'Our cuts will be with a guillotine'
As official figures revealed that Britain is deep into its second recession in four years, with contraction running at a rate not seen for half a century, the European dimension of the global crisis is set to get a whole lot worse.
The IMF-led assault team is back in Greece insisting on impossibly severe additional austerity measures for an economy that has already contracted by 20% in the five years since the 2007/8 financial meltdown.
As their plane touched down, Greek prime minister Antonis Samaras said the country was in a Great Depression and that the economy was now expected to decline by a further 7% in the coming year – far worse than the previous 4.5% estimate.
But, as has now become clear, Greece’s agony is just a small part of the global economic contraction of a depth and ferocity that is hard to grasp.
As Spain auctioned off its increasingly risky debt to postpone what is an inevitable bailout, this stark assessment came from the Spiro Sovereign Strategy consultancy:
Pretty much everything that could go wrong in Spain is.
• The bank-focused bail-out is perceived as insufficient
• a funding squeeze in the regions is putting more pressure on Spain's creditworthiness
• non-stop austerity is increasingly seen as self-defeating and
• the recession is deepening.
The question is no longer whether Spain can persevere with its adjustment, but rather how much more its economy and citizens can endure.
Cities across Spain are the sites of a mounting revolt against austerity, raising the political stakes and increasing the risk that the country would be unable to service its soaring debt.
Film Actor Javier Bardem, who won an Academy Award for his role as psychopathic assassin in No Country for Old Men, joined the protest appearing next to a placard bearing a revolutionary threat, declaring “Our cuts will be with a guillotine”.
The financial markets are responding – in a self-defeating action – by pushing Spain’s cost of borrowing to 7.5% and through the limits of sustainability. The only way they can get their money back is by squeezing the population beyond its limits of endurance.
Something has to give.
The global contraction follows a relentless capitalist logic. Once the seemingly limitless 60 year expansion of credit and debt ended in 2007, an historically unprecedented bust was sure to follow.
The eurozone downturn is being led by an increasingly severe slump in manufacturing, where output is falling at a quarterly rate of around 1%. Germany is now contracting at the steepest rate for three years, while the rate of decline in the periphery is also among the highest seen since mid-2009.
Companies across the region are cutting staff numbers at the fastest rate for two-and-a-half years as the outlook darkens. Service providers are now the gloomiest since March 2009, while manufacturers are slashing their stocks of raw materials in the expectation of ongoing weak sales in coming months.
The US manufacturing sector is struggling under the pressure from falling exports, which showed the first back-to-back monthly decline for almost three years in July. Growth of production is slowing closer to stagnation as a result, and rising levels of unsold stock will mean companies seek to scale back production in coming months.
China’s growth rate is also slowing, as it must, in response to shrinking markets in the US and Europe for the commodities churned out by the millions of low-paid workers in factories sub-contracted by transnational corporations.
Under these conditions, resistance to austerity in the form of protests, demonstrations, occupations, however angry, daring or violent quickly reaches their limits. They will give way to a movement that can break through the constraints of the failing social relations imposed by capitalism.
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25 July 2012