Archive for category: #economiccrisis
Economists and economic experts once again are cheering the latest jobs report that beat expectations and shows not only did unemployment drop to 3.5%, it hit a new 50-year low as 223,000 jobs were added.
“For the year, the economy added 4.5 million jobs, the second-most on record,” The New York Times reports, neglecting to note the the record was set just one year earlier in 2021, also under President Joe Biden. “The unemployment rate ticked down to 3.5 percent, back to its low point from before the pandemic.”
“Wall Street is very happy with this number,” CNBC’s Andrew Ross Sorkin said on MSNBC. He added that the Fed’s strategy of raising interest rates to combat inflation and avoid recession looks like it may be working better than expected.
“A trifecta of good news,” MSNBC’s Stephanie Ruhle noted, calling the job numbers “robust.”
“It’s hard to say this is not a good jobs report, it just is,” Ruhle announced.
“Anyone who thinks this is economy is in a recession is bananas,” declared popular University of Michigan School of Economics Professor Justin Wolfers. He notes the jobs report “comes in HOT again, adding 223k jobs, which is both robust in its own right, and stronger than expected.”
Wolfers also used the “trifecta” analogy.
“Lemme draw a line under today’s jobs report: Rapid job growth, record low unemployment, and wage growth running at levels likely to cool inflation is an astonishing trifecta of good news,” he explained.
“I’ve just calculated the unemployment rate to extra decimal places, and December’s rate of 3.468% is a new 50 YEAR LOW, the lowest rate since 1969,” he added excitedly.
Political strategist Simon Rosenberg, founder of a liberal think tank, explains the bigger picture.
President Biden “is averaging almost 50 times the jobs created per month as last 3 GOP Presidents averaged.”
u201cBiden is averaging almost 50 times the jobs created per month as last 3 GOP Presidents averaged. nnThese 3 R Presidents averaged about 120k jobs per year – half of what was created LAST MONTH. 7/u201d
— Simon Rosenberg (@Simon Rosenberg)
He shows how jobs surge under Democratic presidents, and says since 1989, 96% of jobs have been created under Democratic presidents.
u201cSince 1989 47m jobs have been created in America. nn45m – 96% – have been created under Dem Presidents. nnDems have repeatedly kept the the country moving forward, Rs repeatedly have failed to do their part. 8/u201d
— Simon Rosenberg (@Simon Rosenberg)
Wolfers also threw in some political sarcasm, tweeting: “Note that the mass unemployment of elected-but-not-yet-seated-and-so-not-on-payroll Congressional Representatives occurred after these December employment numbers, and they should affect the January report.”
‘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.”
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 Federal Reserve and the European Central Bank are withdrawing money from markets in the name of fighting inflation. But the move is aggravating the pressures of debt on the Global South — and pushing states toward ruinous austerity measures.
Christine Lagarde, president of the European Central Bank, at a news conference in Frankfurt, Germany, December 15, 2022. (Alex Kraus / Bloomberg via Getty Images)
The current policies of the European Central Bank (ECB) and the Federal Reserve are being sold by bankers and most economists with the argument that they lack any alternative. After more than ten years of lax monetary policy that guided as much money into markets as possible, increased liquidity, and stimulated inflation, a shift is underway. Now money is actively being withdrawn from markets to fight inflation.
Advocates of this shift ignore that other instruments of economic policy — notably, comprehensive price caps, taxes on corporate profits, and redistributive measures — are far better suited to fighting inflation than the current focus on monetary policy.
In light of this, it is hardly surprising that, outside of the business press, the impact of monetary policy decisions in the Global North on the states of the Global South are rarely even mentioned, let alone debated. When currencies of the Global North, and especially the US dollar, become stronger (the stated goal of the current policy shift), states in the Global South come under pressure, as their currencies become comparatively less valuable.
As a result, many of these states lose the ability to service large outstanding international debts, and thus find themselves forced to take on new debts under ever-worsening conditions. All the while, they are pressured by international institutions to implement austerity measures — if they aren’t already ruled by neoliberal governments happy to cut public goods and services on their own.
Strong Currency at the Expense of the Poor
While history never repeats itself perfectly, a look to the past paints the current monetary policy shift in a troubling light. When central banks in the Global North tightened the monetary reins in the 1970s in response to low growth and high inflation, Latin America (along with other parts of the Global South) was hit by an unprecedented sovereign debt crisis that plunged the continent into a nearly decade-long economic crisis. And as is so often the case, wage workers, indigenous people, and the poor were hit the hardest.
In many ways, the political-economic conjuncture of 1979 is similar to our present. Although COVID-19 did not exist, and most imperial wars of aggression were still waged by the US, the situation in the Global North was just as much a product of low growth and high inflation as it is today. These factors stemmed, among other things, from the collapse of the Bretton Woods system.
Though the Bretton Woods Agreement foresaw the establishment of the International Monetary Fund (IMF) and the World Bank, two institutions that exacerbate global inequality, it also created a system of fixed exchange rates. Based on the gold standard, this system played a major role in stabilizing the global economy following World War II. When Richard Nixon abandoned Bretton Woods in 1971, partly to combat recession in the Global North and financial speculation, exchange rates became increasingly unstable, as mountains of yield-hungry capital were unleashed on the Global South.
At first, this produced a fairly comfortable situation for many Latin American states. Although exchange rate fluctuations caused some problems, interest rates on loans were generally favorable because of the glut of capital from the Global North — seemingly decent parameters for states whose governments were working to industrialize. After 1975 in particular, many corporations, banks, and governments took out loans offered by Global North banks on conditions that appeared solid. But during this period of relative stability in Latin America, the economic climate in the United States grew more complicated.
In response to the oil crisis, growing pressure on the US dollar from currency speculators, and the resulting slowdown in economic growth, US economic technocrats were forced to loosen monetary policy to prevent low growth rates, as the stability of capitalist economies depends on high growth. At the time, so the thinking went, lowering key interest rates would give firms easier access credit, which would in turn make the economy more productive, increase exports, and ultimately raise the value of the US dollar relative to other currencies. However, the intended effect was not achieved: economic growth remained lacking, and inflation kept rising anyway.
In 1979, Jimmy Carter appointed Paul Volcker as chairman of the Federal Reserve. As soon as he took office, Volcker instituted a drastic and unprecedented key interest rate hike. The consequences were predictable: the US economy collapsed, and millions of people were forced into unemployment. As we now know, this could have been avoided.
Yet the consequences were even graver in Latin America. As the relative value of the US dollar shot up in response to the rapid key interest rate hike, the costs of tending to debts exploded for countries such as Brazil. Not only were their currencies suddenly worth less in comparison but the interest rates on their debts skyrocketed, as most of their loans had been borrowed with flexible interest rates linked directly to monetary policy in the Global North.
In theory, states that could no longer afford to service their debts had a variety of options. Indeed, in financial crises before 1981, it was common for them simply to not repay loans when they couldn’t. This was exactly the course of action taken by the Mexican government in 1981. Yet as many now believed the financial markets spelled risk for their investment returns, borrowing conditions for Latin American states deteriorated considerably. After all, this crisis was different: the amount of loans extended to Latin America was so great that a series of defaults could have meant the collapse of the US banking system.
For this reason, the US banking sector and government put massive pressure on Latin American governments to repay their national debts — including by taking on new debts if necessary, either from major US banks on conditions that were economically miserable or from the IMF on conditions that were politically miserable to boot. Though the emergency credit offered by the IMF for repaying debts seemed generous, it was in fact contingent on so-called structural adjustment programs.
Structural adjustment programs force states to open their financial markets to foreign capital, slash social spending, and sell off public assets to private firms and individuals. In the late 1970s and the 1980s, many Latin American states spent multiple years trapped in situations where they had to implement them. The consequences for their populations were so severe that this period is now known as the “lost decade.” At the same time, Volcker’s policy also drove masses of working-class people in the US into unemployment and personal debt — the effects of which can still be felt today.
Old Strategy, New Resistance
Much about the current situation recalls the year 1979. Due to the shutdowns in response to the COVID pandemic, states around the world took on a considerable amount of debt to keep their economies up and running — just as many had already done following the 2007–8 financial crisis. In the ten largest Latin American economies (excluding Venezuela), the ratio of national debt to economic output has increased on average by 22.7 percent since 2007.
In the last two years, the costs of national debts in Latin America have gone through the roof: Argentina is now paying 21.5 percent more interest on government bonds than Germany, whereas the rates faced by Ecuador and Venezuela, respectively, are as much as 46.8 and 89.4 percent higher. On average, the ten largest Latin American economies pay 25.5 percent greater interest than Germany — money that has to be obtained through new debts or spending cuts, or extracted from national economies through taxes.
At 8.3 percent in the United States and 10 percent in the eurozone, inflation is at similarly high levels to 1979. Moreover, just as was the case at the time of the Volcker Shock, economic growth in the United States and EU is low, and federal banks in both are again tightening monetary policy. Today, among other things, this means raising key interest rates. In the last two years, the Federal Reserve and the ECB have increased their respective key interest rates by 3 and 2 percent.
Yet we don’t live in the same world as forty years ago. Progressive forces in the Global South have sought and found ways to defend themselves against exploitation by the Global North. For example, many states have deliberately reduced their foreign currency debts. In Brazil, 3.3 percent of the total debt is now in foreign currency, compared to 22.5 percent in Mexico and 49.6 percent in Chile — significantly smaller figures than in 1979.
Many states have developed mechanisms for responding to fluctuating exchange rates. In Latin America, countries such as Colombia and Chile have compiled large reserves of foreign currencies, which they can sell to stabilize their own currencies in periods of economic turbulence. Central banks in Brazil, Mexico, Peru, Chile, and Colombia have kept their financial markets liquid with asset purchase programs. Financial sector regulations have become tougher throughout the continent, with oversight power allocated to central banks. Brazil and Mexico now also have direct access to US dollar liquidity from the Federal Reserve, which allows them to absorb exchange rate fluctuations.
Yet since the 2007 financial crisis, the financial markets of the euro and the US dollar have only been propped up by massive interventions from central banks. By buying government bonds and other assets, central banks have maintained the stability of both prices and the shadow banking system.
Since 2007, central bankers and economists have been developing new instruments for dealing with the effects of the financial crisis, the European debt crisis, and the COVID-19 pandemic. Little by little, these instruments have now become normalized. Most prominent among them are bond purchasing programs, where central banks buy up bonds mostly from governments but also from private firms in order to stabilize financing costs and stimulate inflation. This has happened to such an extent that the ECB’s assets are now worth as much as a third of the EU’s annual economic output. The situation in the United States is similar. The point of these programs has been to give unregulated financial actors, or so-called shadow banks, access to short-term liquidity.
Today, scholars are warning that more than fifty states in the Global South are on the verge of defaulting on their debts. Meanwhile, inflation is rising not only in the Global North but also in Latin America. In response, central banks in the region are raising key interest rates, which is supposed to stabilize currency values by reducing borrowing and thus inflation. Although interest rate hikes often don’t achieve this stated goal, they do entail a number of side effects — such as causing economies to shrink. In capitalism, this means increased unemployment, reduced state revenue, and cuts to public spending.
In spite of current economic insecurity and instability, the Federal Reserve and ECB are proceeding in an extremely risky manner by simultaneously reintroducing stabilization programs and raising key interest rates. Back in 2013, a simple announcement that the Federal Reserve would reduce asset purchase programs was enough to send the costs of Latin American debt through the roof. What we are currently witnessing is a policy that not only repeats the mistakes of 1979 but combines them with those of 2013. What the exact consequences of this policy will be, and whether the tool kit of central bankers and economic policymakers in the Global South will be sufficient to deal with the expected shock, is anyone’s best guess.
International Crises Demand International Struggles
This real-world experiment in economic policy being pushed by central bankers and neoliberal economists has no historical precedent. What makes it so insidious is that little can be done about it in the short term, as the major central banks of the Global North now stand above any kind of parliamentary influence — the consequence of a successful campaign waged by libertarians since the 1970s to push “central bank independence” while selling central bank policy as a purely technocratic matter. Even if elected politicians were to recognize the risks of the central banks’ line, forcing a change would take time.
Since the formal end of colonialism, activists and politicians of the Global South, such as Thomas Sankara, have been struggling against the dependencies of the global financial system, conscious that the political enemy and cause of economic crises resides in the Global North. Today, this struggle is being carried on by organizations like Debt for Climate, a movement initiated by the Global South that blockaded a joint meeting of the IMF and World Bank in Washington, DC, on October 14 and occupied Germany’s Ministry of Finance on October 17. Demanding debt relief for states in the Global South, this movement asserts that the payments demanded by the Global North are not legitimate but the legacy of a power disparity tracing back to the colonial era.
Though debt relief is important, it alone cannot end neocolonial economic relationships. This would require fundamentally rethinking monetary and economic policy while rejecting the economic status quo — which has proven both insufficient in tackling economic crises in the Global North and a catastrophe for the Global South with respect to both sovereign debt and trade relations. Ultimately, monetary policy must be seen not as a technical question but a political one that determines how material resources are distributed.
Those seeking to reshape the international economic order face a difficult struggle. Colombia’s prime minister, Gustavo Petro, knows this. In a public address this October 19, he highlighted that US monetary policy is intentionally destroying the global economy — and called on Latin American states to develop a plan for responding to the actions of the United States with unity and resolve. Such an undertaking is sure to have the support of progressive movements and political forces in Brazil, Bolivia, Chile, Mexico, Peru, and beyond. Let’s hope that the old slogan proves true and “the people united will never be defeated” — not even by the architecture of international financial markets.
The finances of Hispanic consumers, renters and consumers younger than 40 took a nosedive between 2021 and 2022.
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.”
- 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.