As capitalism stares into the abyss, was Marx right all along?
We may avoid a 1930s Depression but the best we can hope for may be a 1990s Japan
Business Comment by Stephen King
THE INDEPENDENT (London, UK) - Monday, 2 March 2009 (...)
Whatever else one thinks of Marx, he certainly knew a thing or two about the business cycle. Were he alive now, he would surely claim his theories were being vindicated. We are, after all, witnessing the most remarkable collapse in economic activity around the world. Take Japan. In November, industrial production fell 8 per cent. That was bad enough. In December, production dropped another 9 per cent. That was even more remarkable. January's production figures, though, are simply eye-wateringly awful, showing a further 10 per cent decline. Production, then, is down almost 30 per cent in just three months, a pace of decline unprecedented in Japanese post-war economic history.
Or how about the US, where we discovered last week that national income contracted in the final quarter of last year at an annual rate of more than 6 per cent, the biggest drop since the early 1980s. Then there's Taiwan, where exports have been in freefall in recent months. Not to mention dear old Blighty (Great Britain / UK), where the economy might end up shrinking by approaching 4 per cent this year.
The pace of decline in global economic output is extraordinary. On virtually any metric, we are seeing the worst global downturn in decades: worse than the aftermath of the first oil shock in the mid-1970s and worse than the early-1980s downswing, when the world economy had to cope with a doubling of the oil price, the tough love of monetarism and the onset of the Latin American debt crisis. Moreover, this time we cannot use the resurgence of inflation as an excuse for lost output: the credit crunch in all its many guises has seen to that. Instead, we have a world of collapsing output combined with falling prices: a world, then, of depression.
For many years, Marxist ideas appeared to be totally irrelevant. The collapse of the Berlin Wall in 1989 brought to an end the era of Marxist-Leninist Communism, while China's decision to join the modern world at the beginning of the 1980s drew a line under its earlier Maoist ideology. In western economies, Marxist ideas were at their most potent after the First Word War when the likes of Rosa Luxemburg could smell revolution in the air and as the Roaring Twenties gave way to the Great Depression of the 1930s.
I'm not suggesting we're entering revolutionary times. However, it seems increasingly likely that the economic landscape in the years ahead will be fundamentally different from the landscape that has dominated the working lives of people like me who entered the workforce in the 1980s. We've lived through decades of plenty, where incomes have risen rapidly, where credit has been all too easily available and where recessions have been mostly modest affairs.
Suddenly, we're facing a collapse in activity on a truly Marxist scale. It's difficult to imagine the world's love affair with free markets being sustained under this onslaught. The extreme nature of this downswing will change our lives for decades to come.
(...)
Stephen King is HSBC's group chief economist and global head of economics and asset allocation research. During the 1980s he was employed at HM Treasury and now appears regularly on TV and radio to discuss economic matters, and in 2007 became a member of the European Central Bank Shadow Council. His column for The Independent focuses on UK and international economic issues.
Read the full column here:
http://www.independent.co.uk/news/business/comment/stephen-king/stephen-king-as-capitalism-stares-into-the-abyss-was-marx-right-all-along-1635162.html
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