Basially, it is sary, very scary. But it has its funny, even hilarious side as well. i am talking about the eonomy -an eonomy enteringa severe recession, if I interpret the signs correctly.
Some of those signs: stock exchanges are almost in free fall. London loses 2,49 % today; Frankfurt and Paris lose more than two % as well. Asia: same story basically. Hong Kong donw 4 %, Japan 2 %, China 2 % (BBC, 15 july). In Britain, talk is now of impending recession. Consumer prices have risen 3,8 %, the highest inflation rate since 1997. Inflation is expected to rise even higher, to above 4 %. This means that the Bank of England is not inclined to lower rates. Lowering rates – the way to make lending-for-investments cheaper – is what central banks are supposed to do to encourage economic activity. But it also tends to encourage inflationary tendencies. “Rate cuts are looking much less likely”, accoording to Ross Walker, an economist connected to the Royal Bank of Scotland Group ( International Herald Tribune , 15 July).
The recession is connected to the crisis in the housing market. Cheap lending to encourage people to buy their own house hase gone wrong, when too many people could nog pay back what they borrowed. That meant people losing their homes through repossession; it also meant banks getting in trouble because they did not get their money back. In the marxist sense, this is a crisis of overproduction: an overproduction of credit, as it were. But credit is connected with all kinds of economic activity, one bank in trouble can pull down other companies. The crisis in the banking sector is flowng over into what looks like a rather serious recession.
What makes the world economy more vulnerable is the steep rise in oil prices. Last week, the price of a barrel of crude oil reached 147 dollar. This means a price rise of 50 % in 2008 alone. Car drivers are paying the price, transport costs are rising, peoplecan look forward to high heating bills coming winter (Aljazeera, 12 july). The threat of general inflation will become even more serious this way.
Meanwhile, companies are reacting to economic trouble in a very familiar and very anti-social way. Siemens, for instance, the big automobile company in Germany. “Against the backdrop of a slowing economy, we have to become more efficient”, according to Peter Loescher, Siemens CEO. and that is why Siemens will cut 16,750 jobs, out of the 400,000 jobs in that company (Aljazeera, 8 July). Making workers pay for an recession that is the product of an economy over which these same workers have no serious say. That is the answer from above, from the company directors and big shareholders, supported by governments. When will we see a big company trying to become ‘more efficient’ by seriously cutting back on shareholders’ profits en CEO salaries and bonuses?
This all is scary. It means more unemployment, more people in financial troubles, more people losing homes. That is already scary enough. It means that there will be a need for collective resistance, for radical left wing answers, left wing forces uniting workers and other disadvantaged people in solidarity against lay-offs, wage cuts and so on. These left wing forces, however, are weak in many places, almost non-existent in oiothers. This is even more scary than the recession itself. For, where people get desperate, and the left isn’t there to offer hope, the fascist right may begin to fill that void. We better get our act together.
However, let us not stop smiling when we find a reason to smile. For instance, when the US government acts forcefully to save two lending institiutions, Fannie Mae en Freddie mac, both deeply introubled because of the problems in credits in the housing sector. Th government plans to buy stocks in both companies and is ready to lend momey to these companies as well (Christian Science Monitor, 15 July).
This shows how hollow are the neoliberal claims of ‘let the market do it’s job, and let the government stay out of the economy’. The money that is not there when it is a matter of supporting poor people, is readily available when it ios a metter of corporate needs. As soon as it is a matter of saving big companies and the whole financial sector from collapse, we don’t see much free market liberalism. Instead, we see massive state support going to big corpaorations. Let us smile about this irony-coupled-with-hypocrisy. We will need all good cheer we can get in the troubled times ahead.