What is this economic crisis?

Written by: John G. on 11 May 2024

 

Free Food Pantries have sprung up across cities and towns

The capitalist economic system and US imperialist domination of Australia is very destructive for this country and the working class. 

For capitalist economists, commentators and planners, economic activity is measured by stock exchange prices and corporate monopoly profits. Just look at ‘financial’ pages in the press, on TV and in digital media news.  

 

For workers economic activity is measured in wages and what we can get for them. We are looking for wages, government benefits, production and sale of goods and services for people to live. 

 

They are completely contradictory outlooks, the contrast sharpened in times of crisis. 

 

Capitalist economics can only conceive of people’s well-being - having good homes, food on the table, education and healthcare - as an outcome of the capitalist economic system ticking over making profits, propped up by workers’ hard yakka. 

 

Crisis rescue operations for bankers, mining monopolies and corporate giants generally rely on carving holes in reasonable living standards and driving heaps of people into hardship. They can only consider a system with corporate well-being as the foundation on which people can eke out some life. 

 

But what is happening now? We all know our families and friends are in a recession. Our incomes don’t satisfy our wants, just create worries over making ends meet. When you think about it, it’s really dumb relying on the system created by, developed by and dependent on capitalist investments as the starting point to sustain people. 

 

All it’s set up to sustain is the accumulation of profits, not the well-being of people. 

 

In this interest rates/ price inflation crisis, we all know, our lives are poorer. 

 

Small and medium business sales are slow. That pressures them to cut margins and cuts costs to keep sales up. They face high rents and high interest rates on loans for mortgages, stocks and machinery. Dropping turnover, lowered margins, and debt mean small and medium businesses are not able to drop prices.

 

They are forced to hold and increase prices in many categories. 

 

They are in recession. Bankruptcies and closures are rapidly increasing. According to debt monitoring firm CreditorWatch, more Australian businesses are now in the hands of external administrators than ever before, rising more than 22 per cent since this time last year.

 

Bonza airlines one of the latest to hit the wall

 

At the heart of the crisis, workers are in recession. 

 

Current economic news outlines numerous features of the crisis the country’s in, and details how we and others are suffering.  They can help when we are looking at ways to fight our way out of it. 

 

Customers are in trouble, sales down, consumption in recession

 

An MYOB survey of 1000 firms with less than 200 employees across the country found pressure on customers had disrupted their customer purchases. 

 

• 28% are buying fewer products;

• 20% have moved to cheaper goods and services;

• 20% put off purchasing altogether.

• That’s 68% of firms seeing customers spending less. 

 

Just 6-7% of firms reported an increase in sales. 

 

It is a national recession in working peoples’ consumption.

 

There were few differences between small, medium and large businesses, and was common to both cities and regional areas. 

 

Retail Sales data from the Australian Bureau of Statistics recorded a 0.4% fall in the value of sales economy wide in March alone. In the year to the end of March retail sales grew by just 0.8%. Only the DotCom crash, the GST introduction and the pandemic saw such slow growth in the last 35 years. The fall in sales occurred on both real value and in volume of goods and services. 

 

People are being driven to consume less in volume and in quality, reflected in cheaper goods and services.  In the Pandemic the low growth happened when the population went down. The effect was that ‘per capita growth’ didn’t fall anywhere near as much as now. Current population growth is reported at 3.6%.

 

Sales of clothing, footwear and personal accessories were 4.3% down, and department store sales down 1.6% in the year. Household spending on household goods, cafes, restaurants, hotels, vehicles, and tobacco products, takeaway was also down. Food retailing was up 0.9%. In the December quarter, household discretionary spending was down 0.9%. Eating is not discretionary. With spending on cafés, takeaway and restaurants down, eating at home and taking lunch to school and work makes sense where you’ve got the income. 

 

Prices and wages

 

Prices for education, health, rent, food, fuel and power, and insurance drove inflation rises. Rent rose 7.8% in the year even with the Commonwealth rent assistance rise providing some relief. A nationwide housing shortage guarantees rent inflation will continue.  Insurance prices rose 16.4% in the year, driven by higher costs of reinsurance and ‘natural’ disasters.

 

Education prices were up 5.9% in the March quarter alone, with prices across primary, secondary and tertiary sectors. 

 

The increases in household incomes was 4.2% last year according to the Bureau of Statistics. Employee households recorded a rise in living costs of 6.5% over 2023, down from a peak annual rate of 9.6% in April-June 2023. Household incomes were 2.3% lower than the rise in employee household living costs. 

 

Australian Bureau of Statistics Labour Force reports for March 2024, found  

    

   unemployment rate increased to 3.8%.

    participation rate decreased to 66.6%.

    employment decreased to 14,259,900.

    employment to population ratio decreased to 64.0%.

    underemployment rate decreased to 6.5%.

    monthly hours worked increased to 1,956 million.

    full-time employment increased by 27,900 to 9,853,800 people.

    part-time employment decreased by 34,500 to 4,406,100 people.

 

 

House prices nationwide were up 11.1% in the year to January according to Corelogic. They have kept rising since, though there are minor falls in some localities, notably a 0.1% drop in Melbourne in April. 

 

Population Growth masks the extent of Recession

 

The drop in consumption of day-to-day goods and services has been happening despite a rapid growth in population of 3.6% in the year to March. 

That means the 0.8% retail sales growth in the economy to the end of March translates to a 2.8% drop in sales per capita, a recession in homes across the country. Food sales per capita also dropped 2.7%. Little wonder there is a scramble to bad-mouth and direct the initial distress at supermarket monopolies.

 

Now population increase is being slowed by tightened visa requirements, particularly on international students. That will add to pressures on sales and consumption, giving businesses more headaches.

 

Some International features

 

The International Labour Organization (ILO) reports that the global unemployment rate in 2023 was 5.1 per cent, with number of unemployed and underemployed close to 435 million, remaining high. Average hours worked remain below their 2019 pre-pandemic levels. The number of workers living in “moderate poverty” – earning less than US$3.65 per day per person – increased by about 8.4 million in 2023. The number of informal workers reached 2 billion.

 

Over $15 trillion was added to the global debt mountain in 2023, bringing the total to a new record high of $313 trillion. The global debt-to-GDP ratio is 330 per cent.

 

Real interest rate increases in 2023 made the debt burden on many poorer countries unbearable. Since March 2020, Argentina, Zambia, Ethiopia, Ghana, Lebanon, Sri Lanka and Ukraine defaulted on their government debt, and Kenya, Egypt, Pakistan and Tunisia are in danger of defaulting.

 

Working people and small and medium businesses are carrying the burden of the slowdown of the capitalist cycles of production and sale for profit. 

 

Contradictions within countries worldwide have intensified. Internal civil conflicts are rife. Imperialism is meddling and interfering everywhere. Proxy wars by client states raised tensions. Preparations for war between rival nuclear-armed imperialist camps haunt the globe. Divisions grow within imperialist homelands. 

 

National Liberation struggles are reaching new high points. People’s struggles for freedom from imperialism and its local agents grow.

 

This crisis drags on and capitalism’s hold is weakening. Imperialism is strong but faces billions of people whose lives the imperialist system is devastating.

 

While capitalist crisis keeps hitting people, the call for workers’ power has plenty of fertile soil in which to flourish.   

Australian Economic Trends 2023 – A “Fair Go”?

 

(Above: Photo by Chris Devers   Creative Commons Flickr)

Written by: (Contributed) on 31 May 2023

 Information emerging from reliable sources has revealed a looming crisis in Australia: forty years of economic rationalism has produced a dysfunctional economy based on short-term profit, with little resilience or sustainability. 

The problem has been exacerbated by political spin and carefully edited statements from government departments and private business intelligence bodies to hide the deep-rooted economic malaise. The business model has also been accompanied by standard management practices which, at best, can be aptly described as questionable; at worst, they are frequently illegal.

In mid-May a business report noted the Australian economy was 7.2 per cent bigger than at the start of the pandemic in December, 2019. (1) Taking the problems of the pandemic period the report, at face value, made an interesting read. Reading between the lines, however, economic developments are not what they appear; 6.5 per cent of the increased size of the economy was explained by Australians working more hours than before 2019. (2)

The price / profit inflation which has become a major problem in Australia during the past couple of years has eaten into household budgets with declining living standards. Inflation was virtually zero in 2020, in December last year it reached eight per cent. (3) The figures are all the more appalling when taking other detailed statistical records: the noted cost of living for an employee house has increased by 9.6 per cent during the past twelve months. By the end of the year the Reserve Bank of Australia has forecast mortgage repayments will reach 9.9 per cent of disposable income. (4) Increased costs of basic food items have reached a peak of 9.6 per cent in April. (5) Workers, in present day Australia, are now more inclined to work overtime or even have second jobs to make ends meet.

The outcome of forty years of economic rationalism has not produced a stable economic environment. In fact, present day Australia has become increasingly unstable. Massive discrepancies in distribution of income have been recorded elsewhere: Australian company tax receipts have risen from $123.3 billion in 2021-22 year to a forecast $190.2 billion by 2026-27. (6)   

Company profits, however, remain based on rampant levels of exploitation and inside the sphere of financial speculation in an economy increasingly resembling a casino. Recorded levels of GDP growth, the only accurate economic criteria for studying the health of an economy, nevertheless, remain continually slow. During the early 1960s, for example, GDP growth rates hovered around seven per cent, by the early 2020s it averaged a dismal two per cent. (7) If the trend is continued into the next decade GDP growth rates are likely to sink to zero, heralding serious economic problems and crisis.

A recent study of the building trades found an increasing number of businesses already failing: there have been fifty per cent more failures in 2022-23 than the previous year. (8) A trend has been established due to increased interest rates and operating costs.

During the early days of economic rationalism political spin and media releases from government departments were quick to push the business model: the years of the Howard coalition governments were a prime example. A race-to-the-bottom mentality of cost-cutting was accompanied by anti-trade union legislation designed specifically to undermine awards and workplace agreements and boost company profits with master-and-servant style industrial relations procedures. Their praise of so-called free enterprise was little other than a massive cover for dubious and often illegal behaviour: one noted feature of the business model has been the rampant casualisation of work.  

Taking the Australian workforce as composed of about 13 million, a participation rate of about 66 per cent has given an actual workforce of about 8.5 million in full-time equivalents. Research conducted by the ACTU has established that close to 2.6 million Australian workers are casuals, meaning over thirty per cent of the present-day workforce are without paid holidays, sick-leave and other entitlements. (9) Casualisation, furthermore, has been used by employers to systematically undermine trade-union organisation and worker's bargaining power, while pushing up company profits.

The ACTU report also noted a large discrepancy between hourly pay rates between casual workers and those in permanent employment, growing to 28 per cent: a national average has shown casual workers earn $11.59 per hour less than their permanent counterparts, with $28.95 per hour to $40.54 per hour. (10) Such developments are best viewed along lines of the business classes forcing wage rates down, with no concern for the under-dog.

Australia also has a major problem with wage-theft; it is an integral part of the economic rationalist business model. A recent study found underpayment of Australian workers and unpaid Super was in excess of $6 billion a year. (11) When viewed in the context of the actual size of the Australian workforce of about 8.5 million, the problem is widespread.

New immigrants into Australia are the prime target for unscrupulous employers: a recent study found up to sixteen per cent of recent arrivals are paid less than the national minimum wage and are twice as likely to be exploited than longer term residents. (12) The report also found forty per cent of recent migrants were more likely to be underpaid than longer-term workers with the same skills and expertise, and eight per cent of recent arrivals were being underpaid at least three dollars per. (13) When taken in the context of the size of the recent immigrant workforce as being well over one million recent arrivals on temporary visas from a total of 8.5 million, the problem is clearly not a peripheral issue.

Economic rationalism runs counter to Australia being a lucky country with a fair go for all!

*****
1.     Pandemic accentuates problem of our productivity flatlining, Australian, 22 May 2023.
2.     Ibid.
3.     Statistical Report, Annual Wage Review, 2022-23, The Fair Work Commission, page 41.
4.     Young who borrowed low and paid high cop the crunch, Australian, 17 May 2023.
5.     More pain as food inflation reaches 9.6 per cent, Australian, 23 May 2023.
6.     Tax bonanza but slower growth ahead, Australian, 10 May 2023; and, Survival of the Richest, Oxfam, 16 January 2023.
7.     GDP growth rates – Australia, The World Bank; and, Australia – GDP growth rates, 1961-2023, Macrotrends.
8.     No worse time for IR reforms: builder, Australian, 24 May 2023.
9.     Casual pay gaps at record levels, Australian, 23 May 2023.
10.   Ibid.
11.   Senate inquiry calls for laws to stamp out ‘systematic sustained and shameful’ wage theft. ABC News, 30 March 2022.
12.   New migrants the key victims of wage theft, Australian, 24 May 2023.
13.   Ibid.

 

Threat of Economic Slowdown: Workers Need to Organise

 

(Photo credit: Big Stock)

Written by: (Contributed) on 3 October 2022

Statistics from major international financial institutions have revealed a general slowing of the global economy with problems predicted for 2023. The economic downturn, however, will not be uniform, with clear disparities between regions and countries. Australia will also face a particularly troubled time ahead following an already decade-long history of declining living standards together with being a major player with US-led regional foreign policy and the economic responsibilities of being a 'hub' for 'US interests' .

Important lessons from previous times, however, still carry an important theme to present times!

Recent information from international financial institutions has revealed a major global economic down-turn from 5.8 per cent in 2021 to an estimated 3.0 per cent this year, followed by a further decline to an estimated 1.9 per cent or even lower in 2023. (1) Studies of the problem have revealed widespread discrepancies between regions and countries. The region covering South-east, East, South and Central Asia, for example, is forecast to grow by 5.3 per cent this year and much the same in 2023. (2) The major advanced, industrial economies, by contrast, may only grow by only 1.0 per cent in 2023. (3)  

The Euro-zone has been particularly hard-hit with the effects of the war in the Ukraine; their economic growth rates for 2022 are projected at about 3.2 per cent, falling to 0.3 per cent next year. The German economy was projected to grow at about 1.7 per cent in 2023, but is now expected to contract with a shrinkage of 2.4 per cent to minus 0.7 per cent. (4)

Australia had a forecast 2.5 per cent GDP growth rate for this year, with an estimated 2.0 per cent next year. (5) Elsewhere, however, it has already been forecast that the Australian economy is now expected to slow to a growth rate of about 1.0 per cent with the US trailing behind at about 0.5 per cent. (6) It is important to note that Australia has become particularly susceptible to global economic trends: decades of de-regulation, privatisation and liberalisation of a relatively small economy composed of about a 13 million-strong workforce has exposed the country to strong competition from larger, neighbouring countries, with relatively low wages.   

Domestically, Australian workers in the manufacturing and other sectors have seen their wages remain flat for a decade or more, while corporate profits have doubled. (7) The use of casual workers has been used by employers to systematically weaken workplace trade union organisation. The Covid-19 pandemic has also exacerbated economic considerations: a recent study of the Australian workforce, for example, found seven per cent were now holding more than one job to make ends meet, amounting to 900,000 workers; before the pandemic it was only slightly above five per cent. (8)

Australia's economy is also diverse, with China remaining the strongest trading partner. (9)
Reliance, by Australia, on the so-called 'alliance' with the US has also, therefore, created problems with the present Cold War: US-led war-mongering and hostile diplomacy toward China has drawn Australia into a situation whereby trade sanctions have already hit the economy.

While economists with international financial institutions have provided differing projections and assessments for the global economy in 2023, a recent statement from the World Bank should be regarded as central. The bank predicts three likely scenarios:

a.   economic growth will average at about 1.5 per cent;

b.   a sharp downturn will take place and economic growth will fall to 0.8 per cent;

c.   a global recession will occur where growth shrinks to about 0.4 per cent. (10)

Coverage of the problem and the wider implications has tended to be extremely diplomatic, with careful wording to avoid the risk of a panic stations mentality: a recent OECD report, ‘Paying the Price of War', for example, used the G20 countries as a sample and noted economic forecasts were reduced with only three countries seemingly not affected. One of the three countries was the UK, where economic growth rates are already zero and unlikely to improve in the foreseeable future. (11)

The general, historical rule, has shown that economic decline creates the conditions where social and political tensions rise, within countries, and between them.  

In Australia, workers faced with increased costs of living due to inflation are increasingly faced with employers who plead poverty while keeping their shareholders very happy with increased dividends. The superannuation funds of workers are also likely to take a big hit with economic downturn. In the neighbouring region protests from lower socio-economic groups have already shaken governments: in Indonesia, where the economy is booming, mass protests about rising fuel costs for millions of people in lower socio-economic brackets have already raised the political stakes in forthcoming elections.

Regional US-led diplomacy will also continue to attract some supporters while alienating other countries which will seek to strengthen trade links with China on the basis of conducting their own national interest. The problem is likely to lead to hostilities within influential regional trade bodies. It will also increase the likelihood of real-war scenarios taking place in the region, with Australia as a major hub for 'US interests' and large-scale troop rotations through the northern part of the country in preparation for rapid deployment.

The economic downturn presents the working class with an important challenge. Behind the scenes, however, it is important to remember that for the international working class there are few new lessons to be learned in the history of class struggle, calls from some quarters for 'modernisation' remain irrelevant: in the words of Joe Hill (1879-1915) who wrote the song, 'There is power in the Union', one of his last wishes was, 'don't mourn, organise!'.

The key to the successful challenge of the working class to the forces and tyranny of capital is organisation; it remains a central theme of working class struggle to the present day, without it workers are left powerless with their employers and the wider business classes.

An independent foreign policy, ridding Australia of US-led diplomatic influences and all that accompanies it, including the huge financial outlay, is also a demand!

1.     World GDP., Macrotrends; and, Global GDP., Euromonitor International; and, Recession risk as region growth outpaces China, Australian, 22 September 2022.
2.     Australian, ibid., 22 September 2022.
3.     Ibid.
4.     Dark days downgrade on growth as OECD warns of recession, Australian, 27 September 2022.
5.     Australia's economic growth forecast, 9 News, 27 September 2022.
6.     Risk of downturn rises as financial markets price in steeper rate hikes, The Weekend Australian, 24-25 September 2022.
7.     How to talk about wages and the cost of living, AMWU., September 2022.
8.     Record numbers work two jobs, Australian, 15 September 2022.
9.     See: Composition of the Australian economy, Snapshot, RBA., 8 September 2022.
10.   Slowdown suggests there's worse to come, Australian, 26 September 2022.
11.   Quoted: World economy to slow, 'paying the price of war', Australian, 27 September 2022.

Bold Resistance grows to Corporates’ Economic Crisis and War

 

Written by: John G. on 18 April 2022

Ongoing capitalist economic crises are being driven hard by superpower rivalries and war.

Already sharp contradictions between imperialist powers are deepening. International finance is awash with money-capital, debt and credit, desperately seeking places to invest to realise average profits while interest rates are effectively negative. 

The capitalist house of cards is poised for a new crash. One commentator has joked the only thing stopping the financial and commercial system collapsing is that the termites in its beams are holding hands. 

That is also driving imperialist powers to war in a self-reinforcing two-legged dynamic of struggles to snatch territories from each other where their capitalists can expand the regions of their investments, production, markets and accumulation of profits. 

Ongoing economic crisis 

In the wash-up of the 2008 credit implosion, the US Federal Reserve pumped money into US corporations through buying their government bonds. They spent over $8 trillion dollars. 

It left US capitalists sitting on great stashes of dollars, capital they couldn't find lucrative places for. It saw them roll huge sums into stockmarket and new real estate speculation.  With Trump’s tax cuts in 2017, their rush into stocks saw the Dow Jones Index of the New York Stock-exchange jump over 25,000. It’s now at 34,000. 

In 2015 investors received $1.00 for every $17 spent on shares on the New York Stock Exchange. By 2018 that had slumped to $1 for every $30 worth of shares. By March 2021, it had reached $1 for every $40 in shares. In April 2022 it has been racing down to $1 dividend for each $53 paid for shares. Dow Jones had share prices at more than 2 ½ times the book value of the companies NYSE shareholders owned. 

Capitalists have pumped up share prices as governments considered safe have pulled back from issuing bonds. That effectively means they have slowed down on borrowing trillions and issuing IOUs payable at a nominated time a few years down the track at a fixed rate of return. Safe government bonds are normally a safe refuge but even lousy basket case governments have been finding they could issue bonds and find swags of money prepared to take looney risks. 

In 2017 Argentina offered to sell nearly $18 billion of bonds to mature in 2117, a hundred years away. The offer was oversubscribed 2 days after opening. Argentina had defaulted on international debts in 2014. It was the 6th time it had defaulted in the last 100 years. By August 2018 Argentina sought an IMF bailout seeking $59 billion.  The international capitalist system is awash with credit, with production capacity way in excess of any capacity of markets to take the products. 

The system is choking on its own excess, the accumulation of money-capital, of productive capital, of credit and debt in quantities never seen before.
To resolve the problems involves what bankers gently call ‘rebalancing’. That quaint expression actually means destruction on a grand scale.

Destruction represented by scenes of empty decaying suburbs in the US, imploding residential towers in China, ‘rustbelts’ in many countries, closure of car factories in Australia, and much more in all corners of the globe are just an entree to the answer key international banks and institutions identify. Destruction of astounding amounts of value in the system is their recipe for recovery. 

Plant and equipment, goods, buildings, all forms of assets are to be destroyed to get rid of the excess of capacity in the system, an orgy of capitalist crisis so the system can set off again on its journey of production and sales, for accumulation of value exploited from working people. 

Superpower rivalry driven by economic troubles

But that is just one leg of the bi-pedal capitalist crunch. Superpower rivalry is driven by that crisis of capitalist ability to find lucrative places for investment, markets for excess products, new territories for profit and expanded accumulation of capital.   

That rivalry and war in Ukraine sees two camps emerging more clearly defined, a western imperialist bloc under US domination and a China-Russian bloc. 
The western imperialist bloc sees the US overwhelmingly dominant with the UK in close alliance while the Johnson and the Conservative Party is in government. UK Labor has a less cosy relationship with the US. It has tended to lean towards European powers. Germany and France. 

France has taken a more openly independent position from the US for many years including calls for recognition of Russian security concerns over relentless expansion of NATO, with US influence, eastwards towards Russia’s borders. 

Each side is driven to impose its burdens on people within its empire, particularly aimed at their non-homelands and the working class. We have already seen it with the closure of the car industry in response to the glut of vehicle manufacturing capacity across the globe in the middle of the last decade. US and Japanese car companies walked out, destroying the last of Australian vehicle manufacturing capacity, as part of a wide-ranging destruction of value encompassed in plant and equipment world-wide by massive corporations as investors fled their share registers and credit dried up.

The capitalist debt crisis rumbles on despite huge credits being thrown at banks and other corporates by governments over the past decade. When it will collapse is yet to be seen but a reckoning is on the way. 

Central Bankers hitting the Brakes on Credit, Interest rates rising.

The US Federal Reserve and Australia’s Reserve Bank have flagged imminent moves to stop creating credit. 

At its April 2022 meeting the Reserve Bank of Australia kept its cash rate unchanged at 0.1%, as it has for the last 2 ½ years. But it flagged it will be raising that rate soon. The money market has priced future bond prices at rates that say they expect the hike to be in May. 

It will be the first time it has raised the rate since 2010. 

The last meeting of the US Federal Reserve Bank Management Committee showed they are looking at starting to tighten credit in May by upping interest rates by hikes up of 0.5% at a time.  

Banks will raise interest rates on mortgages and business loans here and in the US. Its already affecting emerging economies. 

People’s debt costs will rise, house prices have started to drop, squeezing the ratio of the outstanding debt to the house being the security on the loan.  Inflation has hit the prices of daily necessities. The rich corporates are already shoving the cost of their crisis onto working people. Imperialist powers push the problems onto countries they hold under their economic, financial, political and strategic domination. Australia is right in US cross-hairs. 

With Hardships, People Rebel against them

The coming period will see rapid intensification of people’s hardships. Nothing will change with that even if the government changes at the Federal election. What will happen is that remnants of people’s belief that things can be changed with changes of government, will be getting dashed even more deeply than they have been. 

Workers’ industrial struggle is already more widespread than we have seen in years. That tendency can only grow as the financial aspect of the crisis hits home and finds reflection in slowdowns in production, tightening of government funding, and destruction of values across industries and commodities.  

People are cynical about governments, parliaments or the two major parties as refuges that can help them through crises. The trend towards non-party independents is one expression of the decline in belief that governments change anything much to people’s benefit. Cynicism has great strength.     

The situation has turned in favour of rebellion against corporate power. It calls for bold actions to support and develop people’s struggle to make the rich corporates pay for their economic and political crises.  People are taking action. That is the first and key thing right now. Getting experience in action against people’s hardships is the first thing. The working class has moved to take action across a wide front. Workers are creating organisation and politics against the crises. 

At this stage the action is directed against the symptoms. Help to identify the disease of capitalist power and the system of wages exploitation is key among those on the move. It’s needed to avoid the dead-end of compromise and concessions keeping capitalist power oppressing working and other working people. 

Support and spread the wave of industrial action and organisation of working people.

Alert and organise among workers for workers’ power to target corporate power and the wages system of exploitation.

Be bold. Rely on the workers and other working people to stand up for their struggle to make the rich corporates pay, against hardships being imposed on the people and their leaders in struggle.      

 

The Five Eyes in Crisis

Written by: (Contributed) on 17 June 2020

In early June an announcement that the elite Five Eyes intelligence organisation composed of the United States, New Zealand, Australia, Canada and the United Kingdom, had agreed to seek closer working relations 'and alliances with economic security emerging as a key strategic threat', revealed underlying problems. (1) All five countries have entered a period of prolonged economic crisis and decline.

Moves by successive governments to implement economic rationalist policies from the 1980s period failed to stimulate meaningful economic growth. The policies followed a set line of privatisation of state industries, liberalisation and de-regulation of entire economies. While huge amounts of finance capital suddenly found its way into the developing world, the economies of the advanced, industrial countries tended to stagnate: GDP growth rates started to fall.  It has taken four decades for them to realise that the economies of the Five Eyes will not reach the bottom-line and then re-emerge as vibrant entities.

Easily accessible economic statistics from reliable sources, reveal the extent of the problem:

The growth rate of the global economy has declined from over 4 per cent in 1961 to about 3 per cent in 2019 (2).

Ranked in order of the 192 countries and regions whose 2019 GDP growth rates were recorded by the International Monetary Fund, the position of each of the Five Eyes countries were:

USA                         101st

New Zealand           113rd
Australia                   125th
Canada                     131st
UK                            134th 

These are hardly impressive rankings for leading world economies! (3)

A closer study of each of the GDP growth rates of the economies of the Five Eyes has revealed:

  US                       over 6 per cent in the mid-1980s, falling to under 3 per cent in 2018;
   
  New Zealand       8 per cent in 1971, falling to under 3 per cent in 2018;
       
  Australia              7 per cent in 1970, falling to under 3 per cent in 2018;

   Canada               nearly 8 per cent in the early 1960s, falling to less than 2 per cent in    2018;

   UK                      7 per cent in 1974, falling to under 2 per cent in 2018. (4)

Behind the economic criteria lies the growth rate of China, which has surpassed the west. China has now successfully become a competitor with the US, pushing Japan into third place in the global economy. From its second place, China is now regarded as a threat to traditional US-led hegemonic positions, particularly in the Asia-Pacific region.

Two important factors have to be considered:

Firstly, projections of the declining GDP growth rates of the Five Eyes economies show sometime in the present decade they are likely to fall to zero. Serious problems will then occur; the present COVID-19 pandemic has merely hastened a process already well under-way from much earlier. The statement from the Australian Strategic Policy Institute (ASPI) about the pandemic and how 'the crisis has made us all vulnerable to supply chains … and a lot of that has to be reconsidered' was merely an attempt at a diversion away from the real problem. (5)

Similar statements issued from Washington that the US economy could take a decade to fully recover from the COVID-19 pandemic problems, together with an assessment from Canberra that the Australian economy might take five years to recover, completely overlook other, more important, causal factors. (6)

Secondly, sometime in the next decade China will replace the US as the world's biggest economy.

Both developments are likely to have serious implications for the Five Eyes.

It is, therefore, understandable why the Trump administration has seized upon the G7 grouping as a centre for a concerted attempt to contain and encircle China, and thereby attempt to restrict its economic viability. It is significant to note the Trump administration has also planned to widen the G7 to include South Korea and Brazil, both countries with considerable strategic significance with US-led military and security provision in Asia and Latin America. (7) Other additional countries being considered for inclusion into the new G7 also include the Russian Federation and India, while China has not been invited.

While the economic outcome of the planned expansion of the G7 is problematic and likely to produce regional trading blocs operating with hostility toward China, it should be noted many of the developing countries ranked inside the top hundred using GDP growth criteria have stronger links with China than US-led allies.

With Australian Prime Minister Scott Morrison awaiting his call-up to the G7, and an inaugural meeting scheduled for September, we need an independent foreign policy!

1.     Five Eyes focus on economic pact, Australian, 8 June 2020.
2.     World Bank: GDP Growth rates.
3.     Wikipedia: GDP Growth rates, Country by Country.
4.     GDP Growth rates, Country by Country, Macro-trends/Statistica.
5.     Australian, op.cit., 8 June 2020.
6.     US economy faces a 10-year recovery, Australian, 3 June 2020; and, Five-year path to recovery, Australian, 10 June 2020.
7.     Korea accepts Trump's G7 invite, Australian, 3 June 2020.