And the band played on
As Chinese woes once again spread throughout the world economy, Paul Demarty wonders what could shake the complacency of the bourgeoisie
Michael Roberts, the Marxist economist and occasional contributor to this paper, has frequently predicted that the next major slump will begin in 2017. I am reluctant to start affixing dates to such things - it is very often the ruin of millenarian religious sects and Marxist economists alike, the latter of whom are popularly said to have predicted 10 out of the last five crises.
At this point, however, I am reluctant to bet against him. The last couple of weeks have not painted a picture of a global economy bouncing back happily into health, after the shocks of 2008 and ensuing slump. Quite the opposite: more bad news from China, combined with the continuing freefall of basic commodity prices (especially oil), suggest there are rocky times ahead.
The proximate cause of recent wobbles is news from China, where the key stock exchanges have been subject to dramatic falls in value, following similar events in the middle of last year. A wave of panic selling in Shanghai knocked another 5% off the value of the CSI 300 index, which tracks major Chinese firms. As of the morning of January 12, the Shanghai composite index had dropped around 20% in the last month.
The Chinese stock indices are not terribly significant on their own, of course. Foreign companies investing in production (Apple, say) are tracked elsewhere. The equities traded in Shanghai are dwarfed by those being shuffled around the City and Wall Street. The effects are rippling outwards, however. Most immediately, the Chinese government is taking increasingly drastic steps to stabilise the yuan, with its central bank attempting to drain liquidity from global forex markets to stabilise the price. There were some indications that the yuan was being deliberately devalued to boost a flagging export market, but after more market turbulence the Chinese abruptly switched strategy, leading to the present game of cat and mouse with speculators.
Those flagging exports point, in turn, to globally deficient demand. China has had great success by basically reconfiguring itself as a huge pool of cheap, well-controlled labour. The vast masses in the countryside are lured to the cities, superexploited and packed off home. These great temporary migrations are slowing down, whether because the peasants are more sober about what exactly they are buying into, or simply because the economy itself is slowing down. Growth is expected to fall, according to official figures, to 7% - whether one trusts the official figures is another matter. Analysts looking at proxies like electricity usage think the real number is much lower already.
Lower exports also mean lower imports of capital goods and raw materials. This is a matter of extreme concern to several countries, such as Australia, for whom China accounts for nearly a third of total exports (mostly basic commodities like iron ore). The pollyannas who do Australian budget forecasts had previously based their projections for the years to 2020 on assumptions that amounted to China building, from scratch, more homes than would house all the Chinese (of whom, famously, there are a great many).
A more dramatic case than Australian iron is oil. Governments are already imploding over the precipitate decline in oil prices (an important background element, for example, in the retreat of the ‘Bolivarian revolution’ in Venezuela). Oil-producing countries were not necessarily as blindly bullish as the Australians over their prospects - Iran, for example, planned on a worst-case price of $50 for a barrel of Brent crude a couple of years ago, which would have looked wildly gloomy at the time.
Now, however, things are getting uncomfortably close to $30. Morgan Stanley analysts expect the slide to continue towards $20. The market is flooded with black gold. For a picture of how bad things have gotten, we look not at Venezuela, but the epicentre of oil production in the contemporary epoch - Saudi Arabia.
The house of Saud took control of the Arabian-American Oil Company (Aramco) over a seven-year period from the Yom Kippur war to 1980, supposedly as a protest against US support for Israel in that conflict. Whatever the level of commitment actually offered by this despicable gang of mediaevalist tyrants to the Palestinian cause, the outcome is plain - Aramco was a licence for them to print money, and remained so for upwards of 30 years.
Now they want to privatise it. Its flotation will make it the largest company on earth, by market capitalisation, to go public, dwarfing the petty likes of Apple. Yet with crude at $30, we have already arrived at the point where, at least in marginal operations like Canadian sand, US shale and the Russian Arctic, it costs more to get the stuff out of the ground than can be made by selling it. But even though Saudi Arabia has the world’s lowest production costs at $3 a barrel, it is suffering, albeit from a loss of income. And if that situation continues, and it looks like it will, then how will the murderous crew continue to bribe their population into quiescence at home, and fund murderous Wahabi ‘pet projects’ abroad? If the Saudis are worried enough to sell off their golden goose, then who remains who really believes in the prospect of limitless development in the east and the global south?
The problems are hardly, at this point, confined to such regions. We note, with some interest, that our own George Osborne - the Great Helmsman of the modern Tory Party - has claimed a great deal of credit for getting Britain back to economic health, essentially by creating a huge asset price bubble; and also that the money used to fund recent carbuncular additions to the London skyline has something of a petrochemical smell to it. Gulf monarchs and Russian oligarchs are the sort of people who are going to be squeezed, should demand from industrial producers slump for a prolonged period. So where does that leave George?
The story is, in the end, one of a global economy that has not bounced back from the 2008 crash and subsequent depression with any great vigour. At best, the core capitalist countries have had growth that looks like a rounding error. Significant economies in Europe have suffered much worse fates, leading to a very bumpy ride for the euro zone as a whole. There are moments in Hegel where it seems that the subject of universal history is the Prussian state of his day; at the moment, it looks rather more like Japan, leading the world into a period of apparently unending stagnation.
In such a situation, there is a great twitchiness. The present malaise originated in China, but it might have originated in India; previous difficulties have stemmed from political crises at the periphery of the euro zone. It appears that we lurch from cautious optimism to Defcon 1 every other Monday morning.
Why is the problem so intractable? We may look at the last economic crisis of the scale we saw beginning in 2008: the great depression of the 1930s. It is often taught, to school pupils who may not know any better, that the depression (in America, at least) was ended by a switch from laissez faire economics to aggressive government investment in infrastructure.
In reality, the events of that era are indissociable from World War II. The ruinous material devastation of Europe, coupled with a better-entrenched Soviet threat in the east, that created enough chaos for the rebuilding effort to provide sufficient stimulus, and made that rebuilding effort necessary, respectively. In any society, politics and economics are indissoluble; in capitalism, however, both escape the conscious control of all social actors, and dance together towards terrible chaos.
We are not immediately on the verge of a great-power war at the present, although the widespread ascendancy of revanchist nationalism - from Shinzō Abe to Donald Trump, indeed to Xi Jinping - does not augur well on that score.
Suppose, in any case, that capitalism was, somehow, able to right itself, and return to growth. We know what that growth actually means; barely a month after our glorious leaders met in Paris to agree that climate change was a Very Bad Thing, all have returned to anxiously urging the price of oil upwards, since that would mean that more of it was being burned, so as to manufacture more armaments, selfie sticks, etc, and keep London property prices on their skyward course. All for the best, in the best of all possible worlds!
The status quo ante was apocalyptic enough already. Whatever way things go, it is difficult to see what could break the complacency of the capitalist class - except (dare to dream) a resurgent working class movement, in a mood to shake off the parasitism of its exploiters, and organise production according to a radically different set of priorities.