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Archive for category: #Capitalism #EconomicCrisis #Finance
‘Polycrisis’ is the buzz word among leftists right now. The word expresses the coming together and interlocking of various crises: economic (inflation and slump); environmental (climate and pandemic); and geopolitical (war and international divisions). Indeed, I raised a similar idea early last year.
So it is no surprise that the latest Human Development Report from the UN is so shocking. According to the HDR, the world is more pessimistic than at any point in modern history stretching back to before WW1.
The HDR analysed language trends in books over the past 125 years. It reveals a sharp increase in expressions reflecting “cognitive distortions associated with depression and other forms of mental distress”. Over the past two decades the language reflecting overly negative perceptions of the world and its future has surged. Indeed, today’s distress levels are unprecedented, exceeding those during the Great Depression and both world wars.
What’s also revealing is that negative views about the world began to soar around the turn of the century – even before the Great Recession. This surge coincides with my own economic insight that the major economies of the world entered what I call a new Long Depression, the third in the history of modern capitalism after the depression of 1873-95 and the Great Depression of the 1930s.
The intensity of negative views about the prospects for humanity has never been higher – way higher than in either of the two world wars of the 20th century. We are in a combination of: an economic depression; where real incomes stagnate or even fall; poverty increases along with widening inequality; and where investment to boost the productive forces and solve the environmental disaster now engulfing the world is lacking. And where instead of global cooperation by governments to solve this ‘polycrisis’, we have increasing conflict between nations, both economic and military.
Achim Steiner, Administrator United Nations Development Programme, presented the HDR 2022. This is how he introduced it. “We are living in uncertain times. The Covid-19 pandemic, now in its third year, continues to spin off new variants. The war in Ukraine reverberates throughout the world, causing immense human suffering, including a cost-of-living crisis. Climate and ecological disasters threaten the world daily.”
He went on: “Layers of uncertainty are stacking up and interacting to unsettle our lives in unprecedented ways. People have faced diseases, wars and environmental disruptions before. But the confluence of destabilizing planetary pressures with growing inequalities, sweeping societal transformations to ease those pressures and widespread polarization present new, complex, interacting sources of uncertainty for the world and everyone in it.”
“People around the world are now telling us that they feel ever more insecure.” Six out of seven people worldwide reported feeling insecure about many aspects of their lives, even before the Covid-19 pandemic. And the political consequences: “Is it any wonder, then, that many nations are creaking under the strain of polarization, political extremism and demagoguery—all supercharged by social media, artificial intelligence and other powerful technologies?”
Steiner pointed out that “in a stunning first, the global Human Development Index value has declined for two years in a row in the wake of the Covid-19 pandemic.”
The decline in the global HDI puts it back to the time just after the adoption of the 2030 Agenda for Sustainable Development and the Paris Agreement! So no progress there. Every year a few different countries experience dips in their respective HDI values. But a whopping 90 percent of countries saw their HDI value drop in either 2020 or 2021, far exceeding the number that experienced reversals in the wake of the global financial crisis. Last year saw some recovery at the global level, but it was partial and uneven: most very high HDI countries notched improvements, while most of the rest experienced ongoing declines.
At least 15m ‘unnecessary lives’ were lost from the COVID pandemic, mostly in low- and middle-income countries. But even the US saw its life expectancy fallen to the lowest level in 26 years. Indeed, US life expectancy is now below that of China!
New vaccines were developed to fight COVID in double-quick time, including some based on revolutionary technology and they saved an estimated 20 million lives in one year. But the poorest in the world received the least medical support because highly unequal vaccine access “The pandemic has been a painful reminder of how breakdowns in trust and in cooperation, among and within nations, foolishly constrain what we can achieve together.”
COVID has not gone away, but governments and people have decided to live (and die) with it. The aftermath remains and even worsens. Billions of people now face the greatest cost-of-living crisis in a generation. They are already grappling with food insecurity, owing largely to inequalities in wealth and power that determine entitlements to food. Global supply chain blockages remain, contributing to rising inflation in all countries at rates not seen in decades.
As for the climate, the HDR reminds us that in recent years have seen more record temperatures, fires and storms around the world. The latest International Panel on Climate Change Report is a “code red for humanity.” In essence, as science has advanced, the climate models are, with better precision than before, predicting more disasters ahead. As “the climate crisis marches on, alongside other planetary-level changes wrought by the Anthropocene.” Biodiversity collapse is one of them. More than 1 million plant and animal species face extinction. “We have even less of an idea of how to live in a world without, say, an abundance of insects. That has not been tried for about 500 million years, when the world’s first land plants appeared. This is not a coincidence. Without an abundance of insect pollinators, we face the mindboggling challenge of growing food and other agricultural products at scale.”
The polycrisis is affecting humanity’s mental wellbeing through traumatizing events, physical illness, general climate anxiety and food insecurity. “The effects these have on children in particular are profound, altering brain and body development, especially in families on lower social rungs, potentially diminishing what children can achieve in life.” Inequalities in human development are perpetuated across generations; “it is not difficult to see how the confluence of mental distress, inequality and insecurity foment a similarly injurious intergenerational cycle that drags on human development.”
With economic depression and ecological disaster comes uncertainty, insecurity and political polarization. Large numbers of people feel frustrated by and alienated from their political systems. Armed conflicts are also up. For the first time ever, more than 100 million people are forcibly displaced, most of them within their own countries.
What is to be done? The UN offers its model for a more hopeful future: investment, insurance and innovation—the three Is.
But innovation and new technology, the UN admits, is a double-edged sword. “Artificial intelligence will both create and destroy tasks, causing tremendous disruption. Synthetic biology opens new frontiers in health and medicine while raising fundamental questions about what it means to be human.” Indeed, will these new technologies increase inequality, reduce job possibilities or expand them? I have discussed this issue in previous posts.
Then there is investment. The HDR talks about public investment, particularly for the environment. But says nothing about the vested interests that stand in the way of such investment. Finally, there is insurance: more protection of human rights, access to basic services and minimum incomes, and more democratic accountability. None of this basic insurance exists for the majority of the world’s near 8bn people.
The UN report is devastating in its examination of the human condition in the 21st century. But it offers no convincing explanation of why there is a ‘polycrisis’. Achim Steiner tells us that “the hero and the villain in today’s uncertainty story are one in the same: human choice.” Really, so if we chose to do things differently, we could. So why doesn’t humanity choose a different path? Well, it is because “not all choices are the same. Some—arguably the ones most relevant to the fate of our species—are propelled by institutional and cultural inertia, generations in the making.” Institutional and cultural inertia? Surely, the reason lies with the reality that only a tiny percentage of humanity can choose; the rest of us do not have the power to choose (at least not individually). It is the class division with capitalism, between those who own and control and those who must work for them and obey, that is the fundamental cause of this polycrisis, “generations in the making.”
Muhammed Selim Korkutata/Getty Images
- The next recession could be a “richcession,” according to the Wall Street Journal.
- That’s because high-earners are facing layoffs, and seeing their massive stock holdings tank.
- Meanwhile, lower earners are seeing wages grow and continued job opportunities.
As the economy continues to be in a will-they, won’t-they relationship with a recession, numbers are showing that the possible downturn might not look like previous ones.
That’s because, as the Wall Street Journal reports, it might be a “richcession.” The wealthiest Americans could be disproportionately caught in the crosshairs of mass layoffs and stock losses, leaving the lowest-wage workers to continue quitting and pushing their wages higher.
It’s no secret that the pandemic-induced recession was unevenly felt. A K-shaped recovery — where high-earning Americans saw jobs and wages grow, while the converse happened to lower-earners — began to take form during the recession. Billionaires worldwide saw their wealth grow by 62% during the pandemic, according to an April report from Oxfam. In America, billionaires were adding trillions to their fortunes throughout the post-vaccine era, with their net worths swelling from stock gains.
But now, as the Wall Street Journal notes, things aren’t looking so rosy for the highest-earners (who, to be clear, still hold a lot more wealth than everyone else). High-earners are getting cut at companies like Meta and Twitter, where median workers made over $200,000 in 2021. And, as Insider’s Linette Lopez reports, “The stock market — for the foreseeable future — is royally screwed.” The top 10% of Americans hold nearly 90% of all stocks in the country, a record high.
Now, real wage growth is declining rapidly for those at the top when analyzing changes in their wealth from before the pandemic over time. At the same time, the bottom 50% see their gains far outpacing the wealthiest.
According to real wealth growth data from Realtime Inequality that looks at changes each month from pre-pandemic February 2020 for adults who are at least 20 years old, the bottom 50% has seen their growth soar much higher than those part of the top 1%, top 10%, or even the middle 40%.
For the bottom 50%, real wealth growth from February 2020 to September 2022 is 226.6%. For the top 1%, this growth was just 16.8%. Several months prior in December 2021, growth for the top 1% from February 2020 was 36.7% — much smaller than the just over 250% growth the bottom 50% saw.
That’s not to say that the lowest-earning Americans are doing markedly better.
Ken Kim, a senior economist at KPMG, told Insider in December that “lower-income quintiles are already feeling the brunt of” what has been for some time now elevated inflation. Kim noted that this group doesn’t have a cushion of savings to fall back on and so their paychecks are “immediately going out to pay for necessities.”
“So there is a portion of the US consumer that is certainly not faring too well currently,” Kim said.
The bottom half of Americans hold just 2% of the country’s wealth, according to a report from the nonpartisan Congressional Budget Office, while the top 1% hold about a third. And middle-class and low-wage Americans saw a pay cut in 2021, while the top 1% saw their average wages grow, according to an analysis from the left-leaning Economic Policy Institute.
To be sure, although the recession on the horizon may be considered a richcession, that doesn’t mean it won’t affect lower-income Americans.
“I think the sad, sort of recurring truth about the US labor market is that when we have downturns the most disadvantaged people are the ones disproportionately hurt,” Nick Bunker, economic research director at Indeed Hiring Lab, previously told Insider.
“Lower income, lower wage, lower education workers, Black workers, workers of color” tend to see larger spikes in unemployment during downturns, according to Bunker.
But the labor market is booming for lower-earners. The latest data release on job openings and quits from the Bureau of Labor Statistics showed that job openings are still far outnumbered by the number of unemployed workers. At the same time, workers are happy to quit, with 2.7% of the workforce throwing in the towel in November 2022.
Quits continue to be concentrated in low-wage industries, and hires remain strong. Taken together — alongside continued wage gains for historically low-paid industries — that suggests that workers are still happily quitting for a better deal and higher wages, something that isn’t necessarily happening among the high-earners hit by a richcession.
Read the original article on Business Insider
The ISM manufacturing index, a key gauge of the economy, fell to 48.4% in December from 49% in the prior month.
Kristalina Georgieva says next couple of months will be ‘tough for China’ due to spread of Covid
Cairo says banks will soon be able to help importers clear backlog of goods at ports worth $9.5bn
The finances of Hispanic consumers, renters and consumers younger than 40 took a nosedive between 2021 and 2022.
Getty Images
- Nobel laureate Paul Krugman slammed Elon Musk and Sam Bankman-Fried as “oligarchs” in an op-ed.
- Musk’s massive fortune keeps his fans loyal even as his business dealings falter.
- “The big fortunes made in information technology turned this narrative into a full-blown cult,” he said.
Paul Krugman ripped into prominent tech leaders like Elon Musk and Sam Bankman-Fried, once lauded as revolutionaries, though according to the Nobel economist are in fact living demonstrations that we live in the era of the “petulant oligarch.”
“The very privileged are surrounded by people who would never dare tell them that they’re behaving badly. That’s why I’m not shocked by the spectacle of Elon Musk’s reputational self-immolation,” Krugman said in an op-ed for the New York Times on Monday, referring to Musk’s acquisition and controversial leadership of Twitter. “The more interesting question is why we’re now ruled by such people. For we’re clearly living in the age of the petulant oligarch.”
His comments follow Musk’s chaotic revamp of Twitter, a project that’s sparked growing scrutiny over his leadership style and political tweets. Krugman was a loud critic of Musk even before the Twitter takeover, calling him an “insecure billionaire” in a op-ed last year, and warning that Twitter now risks a “Muskpocalypse.”
Yet, despite Twitter users voting for Musk to step down as CEO, Musk still has an army of dedicated followers, who see him not as a “whiny brat,” but a visionary, Krugman said. It could be attributed to Musk’s enormous wealth. While many have compared the billionaire to 20th century business tycoon Howard Hughes, Musk’s wealth greatly surpasses that of Hughes, even after Tesla’s stock plunged 60% this year. That’s helped keep fans loyal even as the exec’s business dealings falter and investors turn sour.
“Many of the superrich, who as a class used to be mostly secretive, have become celebrities instead,” the top economist added. “But the big fortunes made in information technology turned this narrative into a full-blown cult, with wannabe or seem-to-be Steve Jobs types everywhere you look.”
The same narrative could also be applied to Sam Bankman-Fried, the disgraced crypto executive facing charges of fraud, money laundering, and conspiracy after the collapse of his crypto exchange, FTX. The fallout has destroyed Bankman-Fried’s reputation, but prior to the implosion of FTX’s finances, he was regarded as a wunderkind and the benevolent face of the whole industry—”the mussy haired, scruffily dressed visionary who grasps the future in a way normies can’t,” as Krugman puts it.
But the tarnished reputations of both Musk and Bankman-Fried could mean the allure of the “genius entrepreneur” has evaporated.
“Musk and Bankman-Fried may end up doing a public service, by tarnishing the legend of the genius entrepreneur, which has done a great deal of harm,” Krugman said. “For now, however, Musk’s Twitter antics are degrading what had become a useful resource, a place some of us went for information from people who actually knew what they were talking about. And a happy ending to this story seems increasingly unlikely.”
Krugman has urged his Twitter followers to jump to alternative social media platforms like Mastodon, particularly after Musk banned prominent journalists from Twitter last week, leading to concerns that Twitter users could be censored at Musk’s whim.
Read the original article on Business Insider
Can global capitalism endure? William Robinson tries to answer this question in his book entitled with the same question. Robinson is professor of sociology at the University of California, Santa Barbara. In a fast-moving account, Robinson covers a lot of ground in offering the reader a vision of the global capitalist crisis and the accompanying international conflagration.
It flows like an essay rather than a stodgy full-length book. As Robinson says, “my aim is to present a “big picture” snapshot in a shorter work and from the vantage point of global capitalism theory that takes into account some elements of global capitalism that have come further into focus in recent years, especially the ever-deeper financialization and digitalization of the global economy and society.”
As such, the book offers no original research and relies on the work of others. Fair enough, as Robinson’s objective is to convince the reader that the “survival of global capitalism beyond the present crisis requires a substantial restructuring involving a measure of transnational regulation of the global economy and a redistribution of wealth downward. Even at that, though, a new period of economic reactivation and prosperity will not bring to an end the threat to our survival. For that, we must do away with a system whose drive to accumulate capital puts it at war with the mass of humanity and with nature. Only an ecosocialism can ultimately lift us from the threat.”
Robinson bases his theory on the nature of crises in capitalism on Marx’s law of profitability, but with his own attempt to reconcile that law with alternative theories. “Marxist political economists have debated whether overaccumulation and attendant crises are caused by a fall in profitability or by overproduction and underconsumption. I am not convinced that these two approaches must be incompatible so long as we start the analysis in the circuit of production.”
Robinson agrees that capitalist crises have their origin in over-accumulation or the overproduction of capital. And that this overaccumulation originates in the circuit of capitalist production, ultimately in the tendency for the rate of profit to fall. And the evidence for this is strong. “While figures for the rate of profit tend to vary depending on who is doing the reporting and through what methodology, one report after another has confirmed the long-term secular decline in profitability, notwithstanding short-term fluctuations, and along with it, the steady decline since 1970 in the growth of the net stock of capital (a proxy for productive investment) in the rich countries of the Organization for Economic Cooperation and Development.”
Robinson agrees with me (see my book, The Long Depression) that crises in capitalism are both cyclical and secular, or ‘structural’. “In the history of capitalism there have been periodic crises of two types, cyclical and structural. Cyclical crises, sometimes called the business cycle, occur about once a decade and show up as recessions. There were recessions in the early 1980s, the early 1990s, and at the turn of the twenty-first century. World capitalism has experienced over the past two centuries several episodes of structural crisis, or what I call restructuring crises, so-called because the resolution of such crises requires a major restructuring of the system.” Here Robinson sympathises (as I do) with ‘long wave’ theory, namely that capitalist growth tends to take place in long waves beyond cyclical crises.
For Robinson, the most important structural change in capitalism in the last half of the 20th century was globalization and rise of the multi-nationals. And in “this age of global capitalism the world economy is now inextricably integrated and functions as a single unit in real time.” But that trend came to an end in the 21st century and capitalism is now in a period of stagnation. “Wild financial speculation and escalating government, corporate, and consumer debt drove growth in the first two decades of the twenty-first century, but these are temporary and unsustainable solutions to long-term stagnation.”
Robinson argues that the accumulation of fictitious capital gave the appearance of recovery in the years following the Great Recession. But it only offset the crisis temporarily , while in the long run it exacerbated the underlying problem: “the key point with regard to the crisis is that the massive appropriations of value through the global financial system can only be sustained through the continued expansion of fictitious capital, resulting in a further aggravation of the underlying conditions of the crisis.”
Robinson makes the correct point, that “so gaping is the chasm between fictitious capital and the real economy that financial valorization appears as independent of real valorization. This independence, of course, is an illusion. The entire financial edifice rests on the exploitation of labor in the “real” economy. If the system came crashing down, the crisis would dwarf all earlier ones, with the lives of billions of people hanging in the balance. The unprecedented injection of fiat money into the financial system may result in a new kind of stagflation, in which runaway inflation is induced by such astronomical levels of liquidity even as acute inequality and low rates of profit prolong stagnation.”
Capitalism can only endure if it can find some new structural change. This Robinson sees coming possibly from “digital restructuring and through reforms that some among the global elite are advocating in the face of mass pressures from below”. That could unleash a new round of productive expansion that attenuates the crisis for a while. So capitalism could manage to “catch its breath again” through digitally-driven productive expansion that becomes strong enough to restore sustained economic growth and launch a new long boom.
However, Robinson counters, that any such expansion will run up against the problems that an increase in the organic composition of capital presents for the system, namely the tendency for the rate of profit to fall, a contraction of aggregate demand, and the amassing of profits that cannot be profitably reinvested. “But before such a time that a crisis of value would bring the system down, it is certainly possible that restructuring will unleash a new wave of expansion.” Robinson makes the pertinent point that “the breakdown of the political organization of world capitalism is not the cause but the consequence of contradictions internal to a globally integrated system of capital accumulation.”
But a new boom to happen, the state would have to intervene to build new “political structures to resolve the crisis, stabilize a new global power bloc, and reconstruct capitalist hegemony, given the disjuncture between a globalizing economy and a nation-state-based system of political authority.” And that seems unlikely, given the break-up of the US hegemony and the rise of a multi-polar world.
Robinson’s pessimism about the ability of capitalism to find a way out is compounded by the ecological crisis, which “makes it very questionable that capitalism can continue to reproduce itself as a global system.” Never before have crisis and collapse involved such matters as human-induced climate emergencies and mass extinction.
As Robinson sums it up: “the literary critic and philosopher, Frederic Jameson, once observed that: “it is easier to imagine the end of the world than it is to imagine the end of capitalism.” But if we do not imagine the end of capitalism—and act on that imagination—we may well be facing the end of the world. Our survival requires that we wage a battle for political power; to wrest power from the multi-nationals and their political, bureaucratic and military agents before it is too late.”
REUTERS/Mike Segar
- Nouriel Roubini cautioned the world faces severe risks that aren’t being handled carefully.
- He warned people should “live on high-alert” as inflation, climate change and the risk of military conflict threaten the world.
- Roubini also slammed the Fed for missing the mark on inflation, predicting a “deep and protracted” recession.
Top economist Nouriel Roubini has painted a gloomy picture on what 2023 has in store for the global economy.
In an interview with the Financial Times, Roubini, often dubbed “Dr Doom” for his pessimistic predictions, said a convergence of old and new problems pose risks to the world.
“I think that really the world is on a slow-motion train wreck. There are major new threats that did not exist before, and they’re building up and we’re doing very little about it,” he said.
He warned that a mix of inflation, artificial intelligence, climate change and the risk of a World War III all stand to have enormous global impact. “We must learn to live on high alert,” he said, adding “We will need luck, global co-operation and almost unprecedented economic growth” for a positive outcome.
Expanding on his downbeat predictions for next year, Roubini slammed the Federal Reserve for missing the mark on inflation, warning there’s a sure chance the economy will tip into a recession as a result of the US central bank’s aggressive interest-rate increases.
Just last week, the Fed raised rates by 50-basis points as it continues its battle to bring down inflation from near 40-year highs toward its 2% target. The central bank has boosted borrowing costs by more than 400 basis points since March, fueling sharp financial-market declines across asset classes.
“The conventional wisdom, coming from policymakers or Wall Street, has been systematically wrong. First, they said inflation’s going to be transitory . . . Then there was a debate over whether rising inflation was due to bad policies or bad luck,” Roubini said.
He warned that the oncoming economic downturn will be severe. “No, this is not going to be a short and shallow recession, it’s going to be deep and protracted,” he said.
With US inflation at 7.1% and unemployment at 3.7%, Roubini also cautioned the world’s largest economy will almost certainly face a hard landing.
Earlier this month, Roubini sounded the alarm on potential stock market losses given the likelihood of a US recession. He predicted the S&P 500 could crash as much as 25% if the US economy contracts next year.
Read the original article on Business Insider