Growing signs of new economic downturn

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(Above) Madrid police arrest a protester during July 11 rally by striking Spanish miners against lost jobs caused by cuts in subsidies to the mines. The miners argue that the government is targeting workers while seeking to bail out the big banks. Unemployment in Spain is nearing the 25 percent mark. (Left) A miner sings after three-week march from the coal pits to Madrid.

Signs of a renewed, coordinated global economic downturn have grown in the last few months. Of course, given the in­ herent anarchy of the capitalist system, the “coordination” is more in the nature of a self-reinforcing downward spiral, as each sector drags the others down with it.

One sees the spiral right away in news of stagnation in the world’s largest economy. In the second quarter the U.S. economy grew by just 1.5%. The New York Times attributed the slow pace to curbing of purchases by both consum­ ers and businesses “in the face of a glob­ al slowdown and a stronger dollar. … “The mired recovery makes the United States more vulnerable to trouble in Europe and, at home, the potential ex­ piration of several tax breaks and other buoyant measures at the end of the year, known as the fiscal cliff. … The [official] unemployment rate has stalled above 8% in recent months.”

The Times saw little hope in the short term: “Improvement strong enough to provide real traction or lower the job­ less rate remains out of reach. Wrote Jim O’Sullivan, the chief United States economist for High Frequency Econom­ ics, ‘there does not appear to be much basis for expecting a significant pickup any time soon.’”

Of particular worry was the social me­ dia sector, once thought to be the foun­ dation of a lucrative new internet era. But now, according to The Times (July 27), these corporations were stumbling on the stock market, providing “echoes of the crash of 2000, when the money stopped flowing, the dot-coms crum­ bled and Silicon Valley devolved into recriminations and lawsuits.”

The Economist reported on June 9 that “hopes that 2012 would be the year when America’s economy at last shook off its lethargy seem dashed. Employ­ ers and investors face increasing un­ certainty in every big economy. China, India and Brazil have slowed sharply. The euro zone is dangerously close to collapse. Goldman Sachs reckons that the spillover of European stress into American financial markets will knock 0.2 to 0.4 percentage points off growth this year.

Spillover from Europe’s crisis The vulnerability of the U.S. economy to Europe’s woes was highlighted in a July 26 Wall Street Journal article re­ porting profit slumps at U.S.-based mul­ tinationals with large production and/ or sales in Europe: “Europe’s deepening economic crisis is cutting into corpo­ rate earnings, with the continent’s woes threatening to exert a drag on multina­ tional corporations around the world.”

The corporate alarm bells highlight how the miserable economic conditions in much of Europe are spilling onto the global stage. With much of Europe in recession and unemployment soaring, spending is sliding on everything from big-ticket items like cars to everyday staples like yogurt.”

Rebutting a commonly-voiced hope that Chinese expansion could pull ev­ eryone’s irons out of the fire, The Wall Street Journal noted: “For all the atten­ tion devoted to China’s growth, the 27 countries of the European Union are the largest economy of the world. Europe accounts for about one-fifth of all U.S. exports.” The Deutsche Bank’s chief U.S. equity strategist estimates 17% of prof­ it and revenue of the S&P’s 500-stock index companies comes from Europe.

The paper added: “The downturn in Europe is weighing on China, for which Europe is a big market, and is threaten­ ing to retard an already slow-growing U.S. economy as well.” The Journal said that among the 60% of S&P 500 com­ panies in the U.S. who missed secondquarter revenue predictions, “many companies have cited Europe as a factor.

“’The ongoing European crisis pres­ ents the biggest risk to our economy,’ U.S. Treasury Secretary Timothy Geith­ ner said. ‘The economic recession in Europe is hurting economic growth around the world, and the ongoing fi­ nancial stress is causing a general tight­ ening of financial conditions, exacerbat­ ing the global slowdown.’”

And worse is coming, as government austerity measures imposed suppos­ edly to solve European countries’ debt crises take effect: “’We are in a vicious circle,’ said a BNP Paribas economist, arguing that government austerity is leading households to cut spending, which lowers tax receipts and leads to more austerity. ‘Everyone is afraid. Gov­ ernments are afraid. Households are (continued on page 7, in “World capitalist crisis threatens humanity”)

SYRIA

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