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the global economy slows down « Previous | |Next »
September 27, 2012

All the signs are that the global economy after the global financial crisis continues to slow down. It is world of lower economic growth with the US no longer able to play the role of ‘consumer of last resort’, the engine of growth for the world economy as a whole.

BellSAusterity.jpg Steve Bell

Ben Hunt observes:

China’s stimulus of 2009 helped Germany, other advanced industrial nations, and commodity producers in emerging markets to rebound. The US stimulus, such as it was, helped Asian and European trade. But Europe always seems to have been the weak link in the chain, dragged down by its eurozone debt crisis. Whereas the US has been treading water, Europe has more clearly deteriorated. Chinese exports have slowed, in turn dampening prospects for China-bound exporters. Concern has mounted in the US regarding its manufacturing and export sector, seen as one of the bright spots of the economy.

This, in turn, reduces Australia's mineral exports.

So we have a crisis that is global with Europe generally seen as the critical problem area in the world economy. The harsh austerity being imposed is causing popular unrest and anger in Greece, Spain and Portugal.

Yet it is still the Western nations that can generate the demand necessary to rebalance the global economy, because China cannot do this on its own. China cannot become the global engine of growth in the near-term with the Chinese consumer replacing the US consumer as the driver of world growth.

Globalisation today means that the economy is global, but government is national. This suggests that the flaws in globalisation cannot and will not be tackled effectively unless and until there are much better mechanisms for politicians and people to hold in check global capital and global businesses. How in the hell is that going to be done?

Ha-Joon Chang points out in The Guardian that what is being done in Europe is a rewriting of the social contract. In this contract:

the renewed legitimacy was bestowed on the capitalist system, once totally discredited following the great depression. In return it provided a welfare state that guarantees minimum provision for all those burdens that most citizens have to contend with throughout their lives – childcare, education, health, unemployment, disability and old age. ...Instead of it being explicitly cast as a rewriting of the social contract, changing people's entitlements and changing the way the society establishes its legitimacy, the dismembering of the welfare state is presented as a technocratic exercise of "balancing the books". Democracy is neutered in the process and the protests against the cuts are dismissed.

The imposed austerity measures are damaging the European economies and threatening the very legitimacy of European democracies – not just directly by threatening the livelihoods of so many people and pushing the economy into a downward spiral, but also indirectly by undermining the legitimacy of the political system through this backdoor rewriting of the social contract.

| Posted by Gary Sauer-Thompson at 11:15 AM | | Comments (6)
Comments

Comments

How much can the difference in aims between governments and huge financial groupings be exacerbating the problem for the masses?
It seems there has been a fair argument put that the historical rupture that sees policy formulation and implementation ceded to quasi-governmental groupings operating on behalf of big capital formations behind entities such as the likes of the IMF, is inamicable to the welfare of the environment and human beings.
Nor would a return to nation state ascendancy seem to offer a solution without reforms like Tobin Tax etc in place to regulate big capital away from power and back to a previous role as component of civilisation rather than above it; a mindless feeder off of it.

The austerity economic policy coming from Brussels and Berlin means that the European periphery's future is one of high unemployment and low growth. For Greece, it means that it will become a poor, aging, dysfunctional and irrelevant corner of Europe .

The commentators will be talking about the lost decades in southern Europe soon with the enforced deflationary policies--- imposed austerity, privatisation and deregulation.

You can see the rewriting of the social contract in Australia by the mining interests and neoliberal thinktanks, they blame welfare payments and the mindset of the poor for the Australia's bad record on social mobility. They suggest the need for much greater cuts and hint that the answer is the comprehensive demolition of the welfare system and low wages.

The rhetoric and agenda of corporate Australia is less tax for the rich, less help for the poor and less regulation for business.

The neo-liberal agenda appears to be trying to free the rich from the constraints of democracy. The think tanks claim to champion the free market but their proposals often look like a prescription for greater corporate power.

The neo-liberals go on and on about "competitiveness" and productivity. The assume low wages increase competitiveness.

So they want bad public schools and exams so that students fail. When these students enter the labour market, the employers can say: "You're not qualified to earn a good wage." Hence the working poor.