Volume 17, Number 11
October 24, 2011
in this section:
Economic crisis reaches far beyond the European Union
by Eric Toussaint
Even if Europe is hard hit, the crisis by no means limited to the European Union: almost all the industrialized economies are in a state verging on coma. Depending on the country, unemployment remains high or is increasing. Even in the so-called emerging countries including BRIC (Brazil, Russia, India, China), the strong growth is tending to slow down. The world’s stock exchanges, with few exceptions, have fallen heavily in 2011 -15% in the eurozone, Japan and China; -4% in the USA; -8% in the UK; -22% in Brazil; -19% in Russia; -7% in India. Gold, a hedge value in times of crisis, has been in strong demand.
What is striking is the very erratic nature of an important series of markets; Stock exchanges slide with temporary rebounds; the dollar is plummeting but rallies at times; the parities between the dollar, the euro, the yen, the pound and the Swiss franc (another hedge value) are very unstable; raw materials prices remain high but suffer severe irregularities. The banks are the weak links, totally shored up by the authorities.
From the point of view of North-South relations, the economic situation of the developing and emerging countries is enviable compared with that of the North.1 If the state of exchange reserves may be considered an indicator, the emerging countries hold twice as much as the industrialized countries. They have 6,500 billion dollars in exchange reserves (China holds half, India 400 billion, Brazil 350 billion and Russia 500 billion) compared to 3,200 billion for the North (Japan holding one third of it). The G20 club, which is just as illegitimate as the G7 that founded it, is incapable of finding solutions.
Heavily indebted rich countries (HIRC), is the very latest fashionable expression, overriding another that has been in mode for the last fifteen years in the corridors of the IMF and the World Bank, heavily indebted poor countries (HIPC). Public and private debt is the mainstay of the crisis.
Taking into account the relations between social classes on a planetary scale, everywhere the ruling classes increase their wealth, using the crisis to increase the precarity of workers and small businesses. In the North Atlantic countries and those of Central and Mediterranean Europe public debt repayment is the pretext for imposing new waves of austerity measures. The cost of the catastrophes produced by the private financial system is systematically loaded onto public authorities that in turn pass it on to the workers and small independent earners (by way of taxes, cuts in social spending and redundancies). Social inequalities are aggravated. The social movements of those at the bottom meet with the greatest of difficulties to create coherent resistance not to mention the creation of a counter-offensive. New phenomena of street demonstrations appear in the wake of the Arab spring. The indignados movement has become important in Spain as it has in Greece, finding an echo in the USA and on other continents. These movements, although very important, are not yet sufficient to turn the tide. They need to be actively supported. As far as it goes the turnout for the 15th October is a promising success.2
1. On the Internet, see "The debt in developing countries: a dangerous unconcern," 29 December 2010. See also: Damien Millet, Daniel Munevar, Eric Toussaint, "Les chiffres de la dette 2011," 19 April 2011. In books, see Damien Millet et Eric Toussaint (eds.), La dette ou la vie, Aden-CADTM, 2011, chapter 18. Essential note: although the traditional economic indicators show sustained growth in the emerging countries, the food crisis (important rises in prices) is hitting a great part of the population of the South. Climate change also degrades the living conditions of the populations of several particularly hard-hit countries. The frenetic exploitation of certain natural resources caused by the high prices of raw materials is the cause of increasing human and environmental damage. In particular, open pit mining and petroleum exploitation in sensitive areas (i.e.: the Niger delta).
2. See "15 October 2011: a great victory for the Outraged"
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