This second seminar is a follow-up of the seminar on the economic crisis held in October 2-4 2009. The first seminar was dedicated to the analysis of the immediate consequences of the so-called “subprime crisis” in the USA, namely the rescue of bankrupt banks with public money, the demise of international financial markets, and the deep recession that followed with its dramatic consequences in terms of massive dismissals and increase of poverty.
At the time, there was a consensus that the economic crisis was of a systemic nature, combining a food, energy and ecological crisis. The rescue plans adopted by the G8 countries would only deal with the economic issue but would fall short of addressing the other dimensions of the crisis. Still, even on pure economic ground, the economic measures taken by advanced capitalist economies were considered incapable to promote the return to a moderate and stable growth.The main reason is that the neoliberal agenda and the power given by states to financial markets remain unchanged. The most probable mid-term scenario in advanced capitalist countries is of a low and unstable growth pattern coupled with unemployment that will stay stuck at a higher level than before the crisis.
Yet, it was already visible that capitalist countries of Latin America and Asia were not affected at the same magnitude by the crisis and were able to rebound quickly in the spring of 2009. In these countries, classical expansionary monetary policy and massive public expenses were able to absorb the shock and to resume with a fairly high growth rate. China was the main driver of growth not only for Asian countries but also for Latin America and Africa, confounding many analysts' forecasts that the importance of its exports to Europe and North America would turn China unable to resist and maintain a high rate of growth. Not only has China climbed up a few more steps in the international ladder but we may be witnessing a swing in the centre of gravity of global capitalist accumulation in the near decades.
In the meantime, a new phase in the international crisis is unfolding. Thanks to the rescue plans and very low interest rates policies adopted by central banks, private banks have turned massive losses into historical profits and so have the major multinational companies which have downsized and restructured with the benediction of neoliberal governments. Private banks’ losses have been transformed into public debts and now conservative and social-liberal governments all together want workers pay for it. The IMF has invited advanced economies to return to the pre-crisis median debt-to-GDP ratio of 60 percent of GDP by 2030. This would require a fiscal restriction of 0.84 percentage point of GDP, an equivalent of around US$ 370 billion each year. States have already reacted by deep cuts in public social spending and open or covert tax increases. Brutal as they may be, these cuts and taxes will not restore public finance for the simple reason that they will dampen an already fragile recovery in advanced capitalist countries. Financial investors and banks know it ant they are speculating on the incapacity of the most fragile states to service their debt. The speculation is quite simple: Investors of all kind are demanding very high interest rates to roll over the existing public debt that countries are unable to pay. A new “rescue” is then organised by which the “rescued” country accepts more social cuts, more taxes on wage earners, and more wage repression.
In the eighties and nineties, it was the fate of developing countries of Latin America and Africa to be caught in this debt trap. One of the striking novelties of the present crisis is that Europe is now confronted to the same kind of debt crisis. Greece, Ireland, Portugal and maybe tomorrow Spain and others are caught in the speculators’ net. It is the first time that countries belonging to one of the core regions of world capitalism are being submitted to brutal structural adjustment plans. This will have a strong deflationary impact on growth for other European countries like France or the UK which are not yet struck by speculative attacks but are applying the same austerity plans beforehand in the hope that they will be spared by speculation. It is very uncertain that in the end the founders of the EU like France or Italy will avoid a debt crisis but what is certain is that the EU will dive into a long period of low growth, lower that it already was before the crisis. This will put the political institutions of the EU under much stress with real possibilities of a break-up or its dismemberment into two groups, say northern and southern Europe with a big question mark regarding where the border lies exactly.
The future of the EU is so seriously questioned that one major objective of the seminar is to analyse in details the various aspects of the economic crisis in Europe and to draw the necessary political lessons from a workers’ point of view such as: Is a break-up of the EU a good or a bad thing, and for whom? Should we demand the end of the Euro or support the exit of one or several countries from the Eurozone? Or, beyond the refusal to pay for the crisis, which makes consensus, should we campaign for other proposals such as an updated program for a social convergence of the EU, a “race to the top” instead of a “race to the bottom”?
The second objective of the seminar will be, like the previous one, to analyse the economic and social situation in other continents.
To start with, the situation in the USA is significantly different from the EU. The FED is able and willing to print money (the so-called “quantitative easing”) to buy public debt to the contrary of the European Central Bank. The Federal State is not under threat of a speculative attack fuelled by the possibility that it would be unable to service the federal debt. The room of manoeuvre of the US government is much more important than in the EU. It does not mean that the US debt can reach whatever level the US government wants. Standard and Poor’s downgrading of the US debt in April 2011 and its immediate impact on the stock markets proves that there are limits to the amount of debt that private investors accept to finance at a low rate. Nonetheless, US capitalism is still plagued with serious problems such as households’ debt which impairs their capacity to consume, the high level of unemployment, the high level of income inequality, the failure of the authorities to revamp the housing market, and the recessionary effects of cuts in public and social spending. Not to mention the cost of the war in Iraq and Afghanistan. Although the economic policy is in part different from Europe, the USA face the same incapacity to recover from the crisis four years later. Because the USA is still by far the most important capitalist economy, the seminar will have to assess the state of the US economy and its chance to engage into a new growth pattern.
The third objective of the seminar is to update the analysis of the economic situation in Latin America, Asia and if possible, (and we have to make it possible), in Africa. It is not possible to summarise the many different and common features between these continents but there are at least two key points.
On the whole, developing countries have been much less affected by the economic crisis than rich countries.
This is mainly due to China’s resilience to the crisis and the fact that China is now the main trading partner of many countries in Asian, Latin America and Africa, substituting the US or the EU in this role.
This is a radically new situation and the first clear evidence of what a multipolar world means. It is necessary to take the exact measure of the phenomena and its implications. China has become the second world economy in terms of GDP in 2010 (in current US dollars) and is closing the gap with the US. In 1995, the value of the US GDP was 10.5 times the value of the Chinese GDP. In 2010, it was only 2.5 times. In terms of GDP per capita, the difference is still huge. Yet, there are reasonable expectations that by 2030, there will be more Chinese earning an average income equal to the US’s than in the USA itself. If we add India in the picture, it may be that by 2050 (or before), there will be more consumers of durable goods in Asia than in North America and Europe combined. It does not mean that China is already able to substitute the USA as a consumer of last resort and as an engine of growth for the world economy. Nor does it mean that China and Asia are able to “decouple” from the rest of the world economy. But it means that now a crisis in advanced capitalist countries does not lead automatically to a crisis at the periphery of the same magnitude and does not hinder a recovery. What’s more, the so-called BRIC, are also countries able to say “no” to the US and the EU whenever their major interests are at stake. For instance, China has maintained an almost fixed exchange rate of the Yuan with the US dollar, and India is still trading with Iran despite the embargo. This adds a new complexity in international relations and new problems for imperialist powers.
While it is necessary to acknowledge China’s rise, it is also important to be aware of the weaknesses of the Chinese economy. The stimulus plan decided by the Chinese government in 2008 was successful in reflating the economy which maintained a rate of growth of 9% in 2009 and 10% in 2010 dragging most Asian and many Latin American economies in its wake. The stimulus plan is now over and the main question to analyse is whether China has the capacity to maintain the same level of growth. More, the stimulus plan has revived some traditional problems of the Chinese economy such as inflation, the danger of a speculative bubble in the stock market, in real estate and housing. It has also exacerbated the disequilibrium between investment and net exports on the hand and households’ consumption on the other hand. If China is not able to rebalance its growth regime in favour of its internal market thanks to a boost of households’ consumption, its growth will slow down and with it the demand addressed to many Asian, Latin American and African countries. A third phase of the crisis would begin in which this time many developing countries would be much more affected.
This scenario needs to be explored and validated in order to highlight the possible economic conjuncture in the near future. Although there is no direct and simple link between economics and politics, the economic situation helps to expl9:45 u tot 10:00 u :ain the choices that governments have to make and the possibilities for workers to win.
Author’s calculations based on an adjustment of the primary balance of 8.7 percentage points from a deficit of 4.9 percent in 2010 to a surplus of 3.8 percent in 2020 of advanced countries’ GDP projected by the IMF in Fiscal Monitor, May 2010.
Program of the 2nd Economy Seminar 2011
Friday morning 18 November 2011:
9h00 to 9h15: Welcome and presentation of the seminar.
9h15 to 10H00. The emergence of a multipolar world and the new face of imperialism. Speaker: Cedric Durand, France.
10h00 – 10h45: Debate.10H45- 11H15: The return of the food and energy crisis: structural problems and/or financial speculation? Speaker: Sean Thompson, UK.
11H15 – 12H00: Debate.
12h00 to 13h30 Lunch
13h30 to 14h30: The economic background of the political rebellion in North Africa and the Middle-East. Possible speakers: Adam Hanieh (UK).
14h30 to 14h45: Pause
14h45 to 15h30: Debate
15H30 to 15H45: Pause
15h45 to 16h45: The state of the economy in Latin America. Speaker, Claudio Katz (Argentina)
16H45 to 17H00: Pause.
17H to 18h00: Debate
Saturday morning, 19 November
9h00 to 9H30: Introduction to the special debate on Europe: new developments of the crisis in Europe: the debt trap. Speaker: Eric Toussaint, 30 minutes.
9h30-10h30: Exiting the Eurozone: a good or bad solution? Speakers, 20 minutes each: Costas Lapavitsas (UK), Michel Husson, Philippe Légé (France)
10h30 to 10H45: Pause
10h45 to 11h10: alternatives on the debt and fiscal crisis in Europe. Speaker Özlem Onaran (UK), 25 minutes.
11H10 to 12H30: debate.
12h30 to 14h00 Lunch
14H00 to 14H50: debate.
14h50 to 15h30: Conclusions on Europe: agreement, disagreements and proposals, Costas, Michel, Philippe, Eric and Özlem, 8 minutes each.
15H45 to 16H45: The state of the crisis in the USA. Joel Geier, ISO, (USA).
17h00 to 18h00: Debate
Sunday morning, 20 November
9h00 to 9H45: Presentation: The Chinese economy and its impact on world growth. Speaker: Jean Sanuk (France).
9h45 to 10h00: Pause.
10h00 to 10h45 Debate
10h45 to 11h30: The economic and political situation in South Africa. Speaker: Brian Ashley, South Africa, (to be confimed).
11h30 to 12h15: debate on Africa.
12H15-13H30: Lunch Sunday afternoon.
13H30 to 14H00: Closure of the seminar