accompanying graph showing a correlation between nominal GDP and Fed policy in generating bubbles.