The majority of western economies are now in recession. The OECD, an umbrella group for 30 industrialised countries, says its members are facing “a protracted downturn”.
It forecasts its members to record an overall fall of 0.3 per cent in 2009, with the US economy set to decline 0.9 per cent, Japan 0.1 per cent and the eurozone 0.5 per cent.
The OECD, which comprises north America, Europe, Japan, South Korea and Australia, expects eight million workers to lose their jobs over the next year as a result.
Many capitalists are even more pessimistic. The Financial Times in London is talking of “the fear that the world is heading for a true depression, that will at least bear comparison with that of the 1930s”.
Even Kevin Rudd was forced to admit: “Bank bailouts—30 and counting; diving sharemarkets—down 50 per cent and counting; Government rescue packages—from 15 countries and counting; and major developed economies, like dominoes, are falling one by one into recession.”
China is unlikely to go into recession, but even a slowdown has a big impact, with the steel industry reducing output and hundreds of small and medium businesses closing.
Hundreds of workers sacked from a toy factory clashed with police and smashed buildings in the southern province of Guangdong in one of many protests.
The crisis is truly global. Stock markets everywhere have fallen, but in Brazil and Russia, trading has been suspended at times, such has been the panic.
In Hong Kong, 24,000 people applied for just 400 low-level public service jobs.
Countries including Hungary, Iceland, Latvia, Pakistan, Turkey and Ukraine have approached the International Monetary Fund (IMF) for loans. The loans will come with neoliberal strings attached—demands that borrowers “open up” their economies to international competition and push through more privatisation.
Hungary has received a $US15.7 billion loan. In return, the IMF demanded cuts to government spending and further “reform” of public services.
Today, even before the next round of IMF-inspired cuts takes effect, child malnutrition is a growing phenomenon in Hungary.
World leaders meet
There were two major global capitalist summits in November that focused on dealing with the crisis: the G20 (which brings together the Group of Eight major economies, plus a range of middle-ranking countries) and APEC (the countries bordering the Pacific).
At the G20 summit, leaders decided to regulate to stabilise the financial system, to spend more money to push up demand, and to fast forward the next, Doha, round of free trade talks.
The shift to greater regulation marked a defeat for George Bush’s “Anglo-Saxon”-style neoliberal capitalism at the hands of the European Union.
But there is still support for more of the very neoliberal policies that have helped precipitate the current crisis. At APEC, Mari Pengestu, Indonesia’s trade minister, told the Financial Times that the world had changed so much in two months that ministers no longer disputed the urgency of completing the Doha agreement.
However, beyond the rhetoric, little is likely to be achieved. Richard Baldwin, from the Swiss-based Centre for Economic Policy Research, said of the G20: “Many of the specifics still need to be worked out. The tough work lies ahead.”
By the time G20 meets in London in April to flesh out policies, the world economy may well have deteriorated much further.
Some commentators have talked of the need for a new Bretton Woods, the conference of 44 Allied countries held in the US in 1944 to lay the foundations of our international economic order.
The negotiations gave birth to institutions that dominate the global capitalist system to this day, including the IMF and the forerunner of the World Bank.
But it was only possible because the US dominated the global economy in a way that is hard to conceive today, accounting for half of the world’s output. Today, the US accounts for about a quarter of global output. Once small economies such as China are now major powers with their own interests.
The World Bank is forecasting that 2009 will see the first decline in international trade since 1982.
Each ruling class is, in the end, out for itself. Our rulers will talk cooperation, but they are more likely to turn to ruthless rivalry, at our expense.
By David Glanz