The GATT Agreement: No capitalist solution to the crisis

Since the beginning of the decade, the world economy has been sunk into recession. The multiplication of lay-offs; the brutal growth of unemployment which has reached levels unknown since the 1930s; increasing insecurity for those lucky enough to keep their jobs; a generalized decline in living standards, which have been amputated by endless austerity plans; increasing pauperization, particularly through the marginalization of a whole sector of the population deprived of income and even of a roof over their heads. The working class of the big industrial cities is feeling the full force of such phenomena. Today, the exploited are facing the biggest ever attack on their living conditions. Behind all the abstruse statistics and abstract figures, this reality demonstrates in a terribly concrete way the truth of the economic crisis of the entire capitalist system. And yet, the flatterers of capital never tire of announcing that the recovery is coming ... next year. Up till now, these hopes have foundered every time. But at the end of 1993 this hasn't prevented the media from shouting more loudly than ever about the coming 'recovery'.

What is this new optimism based on? Essentially on the fact that in the USA, after several years of recession, there has been a return to positive national growth rates. Are these figures really significant? Do they herald a bright new capitalist tomorrow? If the workers were to believe that, they would be falling for the worst kind of illusions.

The deafening noise of the media barrage about the end of the recession actually expresses the need of the ruling class to counter-act the growing feeling within the proletariat, which is faced with a day-to-day reality which has been getting worse and worse for many years, that the managers of capital have no solution to the crisis of their system. Over the years, the ideological themes and discourse put forward by the ruling class have varied in form, from Reagan and Thatcher's 'less state' to the reconsideration of the social role of the state by Clinton; governments of left and right have come and gone, but reality has gone on moving in the same direction: the deepening of the world crisis and the generalized deterioration of living conditions for the exploited. All sorts of recipes and bitter medicines have been tried. New hopes have been raised again and again, but all in vain.

In the last few months, capitalist propaganda has found a new theme of mystification: the GATT negotiations. According to this, it's protectionism that has been holding back the development of the economic recovery. Consequently, the opening up of the market, respecting the rules of free competition will be the panacea which will make it possible to pull the world economy out of the doldrums. The USA is the main mouthpiece of this view. But all this is just ideological froth, a smokescreen which is less and less able to hide the ferocious free-for-all between the world's main economic powers in their effort to hold onto their part of an ever-shrinking world market. Under the cover of the GATT negotiations, each fraction of the bourgeoisie is trying to mobilize the proletariat behind the banners of defending the national economy. The GATT agreements are nothing but a moment in the sharpening trade war, and the working class has absolutely nothing to gain from them. The outcome of these negotiations make no difference at all to the trend towards frenzied competition which has been developing for years, and which has taken the form of massive lay-offs and draconian social plans aimed at restoring the competitive edge of enterprises - of attempts to balance the books by imposing drastic economies paid for by the working class. In the future, the capitalists will have yet another argument for justifying lay-offs, wage cuts, immiseration: "it's the GATT's fault", in the same way as we've already heard that it's all down to the EEC or NAFTA[1]. All these false arguments have only one function: to hide the reality that all this misery is the product of an economic system drowning in its own insoluble contradictions.

A recession without end

At the least flicker of the indices for growth, the leaders of capitalism are encouraged to see the signs of a recovery, and thus the justification of the austerity plans they have carried out. This has especially been the case in France and Germany recently. However, the growth figures in the main economic powers over the past few months show that there's very little for them to get happy about.

Thus, for the whole of the European Union (to give the new title of the former EEC), 'growth' was still a tiny +1% in 1992 before falling to -0.6% in 1993. In the last two years it has gone from +1.6% to -2.2% in Germany (not including the eastern part), from +1.4% to -0.9% in France, and from +0.9% to -0.3% in Italy. All the countries of the European Union have seen a fall in their Gross National Product with one exception: Britain, whose GNP has climbed from -0.5% to +1.9%[2].

Behind the required facade of optimism displayed by the politicians when they announce a recovery in 1994, the various specialized institutes, which address themselves to a more select audience, that of the economic 'decision-makers', are much more cautious. Thus, the Nomura Research Institute, having estimated that Japan's GNP would slip by 1.1% in the fiscal year from April 93 to April 94, envisages a further fall of 0.4% in the ensuing period, i.e. up till April 95. In its report it even says that "the present recession threatens to be the worst since the 1930s", and adds "it is important to note that Japan is about to go from a real recession to a full scale deflation"[3]. After a fall in GNP estimated at 0.5% in 1993[4], the planet's second economic power is not seeing any recovery on the horizon.

Apparently the climate is very different in the USA. With a growth in GNP estimated at 2.8% in 1993[5], the USA (along with Britain and Canada) seems to be an exception among the great powers. The country which has always claimed to symbolize liberal capitalism, which has been the latter's ideological champion, has another occasion to raise high the banner of triumphant capitalism. In the current atmosphere of pessimism, the USA presents itself as the spearhead of faith in the virtues of capitalism and in its ability to overcome all the crises it faces; in similar vein, it poses as the incarnation of 'democracy', an ideal which marks the crowning point of human achievement. Unfortunately for our apostles of eternal capitalism, this endlessly repeated ideological verbiage has very little to do with the nasty reality unfolding on the world scene, including in the USA. All this discourse is above all aimed at preventing the working class becoming conscious of the real situation by encouraging false hopes; it also serves as an ideological vector for America's imperialist interests in the face of its European and Japanese rivals. The highly publicized farce of the GATT shows this clearly.

The myth of the fall in unemployment in the USA

To back up its propaganda about the 'recovery', the USA bases itself on an indicator which has a much greater echo in the working class than the abstractions of GNP: the rate of unemployment. Here again, the USA and Canada seem to be an exception. Among the developed countries, they are the only ones who can claim that the number of unemployed has fallen, whereas everywhere else it has risen faster and faster:

Growth in unemployment (percentage rate)[6]

	1992	1993
USA	7.4	6.8
Canada	11.3	11.2
Japan	2.2	2.5
Germany	7.7	9.9
France	10.4	11.7
Italy	10.4	11.7
Britain	10.0	10.3
European Union	10.3	11.3
OECD	7.8	8.2

Is the situation of the workers different in the USA from that of other developed countries? Not a day passes without one of the great enterprises which occupy center stage on the world economy announcing a new train of redundancies. We won't repeat here the lugubrious list of lay-offs announced in recent months - that would take pages and pages. The situation is the same all over the world and the USA really is no exception. Thus, 550,000 jobs were eliminated in 1991, 400,000 in 1992 and 600,000 in 1993. From 1987 to 1992, enterprises of more than 500 employees 'slimmed down' their workforce by 2.3 million. It has not been the big enterprises that have created jobs in the USA, but the small ones. Thus, during the period under consideration, enterprises with less than 20 wage-earners saw a 12% growth in their workforce, those of between 20 and 100 a 4.6% growth[7]. What does this mean for the working class? Quite simply that millions of stable and well-paid jobs have been destroyed and that the new jobs are precarious, unstable, and usually badly paid. Behind the triumphalist employment figures of the US administration lurks all the savagery of a brutal attack on the living conditions of the working class. Such a situation has been made possible by the fact that in the USA, in the name of ‘liberalism' and the sacrosanct law of the market, the rules regulating the labor market is practically non-existent, contrary to the situation that prevails in Europe.

This is the model that the European and Japanese leaders are looking at with envy, in the hope of dismantling what they call the 'rigidity' of the labor market, i.e. the whole system of 'social protection' which has stood for decades and which, depending on the country, takes the form of a minimum wage, protection against redundancy in certain sectors (public service in Europe, large enterprises in Japan), precise rules about redundancy pay, unemployment benefit and so on. In fact, behind the slogans, now being voiced in all the industrial countries, about the need for a greater 'mobility' of the workforce, for a more 'flexible' labor market, lies one of the biggest ever attacks against the living conditions of the working class. This is the 'model' proposed by the USA. Behind the appearances contained in the figures, the diminution of unemployment in the USA does not mean good news for the workers. It corresponds to a huge degradation of proletarian living conditions.

What's true for the unemployment figures is also true for the growth figures. They only have a very distant connection to reality. The return to prosperity is no more than a dream for a capitalist economy that has been in open crisis for 25 years. One example that helps put the euphoric claims of American capitalism in perspective: during the 1980s, under President Reagan, we also had the same assertions about 'recovery' repeated over and over again, a recovery that was supposed to lay the specter of capitalist crisis once and for all. In the end, history took its revenge, and the open recession which followed consigned all this guff to oblivion. In fact the 1980s were years of crisis and the 'recovery' was no more than a hidden recession in which, in contrast to all the ideology, the living conditions of the working class got worse and worse. The present situation is worse still. The least that can be said is that the American 'recovery' is particularly wheezy and has very little significance. It has far more to do with reassuring propaganda than with reality.

A headlong flight into credit

As the GATT debates hotted up, an interesting figure was published in the press: the USA, the European Union, Japan and Canada account for 80% of world exports. This gives an idea of the preponderant weight of these countries on the world market. But it also shows that the economy of the planet is based on three poles: North America, Western Europe and Japan in Asia. And two of these poles, who represent nearly 60% of the total production of these countries, are still deep in recession. Despite all the speechifying of Clinton, who at this level is the continuator of his predecessors Reagan and Bush, the recovery of the world economy is not around the corner - far from it. In these conditions, what then is the significance of the American 'recovery'? Will the USA, Canada and Britain, who were the first to officially plunge into the recession, be the first to climb out of it? Are the positive figures they are boasting about the signs of an imminent revival of the world economy?

Let's take a closer look at this famous American 'recovery'. What's going on? Has Clinton made all the ills of the American economy disappear with the wave of a magic wand? Has he overcome its lack of competivity at the level of exports and thus the vast trade deficit, the colossal budget deficit which translated itself into such a level of debt that the problem of paying it back, and thus of the solvency of the American economy, poses a dire threat to the international financial edifice? None of this has disappeared; rather the opposite has happened. On all levels the situation is worse.

The annual deficit of the USA's trade balance, which in 1987 reached the record level of 159 billion dollars, was only partially reabsorbed, falling to a 'mere' 73.8 billion in 1991. But since then it has grown and grown; it was estimated at 131 billion in 1993[8]. As for the budget deficit, it was estimated at between 260 and 280 billion dollars in 1993. In brief, Clinton has done nothing new; he has continued along the same road as his predecessors, the road of massive indebtedness. Problems are put off till tomorrow and their real aggravation in the present is hidden. The fall in interest rates which has meant that today the Federal Bank lends at a rate of 3%, i.e. a rate equivalent to the official inflation level (and thus lower than the real inflation level) has no other goal than to allow enterprises, individuals, and the state to lighten the burden of debt and to provide a staggering economy with an internal market artificially maintained by 'free' credit. An example: after two years of quasi-stagnation, household consumption has started growing again in the last few months; in the third quarter of 1993 it went up by 4.4%. The essential reason for this is that individuals have been able to renegotiate their loans at a rate of 6.5% instead of 9.5%, 10% or more, thus increasing their disposable income and reviving their taste for living on credit. Thus, the amount of consumer credit jumped by 8% in August, 9.7% in September, and 12.7% in October[9]. The rediscovered confidence of the American economy is above all a new headlong flight into credit.

The USA certainly isn't alone in this massive resort to credit. It's a generalized situation.

Evolution of the net public debt (% age of nominal GNP)[10]

	1991	1992	1993
USA	34.7	38.0	39.9
Germany	23.2	24.4	27.8
France	27.1	30.1	35.2
Italy	101.2	105.3	111.6
Britain	30.2	35.8	42.6
Canada	49.2	54.7	57.8

With the exception of Japan, which is using its well-lined pockets to keep its economy afloat and is already in its fifth recovery plan, with no great results, all the major countries are resorting to the drug of credit to avoid an even more dramatic recession. However, although according to the OECD's figures the American state's debt is not the biggest, it remains the case that the USA is the country which has resorted most massively to debt at all levels of its economic activity - state, enterprises, individuals. Thus, according to other sources, the gross deficit of the state represents 130% of GNP, that of enterprises and individuals 170%. The scale of the overall debt of the USA - more than 12,000 billion dollars, although other sources put it much higher - weighs heavily on the world economic situation. This situation means that while the idea of a dynamic towards recovery might sow illusions for a short time and find some provisional confirmation outside the US, basically it's destined to fizzle out.

America's counter-offensive

What for any other country would be seen as a catastrophic situation that would stir the IMF to anger is, in the USA's case, constantly being minimized by all the world leaders. The present 'recovery', like the one in the second half of the 80s, under Reagan, which was activated in a totally artificial manner by the drug of credit, is being claimed as proof of the dynamism of American capitalism, and by extension, of capitalism in general. The reason for this paradoxical situation is not only that all the economies of the world are closely dependent on the American market for their exports, and thus have an interest in sustaining it; it's also that the credibility of the USA is not only defined by the strength of its economy. The USA has other assets: above all, its status as the world's premier imperialist power for decades, its position as head of the western bloc from the end of the Second World War to the fall of the eastern bloc, enabled it to organize the world market in line with its needs. One example of this situation: the dollar is the reigning currency on the world market. Three quarters of international trade takes place in dollars. Even if the western bloc is now finished since the disappearance of the Russian ogre made it lose its cement, even if, as a result, the USA's main economic rivals - Europe and Japan, who used to obey the discipline of the bloc, including on the economic level - are now trying to spread their wings, it remains the case that the whole organization of the world market is inherited from the previous period. As a result, the USA will try to draw the maximum benefit from this in the present situation of exacerbated competition and trade war. The free-for-all around the GATT negotiations is a striking illustration of this situation.

The USA has stated its aims very clearly. The President has announced that the USA wants to raise its annual exports from 638 to 1,000 billion dollars. Which means that the US is seeking to redress its economic situation by restoring a favorable trade balance. An ambitious objective which can only be attained at the expense of other economic powers. The first plank of this policy is the revival of investment; Clinton sees a growing role for the state at this level. It is highly significant that in the USA the gross formation of fixed capital (investment) has risen from +6.2% in 1992 to +9.8% in 1993, whereas in 1993 it fell by 2.3% in Japan, 3.3% in Germany, 5.5% in France , and 7.7% in Italy; in Britain it has only gone up by +1.8%. The USA is armor-plating its economy in order to make it more competitive and to redouble its assault on the world market. But in the conditions of sharpening competition now prevailing, this purely economic policy is not enough. There is a second plank in the policy, consisting of using all the resources of American power to open up to US exports those markets guarded by protectionist barriers.

It's in this framework as well that we have to understand the NAFTA accords, the recent Seattle conference of Pacific seaboard nations, as well as the disputes which have dominated the GATT agreements. Imperialist motivations are clearly not absent from these economic negotiations. After the disappearance of their bloc, the USA must reconstitute and restructure its zones of influence. In the same way that they ensure that their economy benefits from their imperialist strength, they are also using their economic strength to further their imperialist interests. This is not new, but before, the USA's main economic rivals were tied by the discipline of the bloc and so used to grin and bear it. They paid the bill in the name of western solidarity. This is no longer the case.

France's defiant attitude towards the USA was not as isolated as media propaganda would have us believe. It had the support of the majority of European countries, notably Germany. Japan, meanwhile, has also been visibly defending its own interests. The negotiations were thus very hard and had all the appearance of a psycho-drama because, faced with American demands, Europe and Japan defended their own economic interests with a determination they have never shown before. But that's not the only reason. All the great powers, which are also the main exporting countries, have an interest in an agreement to limit protectionism. Even if France is the world's second biggest exporter of agricultural products, the French arguments about the Blair House pre-agreement, which only affected a very small part of its exports, were essentially a publicity-seeking pretext to draw attention away from the discrete and difficult negotiations about much more economically important issues. The dramatization of these negotiations was also based on the intensifying imperialist rivalries between the USA on the one hand, and the Franco-German alliance at the heart of Europe, and Japan, on the other.

France and most of the European countries have to mark their differences because behind these economic negotiations we are also seeing the development of the ideological themes that will serve the future imperialist alignments. It is thus particularly significant that there has been no agreement on audio-visual products. The famous "cultural exception", which France in particular has talked about so much, actually masks the need for those challenging US domination to block American control over the media, which are indispensable for any independent imperialist policy.

The argument that the GATT accord is going to help re-launch the world economy has been churned out in abundance. It has been based largely on a study done by a team of OECD researchers who predicted that the GATT accord would lead to a 213 billion dollar growth in annual world revenue, though they didn't lay too much emphasis on the fact that this prediction is for next century! By then of course, knowing how often the specialists of the day have been proved wrong, these handy predictions will have been forgotten. The real significance of these accords is the exacerbation of the trade war, the aggravation of competition, and thus, in the short term, the further decline of the world economy. They will not change the dynamic of the crisis. On the contrary they are a focus for the tensions and rivalries between the great powers of the world.

Beyond all the illusions that the ruling class is trying to sell today, the storm clouds are gathering over the world economy. Financial crisis, an even deeper slide into recession, the return of inflation is the specters looming on the horizon. For the working class they bring the threat of an increasingly tragic deterioration in its living conditions. But they also announce the fact that it is becoming more and more difficult for the ruling class to make people believe in its system. The crisis pushes the proletariat to struggle in defense of its living conditions, while at the same time opening its eyes to the lies of capitalism. Despite the suffering it brings, the crisis remains the main ally of the revolutionary class.

JJ, 16.12.93

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[1] NAFTA: North American Free Trade Agreement, encompassing Canada, the USA and Mexico.

[2] Source: European Commission

[3] Deflation: reference to the crisis of 1929 during which the fall in production and employment was accompanied by a fall in prices.

[4] Source: OECD

[5] idem

[6] idem, except for Italy, which in the meantime has changed its methods of calculation; the source here is the European Commission

[7] idem

[8] idem

[9] Source: Federal Reserve

[10] Source: OECD