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Global economy 'off the rails'

No one any longer thinks that piling on the pressure through austerity, grinding millions into the dust, can possibly make any difference to the debt crisis. But despite increasingly strident calls, “pushing for growth” is a non-starter.

The influential Brookings Institution has just updated its Tracking Indices for the Global Economic Recovery. Professor Eswar Prasad, inventor of the index introduced the latest findings with a stark warning:

The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession. Political fragmentation and gridlock have hurt confidence and stunted the effectiveness of macroeconomic policies. Financial markets have shed their optimism and investors are clamouring to retreat to safe havens as confidence has tumbled.

Parallel meetings of the G20 richest countries in Mexico and of 300 hedge fund traders and investors in Monaco have been able to do little more than watch the train wreck from the platform’s edge. The G20 declaration warned of the impending addition to the global catastrophe arising from US attempts to follow the European example, reducing, or even slowing the growth of its towering wall of debt.

Whilst in the European bolthole for the extraordinarily rich, Jamil Baz, chief investment strategist at GLG Partners told the speculators taking a break from sunning themselves on the terraces: “The crisis has not even started. It will take 20 years for us to reach escape velocity,” he said, tossing back another glass of champagne. “It will be devastating.”

For the Greek people, however, turned into guinea pigs by the EU, IMF and European Central Bank, their plight can’t get much worse. Tens of thousands of Greeks made unemployed and homeless by attempts to solve the deepening crisis queue for food at soup kitchens. The Orthodox Church says it is currently feeding a quarter of a million people daily. 

The Athens Chamber of Commerce says that 68,000 Greek businesses closed over the last 17 months and it expects a further 36,000 to close in the next 12 months. The economy is at a standstill. Businesses have no credit, so no-one is paying for anything. The government which controls much of the economy has stopped paying its bills. As of last month, it owed nearly €7bn to the private sector. 

In 30 days it will run out of money, unless a coalition government can show eurozone authorities that it has both the determination and the means to implement a further round of brutalising austerity and so earn the next tranche of bailout funds. They’ll be certain to be relying on the fascist gangs of Golden Dawn who enjoy strong support from the police.

The Greek people are in the front of the firing line but they are not alone. The Spanish and Italian governments are screaming for more help and the terms of any deals will be no less stringent. International lenders, unimpressed by last week’s €100bn loan to Spain, have driven the country’s borrowing costs to even higher, impossible rates.

The logic of all this crash is another Great Depression, much worse than that of the 1930s, and a breakdown of political co-operation. You saw as much this week when Manuel Barroso, president of the European Commission, lost his cool in a press conference and blamed investment banks in the US for causing the recession when asked about the eurozone crisis.

Another world is not only possible but absolutely necessary for there is no way out through the current political system which is in a mutual dance of death with economic and financial elites.

A global network of local People’s Assemblies can act as opposing poles of attraction for all those whose interests lie in replacing the failed, bankrupt capitalist system. Assemblies can build on the achievements and successes of worker’s co-operatives, credit unions, and a broad range of democratically-owned and operated enterprises as the foundations of a new start. Allowing things to carry on as they are is not an option.

Gerry Gold
Economics editor
20 June 2012

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