By BENJIE OLIVEROS
MANILA — News about the world economy have been bleak once again for the nth time in the past few years since the housing bubble imploded in 2007–2008, which sent financial investment houses and banks on the brink of collapse and further worsened the situation of the stagnant industrial manufacturing sector.
Just recently, the Finnish Prime Minister Jyrki Katainen called on European leaders to end the “panic mentality,” which emanated from the sovereign debt crisis plaguing not only European Union economies but the US and Japan as well. He said the “panic mentality” is making things worse for heavily-indebted countries such as Spain and Italy, as well as Greece, Ireland, Portugal, among others, as bond yields are unfairly high, thereby pushing up interest rates and borrowing costs. He added, “We need the market economy to work again in financial markets.” (Signs of market manipulation? Are you surprised?)
In Europe, unemployment in 17 Eurozone countries stood at 11 percent. The Eurozone members are the 17 European Union countries, out of the 27, that use the euro as its currency.
In the UK, the economic outlook further dimmed as England’s GDP shrank by 0.7 percent in the 2nd quarter of 2012. According to a July 31 report published by The Guardian, “The main issues facing the UK economy were the impact of rising prices on real incomes, ‘the confidence shock’ from the eurozone, and a greater impact from the financial crisis on output than previously thought. “
Japan is no better off. It is deeply in debt, having one of the worst GDP to debt ratio at 228 percent. Export demand is still low and prospects of a recovery are dim as Europe and the US, which are big markets for Japanese goods, struggle with their own crisis. Add to this the shifting out of Japanese companies of production overseas thereby resulting in a worsening trade balance. The trade deficit of Japan in January reached 1,275 billion yen, exceeding the 967.9 billion recorded in January 2009 and by far the highest since recording began in 1979.
In the US, Bloomberg reported that what is being considered as a fragile economic recovery is making another downturn with the GDP down to 1.5 percent from 2 percent in the previous three months. Manufacturing has contracted in July. And according to an interaksyon report, “factory orders fell 0.5 percent in June after rising by the same margin the prior month as demand for a range of items such as motor vehicles, machinery and computers sagged.” The jobs report has been disappointing with a mere 80,000 jobs created. Unemployment is still at a high 8.2 percent with 12.7 million unemployed and the claims for unemployment benefits, according to the interaksyon report, increased by 8,000 to a seasonally adjusted 365,000 claims. The interaksyon report also revealed that employers announced 36,855 planned job cuts last month, bringing the number of layoffs up by 2.5 percent compared to the same period last year. The US is also suffering from chronic underemployment, currently standing at 15.3 percent, with one out of three youths underemployed and half of new graduates either jobless or underemployed.
Globally, the Telegraph reported that global manufacturing has slowed down because of the impact of the Eurozone debt crisis. Manufacturing contracted in China and Europe and slowed down in the US and Canada.
Unemployment has hit the world’s youth the hardest. According to the International Labor Organization (ILO) nearly 75 million youths or 12.7 percent of people aged 15 to 24 would be out of work this year, up from 12.6 percent in 2011. It could have reached 13.6 percent in 2011 if the millions of youth who have put off or given up looking for jobs are included. The rate of joblessness among the youth is slowly moving toward the 75.4 million unemployed in 2009, when the crisis was at its peak.
According to Gallup, underemployment stood at 17 percent of the world’s workforce while the ILO estimated that 6.1 percent or 202 million would be unemployed in 2012.
Data from the tradingeconomics.com revealed the China’s GDP during the first quarter of 2012 registered a 8.1 percent increase on a year-to-year basis and expanded by 1.8 percent compared to the previous quarter. This is a three-year low and a sign that China’s economy is slowing down. China is one of the biggest markets for consumer goods, having the biggest population in the world, and the base for manufacturing of a lot of MNCs because of its cheap labor.
All data indicate that the world economic crisis is far from reaching a resolution. In fact, it is being described by analyst James Petras as “unrelenting.” The problem is, the sovereign debt crisis has limited the ability of governments to further inject bail out funds and to pump-prime the economy through more government spending.
American economist Nouriel Roubini has said in a July 9 CNBC report that “stalling growth in the U.S., debt troubles in Europe, a slowdown in emerging markets, particularly China, and military conflict in Iran – would come together to create a storm for the global economy in 2013.” He called this the perfect storm.
Worse, no matter how hard mainstream economists and finance ministers of the world bang their heads, they still could not find a solution to the crisis. The solution could not be found in the liberal, free-market economics of Adam Smith and the monetarism of Milton Friedman, nor could it be found in the demand-side, pump-priming economics of John Maynard Keynes. In fact, regardless how loud governments, finance ministers and economists of advanced capitalist countries have been singing hallelujahs to “free-market” neoliberal globalization and how hard they have been pressuring its neo-colonies and dependent countries to liberalize more, they have been trying a combination of monetarism, privatization, and deregulation, pump-priming and protectionist policies in their own countries. They are now running out of models such that Australian Treasurer Wayne Swan has declared, in a The Guardian UK report, that Bruce Springsteen is one of his economic heroes.
Francis Fukuyama spoke to soon when he declared capitalism as “the end of history.” Perhaps Karl Marx was right all along when he declared that the crisis is rooted in the very foundations of capitalism and Vladimir Lenin was right when he put forward the proposition that monopoly capitalism – or the stage when capitalist countries and their MNCs have divided the world among themselves – is moribund capitalism. They must be smiling in their graves right now.