Chris Harman

explains recession and unemployment

How did we get into this mess?

(1 December 2001)


From Socialist Worker, No.1777, 1 December 2001.
Copied with thanks from the Socialist Worker Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.


AS job losses mount, Socialist Worker editor Chris Harman answers questions about the economic crisis.


Just how bad is the economic situation?

It is very, very serious indeed. You have for the first time in 20 years a simultaneous downturn in all three major sections of the advanced capitalist world. That is a recession in the US, a recession in Germany and across continental Europe, and a recession in Japan.

This is feeding through into the less advanced countries. In Mexico there have been 80,000 sackings this year. Country after country that expected economic growth is stagnating.

The World Trade Organisation’s prediction is that world trade will virtually stagnate this year after growing by about 8 percent last year. Chancellor Gordon Brown is pretending that Britain has escaped recession, but we have had an avalanche of job losses.

These have been in areas like dot.coms, telecommunications – particularly with Marconi GEC – and most recently with the air transport industry and in places such as Rolls-Royce Aerospace. Very large numbers of people who work on short term contracts, and self-employed workers are being sacked across a whole swathe of services, as well as manufacturing industry.

Media workers have been hit. Murdoch’s News International is sacking people and so is the Independent, and people are being asked to accept wage cuts.
 

Is this all due to the 11 September attacks in New York?

11 September does not explain the crisis. Until 12 months ago all the talk was about the booming world economy. The US was booming.

That came to an end last New Year’s Eve. If you look in the financial pages of papers like the Sunday Times, the Financial Times and the Guardian at the time, suddenly you had a scare that a recession was coming.

Then the board of General Motors in the US announced sackings and people began to talk seriously about an economic recession. There was a meeting of European industrialists and bankers at Lake Como in Italy two days before 11 September. They talked about how everything is bleak and they don’t know what’s going to happen next.

Through the late 1990s, companies in the US in particular and also in Britain convinced themselves they could sell whatever they produced. At the same time of course they were continuing to hold back workers’ wages, increasing working hours and attacking workers’ conditions.

In the long term you can’t, across the world, increase the number of goods you sell at the same time as holding wages back. What kept things going for a period was that in the US and to a lesser extent in Britain the middle classes and the better-off sections of the working classes were able to borrow in order to buy goods.

This meant they could spend more than they were earning. The collapse in confidence after 11 September destroyed that process. It was like a huge balloon which was suddenly pricked. When an international system goes into crisis the weakest countries are usually the ones that get worst hit.

So in Argentina unemployment is 18 or 19 percent, wages have been cut and cut again, and social welfare has been cut. It’s the worst possible case.

But it is hitting everywhere. I was in Ireland last week. They used to talk about the “Celtic Tiger” there a year ago. No one talks about that now because the growth rate in Ireland is virtually nil.
 

How does this crisis compare to the last big economic crisis in the “Tiger” economies in South East Asia three years ago?

If you look at the Asian crisis it affected 30 to 40 percent of the world. At the time Japan was already stagnating and Russia was producing 40 to 50 percent less than in 1990. The crisis didn’t spread to the US, and therefore to some extent Europe and Britain in particular were protected from the Asian crisis.

This was because the US government effectively encouraged US firms to ignore the crisis by short term measures like cutting interest rates. This kept the economy booming. What is absolutely clear now is that the basis on which the US economy boomed was more and more narrow, and couldn’t be sustained. Therefore what was avoided three years ago is now coming home to roost.

We now know that the profit rates in the US which seemed very good three years ago were because major firms did various fiddles to make their profits seem a third higher than they really were.

What’s happening now is that firms are cutting back on investment, closing down factories and laying off workers, which then destroys the market for goods produced in Britain, Europe, Japan, South East Asia, and so on. That means the crisis will get deeper across the world for a period of months, at least.

You can’t get out of the crisis by just telling people to borrow more. It is nonsense to pretend in Britain that if people keep consuming that will be a way out.

Put very simply, people working for Murdoch are being told they have to put up with wage cuts to deal with the recession, and workers at Heathrow are told they have to accept sackings.

But if those News International workers have wage cuts they won’t be able to afford holidays and travel on aircraft like those at Heathrow. Sacked workers at Heathrow won’t be able to buy goods, so sackings in one place lead to sackings in another.
 

Is there a way out of this crisis?

Karl Marx analysed the economy to decipher what is really happening – because it seems absurd.

Across the world people go hungry and can’t buy most elementary things, and they are told too much is produced. Even in Britain, which is relatively well off compared to Third World countries, we are told there are too many computers. Then you go to any school and there aren’t enough computers for kids in the classrooms.

Why do people have to be sacked because too much wealth is produced? Marx said the driving force under capitalism is rival groups of capitalists competing with each other merely to try to expand bits of economy under their control.

Under capitalism the aim of each capitalist is to grow bigger, not to satisfy the needs of the mass of people. The people who benefit from this system tell us there isn’t an alternative.

But the alternative is very simple. Instead of corporations competing with each other, the energy and creativity which go into production should be pulled together to satisfy humanity as a whole.

People’s real needs could be worked out roughly, and a democratic plan drawn up to work out what needs to be produced. You might have miscalculation, but you won’t have massive overproduction leading to cutbacks and people’s lives being destroyed.

Anyone who has been part of the anti-war movement should also be concerned about the economic crisis. It will cause even more devastation than the war.

It means millions across the Third World will die from malnutrition and disease. Behind the multinationals that cause unemployment in this country and starve people in the Third World are the same people who make the decisions to wage war.

George W. Bush’s cabinet is full of people who headed giant US corporations a year ago. The demonstrations in Brussels in two weeks’ time are important because they could make the connection between the devastation of people’s lives through unemployment and the devastation in Afghanistan.


Last updated on 9 December 2009