[OPE-L:6019] Re: Evidences for the severity of this crisis

From: Gerald_A_Levy (Gerald_A_Levy@email.msn.com)
Date: Wed Sep 26 2001 - 09:22:36 EDT

Chai-on wrote in [6018]:

> > Jerry asked me to provide evidences for the following assertions.
> > > One apparant thing is that the present economic crisis is going to be
> > unprecedented.  It is  more severe than the 1929 one, in its scale,in
> > coverage, in its less remained instruments. <
> > What evidence do you have for these assertions?
> > At present it looks not so severe. But it will be as it is just
> now after July this year(when the service and construction sectors began
> decline along with the manufacture)
> > It is going to be severe for the following reasons.
> > (1) Almost every country on the whole globe fell into a synchronized
> depression, which is unprecedented.

Odd. I think that the current world economic crisis has been marked by an
extremely uneven and de-synchronized geographic and temporal pattern.
Thus, the crisis manifested itself to a much greater degree and at an
time in South Asia (including S. Korea and Japan) and much of Latin
America and the former 'socialist' nations (e.g. Russia) than in Europe and
especially the US. Indeed, it is striking how the US economy continued to
grow years after the Japanese economy sank into a deep economic slump.

> > (2) For the last 9 years, with no exception, economic boom has been
> artificially created by credit expansion. IT sector in particular has been
> boosted uttermost despite it had no profitability.

There's no doubt that there was a "bubble" related to credit and the "high
technology" sectors of the economy (hence the huge drops in stock prices
of  NASDAQ stocks throughout this year).

> > (3) Yes, IT industry contributed to productivity increases in other
> sectors. But other sectors' productivity increase itself did not guarantee
> the profitability of such sectors, for it was not related with the extra
> surplus value which arose when the productivity gaps were wide between
> countries.

Please explain the meaning of the last sentence more.

> > (4) Except a few advanced countries, almost every continent  is in
> political turmoil. In Asia, many presidents and prime ministers have been
> replaced in undue courses. In Latin America, too, political turmoils are
> growing. The working classes on the whole globe are synchroniously
> mobilized. This is also unprecedented.

The working class globally is mobilized [into action]?  There are certainly
some important working class struggles in individual nations and regions,
I think that your assessment of the state of that 'mobilization' (if that is
said to include increases in militancy, radicalization, and international
solidarity by the working class globally) is too 'optimistic' (of course, it
is true that protests against the WB and the IMF are growing but this does
not represent a 'synchronic' or general mobilization of the working class).

> > (5) The capitalist class has less instruments to resolve the worsening
> situation. The FRB keeps on lowering the interest rates (will it do so
> until  they reache at zero level?).

Perhaps. Weren't there zero interest rates in Japan for a time?

> Keynes described this situation as the
> euthanasia of the rentier class in the Conclusion of his "The General
> Theory  of ..",  His vision was the end of capitalism.

Keynes' vision wasn't of the end of capitalism, but of its salvation by
abandoning laissez-faire.

On one score, Keynes and Marx were in agreement: the rejection of Say's
Law. *Yet, haven't the conjunctural strategies associated with
assumed Say's Law*? I think that  bourgeois governments and FRBs are
beginning to see this problem as they observe how interest rate cuts have
been ineffective in stimulating an increase in investment, employment, and

> > Well, maybe, the interest rates will abruptly jump up when the US war
> begins only to reduce its psychological effect on the economy. But its
> physical effect cannot be hidden.

I doubt if the Fed in the US will, in the short to medium term, raise
interest rates (on the other hand, they might not act to lower them further
such cuts have not had the intended and projected results in stimulating the

> > (6) The legitimacy will be in question when the central banks cannot but
> intervene to boost stock markets. Why not boost labor markets instead of
> the  stock markets?

This might indeed be an area of class conflict in some nations.

At present, we don't know how 'bad' the current global economic crisis will
get or how long it will last. Until such time as we have more information
related to those questions, I think that the comparison of the present time
1929 is premature.

*btw, aren't we supposed to be in a Kondratief UPswing?*
What are the long wave theorists, especially those who are Marxist, saying
about the current crisis?

What do others think about these issues?

In solidarity?

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