On January 25th, as world leaders were meeting to discuss the global economic “recovery” at the World Economic Forum in the Swiss ski resort of Davos, official figures were released showing that the UK economy – far from being on the road to recovery – had shrunk by 0.3% in the last quarter of 2012.
The news followed a first half of 2012 in which the UK economy saw two consecutive quarters of decline, and a third quarter in which growth was positive mainly thanks to the one-off stimulus provided by the Olympics. The figures for the latest quarter show that 2012 was, in effect, a stagnant year for the UK economy, and also highlight the potential for Britain to enter a “triple-dip” recession.
The announcement was a further blow to Osborne and Cameron, present in Davos, after the chief economist of the International Monetary Fund, Oliver Blanchard, had criticised the government’s austerity programme earlier in the week. The IMF economist had called for the UK government to slow down its austerity, and the latest GDP figures show that cuts are indeed making the situation worse for the UK economy.
Osborne’s response – both to Blanchard and to the news of negative growth – was clear: austerity is still the only item on the menu. “We do have to carry on with the cuts”, Osborne stated; “We're not about to bring that programme to an end... [it] will go on until 2017.”
The differing views between Osborne and Blanchard highlight the contradiction facing the ruling class: on the one hand, austerity in Britain – as in Greece, Spain, Portugal, and elsewhere – is only deepening and prolonging the recession; but on the other hand, with the need to pay down public debts and “restore competitiveness” in the UK economy – i.e. slash the wages, pensions, and condition of workers in a global race to the bottom – there is no option under capitalism but to cut. Indeed, whilst Blanchard had suggested slowing down on austerity – note, only slowing down; not stopping or reversing austerity – the official IMF position is still to back the Coalition’s plans.
Angela Merkal, the German Chancellor, also used her speech at the World Economic Forum to call for a continuation of austerity, stating that European countries needed to improve their competitiveness. But competitiveness is relative; not all countries can be competitive – under capitalism, there will always be winners and there will always be losers. “Restoring competitiveness” is simply a euphemism for reducing the living standards of ordinary people and increasing the riches of the capitalists.
After years of crisis and austerity, the British, European, and world economies show no signs of getting better, and the capitalists are incredibly pessimistic of any prospects for recovery. In a recent global survey of over 1300 big business chief executives across 68 countries, 52% believed that there would be no change in the economy over the next year, whilst 28% predicted a decline.
Figures, in fact, show that the current recession is the worst in history, with output still over 3% lower than pre-crisis levels. By comparison, by the same point in time after the beginning of the Great Depression, output was 3% above pre-crisis levels. There has, therefore, been no recovery at all. We are – for all intents and purposes – in another, even greater, depression.
Capitalism shows all the symptoms of a senile system in terminal decline. The political representatives of this rotten, decaying system have no answers for how to treat their moribund patient. Far from providing a cure, their medicine of austerity only makes the situation worse. By taking control of the wealth in society and putting it to use for public need instead of profit, we can begin to transform society in the interests of the vast majority who are currently being made to pay for this crisis. It is time to put an end to capitalism and the intolerable suffering that it causes.