The present ‘recession' is not unique to Britain. It is not the result of Labour's mismanagement of the economy. It is not caused by the greed of the bankers or by ‘neo-liberal' economic policies. It is a crisis of capitalist relations of production on a global scale. And this is why all the propaganda about ‘recovery' is a lie, aimed at obscuring the real bankruptcy of the present system of exploitation.
Tory Shadow Chancellor George Osborne says that Britain is the exception to a trend for recovery in major economies. "It is now official that Britain is the only G20 country still in recession. Labour's disastrous economic policies meant Britain was one of the first into recession and now we are the last out."
We are likely to hear a lot more of this banter in the run-up to a general election. For a more serious view on the state of the world economy we might turn to Dominique Strauss-Kahn from the International Monetary Fund in a recent speech to the Confederation of British Industry. Admitting that the global economy was in a "highly fragile" state he said that "Financial conditions have improved but are far from normal" and he thought that "Signs show confidence returning, but banking systems in many advanced economies remain undercapitalised, weighed down by leaden legacy assets and, increasingly, underperforming loans." Also "On the household side, weak financial positions and high unemployment will damp down on consumption for some time ... and large public deficits add to vulnerabilities." Reminding us that certain indicators were still predicted to get worse for the foreseeable future he said "it is difficult to claim that the crisis is over when unemployment is at historic highs and getting higher still."
As for the ‘recovery' of other countries, he saw no reason to stop all the various government measures that have been introduced across the world as there could still be further turmoil in the months ahead that might warrant further state intervention. The main weakness in Strauss-Kahn's comments was that he saw the growing demands from Chinese consumers as offering the best prospect for a sustained recovery for the world economy.
Crisis of an international system
George Osborne blames Labour for the state of the economy. There have been many other scapegoats named as being responsible for the economic crisis. The Left blames neo-liberalism and deregulation. The Right sees state controls holding back entrepreneurs. Lots of people have a go at financial speculators and greedy bankers. Some say that what we are experiencing is just part of the normal ‘business cycle'
In reality the current phase of the crisis is unprecedented in capitalism's history. Even those commentators that see some future ‘recovery' accept that the economy will be irretrievably scarred and will not be returning to past levels of activity that were only sustained by huge amounts of debt.
Just look at the banking sector. In Britain we are only now discovering the true extent of government intervention a year after it took place. And the IMF thinks that internationally there could be more revelations to come of the true extent of the crisis with maybe as much as 50 percent of bank losses still hidden away in balance sheets.
When Osbourne says that the British situation is different to others he's not entirely wrong. The effects of the crisis on Dubai throw some light on this. Dubai's diminishing offshore oil reserves will be exhausted in 20 years. Apart from re-exports it has no real industry and few natural resources beyond dates and dried fish. Its staggeringly ambitious building projects have been exposed as no more than a form of speculation founded on borrowed money. It has been trying to establish itself as a financial centre, but at a time of crisis in the financial sector it's been on a hiding to nothing.
Among other historic factors the British economy's enormous reliance on financial services (and the long term decline of manufacturing) has left it more exposed to the storms that affected the financial sector globally.
Although there are British specificities, these can only be understood in the context of a crisis of world economy as a whole.
No positive prospects
For all the propaganda about the end of the recession governments, academics and commentators still discuss whether the response of the capitalist state has been adequate to stimulate a recovery in the economy.
For example, the policy of low interest rates and quantitative easing (printing money) if it ‘succeeds' is still only financing a bubble that will itself burst one day.
In reality, after years of trying to maintain growth rates and profits, while keeping inflation as low as possible, the ruling class now faces the prospect of actually encouraging inflation, which, if it succeeds would be completely uncontrollable.
In fact the attempts at stimulating the economy do not yet seem to be having the intended effect. For all the liquidity injected into the economy by the state (governments, central banks etc) the vast bulk of it is not circulating. It's remaining in the banks, or returning to the banks in the form of loans. The fact that money has not started circulating, that money in circulation continues to shrink despite the actions of states, is an expression not of a crisis of liquidity but a major and irreversible crisis of insolvency.
Despite all the efforts of governments credit has not started flowing, again, and is still in retreat. Banks are simply unable to open the valves of credit either because of the internal financial situation of borrowers or because the rare potential borrowers cannot offer sufficient collateral.
Also there are so many companies, and above all households, that are indebted for life and are no longer able to borrow even at zero interest rates.
The general crisis of insolvency means that there has been no recovery in investment by companies, in demand for raw materials, in the transport of commodities.
That is why the perspective of growing unemployment is built into the real state of the economy. In an article entitled ‘The recovery is an impostor' US commentator Bill Bonner summarises the situation as "No new jobs = no new income. No new income = no new sales. No new sales = no new profits = no new jobs." This is not exactly how the capitalist economy works, but Bonner is a good example of a bourgeois commentator who can't see how there can possibly be a real recovery in the capitalist economy. He says we're in a depression.
Unemployment is not the only way that the crisis hits the working class. In the US the Bureau of Labor Statistics does not keep records of pay cuts, but it does have an index of total weekly pay for production workers. "That index had fallen for 10 consecutive months before rising in July and August, an unprecedented string over the 44 years the Bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession."(New York Times 13/10/9).
As a Bureau official put it "the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed."
This is what the capitalist economy has to offer the working class, and there is little perspective even for the creation of a mini-boom through the intervention of the state. On the contrary, there is no policy that the state can implement that will not create the conditions for even more violent convulsions of global capitalism.