A new global recession is imminent. But this time it threatens to trigger a financial crisis and a debt crisis. And we know what “anti-crisis policies” for workers are all about.
Table of Contents
- A looming global recession…
- …fueled by the war
- The combination of recession and inflation threatens to set off a financial and sovereign debt crisis
- The coming “anti-crisis policies” and the workers’ outlook
A looming global recession…
US GDP fell by 1.4% year-on-year in the first quarter despite unemployment being at its lowest since 2020 (3.6%). The productive apparatus is at full throttle and yet production is not finding an outlet in the market. All the US war fury is not serving in the short term to secure new markets sufficiently buoyant to eliminate the trade deficit.
China, which has its own structural problems, much more serious than the impact of the closures to stop Covid, has already announced new anti-crisis policies. But for the time being, the cancellation of container ship charters reflects that the global trade contraction is not letting up. It affects China and will affect it directly as much as, if not more than, the US.
In Europe, the acceleration of the forced reorganization of the international division of labor, even without a change in the energy matrix, would already be dangerous, as Lagarde reminds us whenever a microphone sits close to her. But the immediate problems are no less drastic.
In France, GDP is already stagnating. In Spain, true canary in the euro mine, the year-on-year inflation published yesterday was 8.4%. A “temporary” impact of the Ukrainian war? Not only. Core inflation is already at 4.4%, the highest since 1995. And GDP, already stagnant (0.3%) in the year that was supposed to be the year of the “renaissance” of accumulation, gives two fundamental and valid clues throughout the continent:
- Household consumption (-3.7%).
- Capital formation in construction
That is, two indicators that point to a rapid and sharp decline in the conditions and expectations of the working class. Something totally coherent with the rise in the unemployment rate to 13.65% (70,000 more unemployed) announced yesterday.
…fueled by the war
What lies ahead is not pretty. The war whips up the contradictions of the system as much as of the national bourgeoisies among themselves and within each other.
The latest example: Bulgaria. With a government historically divided between pro-Russian and pro-US interests, the government decided to follow in Poland’s footsteps and refuse to pay in rubles for Russian gas, despite having very low reserves and most EU countries opting to take the indirect payment route accepted by the Commission. The result: an impending industrial crisis and increased dependence on its most direct imperialist rival, Turkey. Just in case an extra dose of tension was needed in the Balkans and in case the working and employment conditions in the land of roses were too much to worry about.
In Germany, the war is already transforming everything. While LNG terminals are being hastily built to receive (much more expensive) US and Qatari gas, the government yesterday presented a shock plan against inflation whose main axes show the stress to which the whole situation is subjecting the least qualified workers.
In fact, without reaching the levels of countries such as Peru, which are facing the prospect of famine due to fertilizer shortages and increases in agricultural inputs, Europe as a whole is beginning to fear a significant increase in undernourishment rates for the first time since the post-war period. The drive to maintain the agricultural Green Deal (“From farm to fork”), to ensure that the countryside once again becomes a desirable destination for idle capital, threatens to let a new strategy to create artificial shortages get out of hand – as has happened with energy – and create a real food problem in the short to medium term.
The combination of recession and inflation threatens to set off a financial and sovereign debt crisis
Few now doubt that a recession is on the immediate horizon. One need look no further than the IMF reports to see that there is more to the recession than the impact of energy prices and their impact on the industrial sector.
The main clues come from far away. Most analysts already acknowledge that the major powers are having more and more trouble “harnessing international trade and foreign direct investment for domestic growth”. In other words, since they are unable to place more production in foreign markets in sufficient quantity, they are also unable to make foreign capital investments profitable on their own soil. The basic mechanism of imperialist accumulation is broken.
Banking also turned on the red lights. Having abused negative rates and the monetary mechanisms of doping accumulation means that central banks have almost no wiggle room and states are condemned to face ever-increasing funding costs while their debts (bonds) lose value. This is why speculative capital is already fleeing at full speed from bond-based funds.
In other words, to curb inflation they need to raise rates, but if they raise rates corporate debts may lead to an epidemic of default and through it to a financial crisis that could soon be accompanied by a debt crisis as the cost of financing for governments also rises. The perspective that is being drawn is that of the Greek crisis, but now multiplied: it would affect a large part of the EU.
At this point, the Bank of Spain claims that 8% of private debt is already at risk and fears that it could lead to a default crisis. Public deficits meanwhile are becoming structural so the EU is encouraging Spain to implement as soon as possible the new “austerity” promised by the government… which would further pull down GDP and attack the basic public services that are the last lifeline of working families.
The coming “anti-crisis policies” and the workers’ outlook
The “shock plans against the effects of the war”, it is now clear, have only been the first act, an attempt of the governments to avoid the first damages on the profit of the big companies and a new revolt of the most stifled petty bourgeoisie.
We arrive now at a situation similar to that of the recession of a decade ago with poverty rates similar to those caused by the response of capital and states to that crisis… before new precarizing measures and new assaults on wages, housing and basic working conditions begin to rain down.
It brings back the worst of the perennial crisis of a capitalism antagonistic to the most basic human needs, now fueled by a criminal imperialist war constantly being fed by all the capitals involved in it. Expecting that the coming “anti-crisis policies” will even cushion the transfer of labor incomes that the profitability of capital demands to revive itself, is an absurd illusion that denies all the experience of the present generations.
Against the devastating effects of the imperialist war and the historic crisis of a capital whose accumulation is once again floundering, there is no room for any vote of confidence in the ruling classes or the social apparatuses of their states. It is necessary to stand up to them. And in order to do so in the only productive way, as workers acting as a class, we need to make an effort of organization and discussion. Company by company, neighborhood by neighborhood, village by village. From now on.