A decade ago in the heady days of 'capitalism's final triumph', when the New World Order was announced and the End of History proclaimed, the century old industry of writing learned tomes under which to bury the ideas of Marxism appeared to have become redundant. Yet before one could finish reading a single volume of these confused scribblings, the New World Order choked beneath the ashes of war in the Balkans; the south east Asian economies collapsed; leaving the New Paradigm hanging by the single thread of the innovations associated with new technology.
Amid the protests taking place in Prague against the International Monetary Fund, pollsters everywhere are detecting a growing anti-corporate mood throughout the major capitalist countries. After years of privatisation, stock market euphoria and propaganda about the wonders of the capitalist market, the pendulum is certainly swinging in the opposite direction.
In the last month or so, the world's stock markets have taken a huge tumble, down about 20% on average. Of course, prices of shares in most markets are still way above where they were five years ago and even still above levels of 18 months ago. After the excitement of the US stock market index, the Dow, going over 10,000, it seemed there was no stopping the boom. The Dow hit 11,500 and the NASDAQ index, which combines the prices of all the new high-technology and Internet company shares (like Yahoo, Cisco, Microsoft and Amazon), rose to an amazing 4,500 from just 1,000 only two years ago. There was even talk of the Dow going to 36,000 within a few years! But the trend now is clearly downwards. The Dow has fallen back to just above 10,000 as I write and the NASDAQ is back to 3,000. The casino capitalism of the stock market is in what they call a bear market."
The capitalist system moves in a never-ending cycle of booms and slumps. That has been the case for the last two hundred years. The cycle of booms and slumps, however, does not have a fixed and regular character. To begin with, the length of the cycle has always been somewhat flexible. In Marx's day it was an average of 10 years, but in the years of upswing after the second world war it was considerably less, something like 5-6 years, or even less. The exact length of the cycle is therefore not a principled question for Marxists. What is necessary is to analyse concretely the nature of the cycle, and try to establish how it will most likely evolve. The prolongation of the boom undoubtedly has an effect on the whole rhythm of the perspectives. Twelve months ago it seemed to us that following the crisis in Asia and Russia we would move fairly quickly in the direction of recession. We never put a date on it, however it is true to say that we did not think that the boom would continue for as long as it has done.
The euro's launch has been greeted with a well-orchestrated campaign of official enthusiasm, designed to silence all doubts on the question. The Euro has finally been introduced as a common currency in 12 of the EU states. This is an important development. A common currency is the first condition towards European integration. It ought to boost internal trade and thus act as a powerful stimulus to the development of the productive forces. But is this going to happen?
For the past few years we have been carefully following the development of the US and world economies. Yet almost overnight, instead of "the boom will last forever", the press now has stories about "how to survive the recession", and openly discusses the economic slowdown. They don't even blush at the fact that mere months ago they were encouraging everyone to get into the stock market or miss out on fabulous wealth and early retirement! We explained long ago that the so-called "New Economic Paradigm" was nothing new at all - that it was an investment boom propelled by the super-exploitation of the working class and ex-colonial world.
The complacent optimism of capitalist consensus is fast disappearing. At the beginning of this year, the general view about the world economy was that US growth would slow gradually to about 3% from 5%, Japan would pick up a little to about 2% and Europe would trundle along at about 2.5%. The US central bank, the Federal Reserve, would cut interest rates to ensure that any slowdown would not mean a loss of investor confidence or consumer demand. Well, January seems like eons ago in global economics. After a non-stop spate of warnings about lower profits from the main US corporations and the release of economic data each day that showed a weakening economy, US stock prices have plummeted. Michale Roberts analyses how all this is affected by the growing problem of deflation in Japan.
The world’s stock markets took a big hit in the first quarter of 2001. The US markets were down at least 10%, as was the UK’s FTSE index. The world index of all stock markets measured in dollars was down 14%. The technology sectors were hit even more. The US hi-tech index, the NASDAQ, fell 26% in the first three months of this year and the UK’s Techmark index did nearly as badly. Michael Roberts looks at the relationship between the stock exchange and the business cycle and the likely effects of this collapse on the real economy.
The last time Michael Roberts commented on the state of the US and world economy was in May. The piece was called: "The worst is yet to come". Now things are getting worse for world capitalism. The US economy is in "recession" and there is little doubt that the third quarter figures will confirm the end of the long boom. Michael Roberts updates our analysis of the present economic situation.
Our economics correspondent, Michael Roberts, looks at the different attittude of working people and capitalists when faced with tragedy and explains how the terrorist attacks on September 11 are likely to be the tipping point which will plunge the world economy into recession.
The Organisation for Economic Cooperation and Development (OECD), the body representing the world's richest 30 countries, has predicted that this year economic growth would be as low as 1% and would be only 1.2% next year. At the same time, capitalist economists forecast that global economic growth this year and next would be the worst for 30 years. The great economic recession of the early 21st century is under way.