Global slump: the trade and technology trigger

Despite all the optimistic talk by President Trump about the state of the US economy, the latest data on economic activity and industrial production suggest that America is joining Europe and Japan in a sharp slowdown as we enter the second half of 2019.  And this is at a time when the trade and technology war between the US and China has moved up another gear and so threatens to trigger an outright global recession before the year is out.

JP Morgan economists report that the so-called flash May PMIs for the US, Europe and Japan G-3 point to a 0.7-pt decline, consistent with just 2.5% annual growth in global GDP. Purchasing Managers Indexes (PMIs) are surveys of company views on their current and future sales and purchases.  They have proved to be reasonable guides to actual production.  And 2.5% growth globally is considered to be the ‘stall speed’ for the world economy, below which a recession is indicated.

JP Morgan find that global manufacturing is suffering most – being nearly at 50 in the PMI (anything below 50 means contraction).  But services, which constitute 70-80% of most major economies (at least in the official definition), are also sliding towards the levels of the mini-recession of 2015-6.

Most concerning, “the global manufacturing and services expectations measures look set to fall roughly 2-pts in May and would push the indexes beneath the lows set in early 2016.”  (JPM).

Like other forecasters, the OECD’s Economic Outlook, published last week, predicts slower growth this year than last in most big economies — in some cases much slower. What is more, even in 2020, global growth will not return to the pace it reached in the past few years, it says.  Angel Gurría, its secretary-general, said: “The world economy is in a dangerous place.”

Up to now, it has been in Europe and Japan that signs of a slowdown and even an outright recession were visible.  But now the US economy may be joining them.  The US Manufacturing PMI dropped to 50.6 in May, implying almost stagnation. It was the lowest reading since September 2009 as new orders fell for the first time since August 2009 while output and employment rose less.

US Manufacturing PMI

The services sector also dropped back. The overall economic indicator showed the weakest expansion in the private sector since May 2016.  Then on Friday, we had actual data for US manufactured durable goods. In May new orders fell 2.1% from a month earlier in April 2019.  Transportation equipment, also down two of the last three months, drove the decrease.  The Atlanta Fed’s GDPNow model estimate (a very reliable indicator of future growth) puts US real GDP growth in the second quarter of 2019 at just 1.3%.

When we get to Europe, the latest figure for Europe’s powerhouse, German manufacturing activity, makes particularly dismal reading.  The May reading pointed to a fifth month of contraction in the manufacturing sector, as new orders continued to fall sharply largely due to lower demand across the car industry and the effects of customer destocking. In addition, the rate of job losses accelerated to the quickest since January 2013.

German manufacturing PMI

Even with the services sector holding up, overall activity in Germany looks very weak. And the business morale survey is at its lowest for nearly five years. Activity in the Eurozone as a whole is also at a near five-year low.

Eurozone composite PMI

Japan’s economy is “worsening” for the first time in more than six years, according to one of the government’s main indicators.  The index of economic conditions compiled by Japan’s Cabinet Office fell 0.9% from February to March. That prompted government statisticians to cut their assessment of the economy from “weakening” to “worsening” — the lowest of five levels. The last time the Cabinet Office used the bottom grade to describe the economy was in January 2013.  Barclays economist Kazuma Maeda said that the “mechanical” downgrade in the assessment did not necessarily imply that a downturn was in prospect. But he added: “That said, there is mounting concern about an economic recession”

Nominal activity growth in Japan, which can be viewed as an up-to-date proxy for nominal GDP, has been falling since the end of 2017, since the decline in real output growth has been greater than the rise in inflation. On the core nominal activity measure, the rate of increase has now dipped to around 0.5 per cent, lower than it was at bottom of the 2016 deflationary shock.

As an aside, it is worth noting that Japan is supposed to be the poster child of Keynesian fiscal and monetary policy.  The Bank of Japan has negative interest rates and has bought virtually all government bonds available from the banks, as well corporate debt and stock, through massive credit injections in the last ten years.  And it has consistently run budget deficits to try and boost the economy; so much so that the government debt to GDP is the highest in the world. But nominal GDP growth and prices continue to stagnate.

Those who support Modern Monetary Theory should take note.  Yes, you can run budget deficits permanently and run up public debt without consequences for inflation or even the currency in an economy like Japan.  But you cannot get a permanent boost to growth if Japan’s corporations won’t invest or the government won’t either.  Creating money does not necessarily create value. The irony is that Prime Minister Abe plans to raise the sales tax later this year to try and lower the deficits and debt ratios in line with neo-liberal policy. The last time he did that, Japan went into recession.

Outside the imperialist blocs, the so-called ‘emerging market’ economies are also slowing.  Turkey, Argentina, Pakistan are already in recession.  Brazil and South Africa are on the brink.  And capital flows to these economies from the imperialist bloc are drying up, while public sector investment has nearly ground to a halt.

Net public investment in emerging market countries has fallen below 1% of GDP for the first time on record, raising fears of widening infrastructure gaps. The share of national output developing world governments are spending on investment in assets such as schools, hospitals and transport and power infrastructure, net of depreciation of the existing capital stock, has fallen from 3.3 per cent in 1997 to a low of just 0.9 per cent last year, according to data from the IMF. This is well below what the IMF believed was needed to meet basic needs and allow countries to close infrastructure gaps that are slowing the pace of development.

Indeed, if you exclude China, then investment growth is dropping in the rest of the G20 economies.  Only the US and India are keeping investment positive.  If they should falter, as investment is the driver, a global recession would follow.

If China is stripped out of the data, the weighted average for the rest of the emerging world is 3.9 per cent of GDP, markedly lower than the 4.8 per cent figure seen as recently as 2010. The 49 low-income developing countries, mainly in Africa but also encompassing the likes of Vietnam, Bangladesh and Moldova, are even more badly placed, with the IMF calculating they need to invest an additional 7.1 per cent of GDP a year until 2030 on roads, electricity and water alone. With health and education added in, this rises to a colossal 15.4 per cent of GDP, or $528bn, a year.

Low profitability explains above all else why corporate investment has been so weak since 2009.  What profits have been made have been switched into financial speculation: mergers and acquisitions, share buybacks and dividend payouts.  Also, there has been some hoarding of cash by the FAANGS.  All this is because the profitability of productive investment remains historically low.

The other key factor in the long depression has been the rise in debt, particularly corporate debt.  With profitability low, companies have run up more debt in order to fund projects or speculate.  The big companies like Apple or Microsoft can do this because they have cash hoards to fall back on if anything goes wrong; the smaller companies can only manage this debt spiral because interest rates remain at all-time lows and so servicing the debt is still feasible – as long as there is not a downturn in sales and profits.

When fundamentals like profitability and debt turn sour for capital, then anything can trigger a slump.  Each crisis has a different trigger or proximate cause.  The 1974-5 international recession was triggered by a sharp rise in oil prices and the US coming of the dollar-gold standard.  The 1980-82 slump was triggered by a housing bubble in Europe and a manufacturing crisis in major economies.  The 1990-2 recession was triggered by the Iraq war and oil prices.  The 2001 mild recession was the result of the bursting of the dot.com bubble.  And the Great Recession was started with the collapse of the housing bubble in the US and ensuing credit crunch brought on by the international diversification of credit derivatives. But underlying each of these crises was a downward movement in the profitability of productive capital and eventually a slowdown or decline in the mass of profits. (The profit investment nexus).

It now seems possible that brewing trade war between the US and China could be a new trigger for a global recession.  Certainly, US investment bank, Morgan Stanley has raised such a risk. “While a temporary escalation of trade tensions could be navigated without much damage at all, a lasting breakdown would inflict serious pain. If talks stall, no deal is agreed upon and the U.S. imposes 25% tariffs on the remaining circa $300 billion of imports from China, we see the global economy heading towards recession,” the bank’s analysts said in a note.

The OECD also highlighted the danger coming from the trade war.  According to the OECD, international trade has slowed abruptly. Its rate of increase has fallen from 5.5 per cent in 2017 to what the OECD thinks will be 2.1 per cent and 3.1 per cent this year and next respectively. That is lower than projected economic growth, meaning trade is shrinking as a share of global economic activity.  Since 2009, it had been the slowdown in investment growth that has led to a slowdown in trade growth; and the IMF estimated that three-quarters of the trade growth slowdown could be attributed to weak economic activity, especially in investment.  But now the boot seems to be on the other foot.

The OECD numbers on aggregate investment are corroborated by more fine-grained data. Most big US companies’ investment spending, as reported in regulatory filings, has stalled dramatically. A Wall Street Journal investigation of 356 of the S&P 500 companies found that they spent only 3 per cent more on capital in the first quarter year on year; down from a 20 per cent growth rate a year earlier. For the biggest capital spenders, investment fell outright. Trade frictions seem the main cause — directly for businesses particularly reliant on Chinese demand, such as specialised chip producers, as well as indirectly through the increased uncertainty spreading through the economy. Another survey has found that many US companies operating in China are also holding off on investing.

Morgan Stanley also warned not underestimate the impact of trade tensions in a number of ways.  Firstly, the impact on the U.S. corporate sector would be more widespread as China could put up non-tariff barriers such as restriction of purchases. Given the global growth slowdown that would follow, profits from firms’ international operations would be hit and companies would not be able to fully pass through the tariff increases to consumers.

What makes it likely that the trade war will not be resolved amicably to avoid a global recession is that the battle between the US and China is not just over ‘unfair trade’, it is much more an attempt by the US to maintain its global technological superiority in the face of China’s fast rise to compete. The attack on Huawei, globally organised by the US, is just a start.

A chain reaction is under way as a giant industry braces for a violent shock.  US Investment bank Goldman Sachs has noted that, since 2010, the only place where corporate earnings have expanded is in the US.  And this, according to Goldmans, is entirely down to the super-tech companies.  Global profits ex technology are only moderately higher than they were prior to the financial crisis, while technology profits have moved sharply upwards (mainly reflecting the impact of large US technology companies).

The growth slowdown is being driven by low investment and profitability in most economies and in most sectors.  Only the huge tech companies in the US have bucked this trend, helped by a recent profits bonanza from the Trump tax ‘reforms’.  But now the technology war with China will hit tech profits too – even if the US and China reach a trade deal.

The IMF is very concerned.  New IMF chief economist, Gita Gopinath, commented. “While the impact on global growth is relatively modest at this time, the latest escalation could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardise the projected recovery in global growth in 2019.”  Roberto Azevêdo, director general of the World Trade Organization, said the US-China trade war was hurting the global economy. The WTO has been bypassed by the US as the Trump administration aims its attacks directly on China.  Azevêdo said that: “$580bn [£458bn] of restrictive measures were introduced in the last year, seven times more than the previous year. This is holding back investors, this is holding back consumers, and of course it is having an impact on the expansion of the global economy. Everyone loses … every single country will lose unless we find a solution for this.”

Indeed.

41 Responses to “Global slump: the trade and technology trigger”

  1. Will Westerlund Says:

    “Yes, you can run budget deficits permanently and run up public debt without consequences for inflation or even the currency in an economy like Japan.”

    I don’t know where you get that from. No, you can’t run deficits permanently. Why give this to the MMT fundamentalists. Can send papers if you like.

    • michael roberts Says:

      Will, yes you are right. What I meant to say was EVEN if it were true that you could run deficits and run up debt without risking inflation or currency collapse, it still would not deliver faster growth if capitalist companies don’t invest and/or government do not either.

  2. richardfalvey555101905 Says:

    Hi Michael,

    Great post which clearly lays out the current situation and high likelihood of a full blown global recession beginning within this year.

    Is it possible for you to add in figures including China in the following sentence, as I’m assuming the 4.8% figure from 2010 includes China?:

    “If China is stripped out of the data, the weighted average for the rest of the emerging world is 3.9 per cent of GDP, markedly lower than the 4.8 per cent figure seen as recently as 2010.”

    Thanks,
    Richard

    • michael roberts Says:

      Yes. it means that China cut back on its public investment after 2010. But it is now picking it up again.

      • richardfalvey555101905 Says:

        Sorry I don’t think I asked that clearly enough. The current “weighted average for the rest of the emerging world is 3.9 per cent of GDP” – what is the figure when you include China?

      • michael roberts Says:

        I cant find a figure from the statements of Paulo Mauro from the IMF on this. But the IMF has a database on public investment for all countries. From that, I calculate that China’s gross public investment ratio reached a staggering 18-19% of GDP in the 2000s but has since declined to about 14% in 2015. So I assume that if China is included, the overall investment ratio for EMs would be much higher (say 6-7%) BUT the decline from 2010 to now would be pretty similar.

  3. Boffy Says:

    There will be no slump, or severe recession. Trump’s global trade war, along with Brexit, which is part of the same global political crisis – that its true does have economic roots as its about the struggle between fictitious capital owners and real capital, and the death of the conservative social-democratic (neoliberal) model built on the former, and the idea that wealth can come from continually inflatin the prices of fictitious assets – is causing a slowdown in growth.

    But, its main feature is to be reorganising the channels through which trade is conducted, as the US and UK continue to relatively decline, and China (Asia) alongside Europe, and increasingly Africa rises.

    As Marx points out in Capital III, real industrial capital subordinates interest-bearing capital and landed property, and in the end the interests of fictitious capital can never override those of real socialised capital. Trump and those behind Brexit, are seeking a way out of that contradiction via, reactionary means, i.e. an emphasis on the interests of the small (often very small capitalists), and an attempt to force capital back into the constraints of the nation state. They will necessarily fail, even if it leads to severe political crises with economic consequences along the way.

    Brexit will be resolved one way or another. Either Britain will leave (via a chaotic crash out that will probably lead to an ignominious plea for readmission), or via some kind of deal that will lead to simply a slower death, (which might arise because the EU kicks us out) or else Article 50 will be revoked. I think the latter is more likely. That will unleash a spate of relief investment, and spending.

    Similarly, a deal between Trump and China will either be reached, or China will simply develop alternatives, as for example it is doing in response to the US attempts to bar US technology firms providing software and apps to Wuawei. The biggest loser will be the US, as its actions will see other economic blocs development alterntives to the things that have allowed the US to dominate the globe for the last 75 years, including the development of alternative strategic defence alliances, e.g. the development of a European Army.

    A slowdown in trade and economic activity, whilst trade flows are rejigged, yes, a hit to costs due to increased trade frictions, yes, but a slum, no.

    • Anti-Capital Says:

      “There will be no slump, or severe recession”–

      Remember these words from Boffy and remember these:

      “Trump’s global trade war, along with Brexit, which is part of the same global political crisis – that its true does have economic roots as its about the struggle between fictitious capital owners and real capital, and the death of the conservative social-democratic (neoliberal) model built on the former, and the idea that wealth can come from continually inflatin the prices of fictitious assets – is causing a slowdown in growth.”

      Because it wasn’t so long ago that Boffy was telling us how growth would not just resume but actually accelerate, throughout capitalism.

      I don’t know whether there is going to be a severe recession or not, but I do know 18-24 months before the recession in 2001, the uptick in the profit rate in the US turned down; I do know that 12 months or so before the onset of recession in the 4Q 2007, the rate of profit in the US turned down. I think, but don’t know yet, that US profits pretty much are past their peak in this quarter, so we might expect something not so sunny as Boffy predicts to occur within a year.

      “and China (Asia) alongside Europe, and increasingly Africa rises.”
      Remember these words, too.

      Europe rises? Seriously? Compared to what 2009, 2010?

      China, which is not identical to Asia, has experienced slower growth each year for the past ten. The trade war is not some hiccough in the alimentary canal of capitalism but a result of overproduction.

      And Asia? The slowdown in imports/exports by/from China is having serious repercussions on Vietnam, South Korea, Taiwan, and…Japan; repercussions which are not offset by increased exports from Vietnam, South Korea, etc. to the United States.

      Remember these words by Boffy:

      “or else Article 50 will be revoked. I think the latter is more likely. That will unleash a spate of relief investment, and spending.”

      Right, article 50 will be revoked. By Theresa May no doubt. She’s got until June 7 (or is the 10th). Sure thing, her farewell kiss to Boris and Rees-Mogg.

      And these: ” e.g. the development of a European Army.”

      Bet on it. One thing Salvini and Wilders and Le Pen etc etc agree on is a European Army.

      Man, the future is so bright we ought to all be wearing sunglasses– unless of course you are a worker. Then……..none of this junk matters, because Trump or China, the EU or the League, makes not a bit of difference to what must be done to emancipate human beings from the reproduction of poverty.

    • Jack Mackerel Says:

      My father owns a small, specialized technology design, manufacturing and services company based in the United States. He is one of the small capitalists you’re talking about. It’s his impression that the trade war is not only raising the costs of components — large tech companies have also taken to hoarding parts — but it is accelerating businesses like his to leave the United States. If you’re an American company selling gizmos to Americans but also Europeans and other countries, why would you build inside the U.S. and pay the import tariffs on Chinese-made parts? Might as well move your manufacturing operations to Vietnam, Malaysia, the Phillippines, etc. So the effect is to further push businesses out to (as my Marxist friends say) the “imperial periphery.”

      • Charles Says:

        @Jack Mackerel: Would your father welcome U.S. industrial policy to restore domestic manufacturing of the parts that he must source from overseas or Mexico?

  4. Charles A. Says:

    Yes, the “trade war” is more. U.S. capital has finally decided it must unwind the outsourcing and cross-country investments that gave their corporations a bonanza of cheap labor for 25 years. Globalization wreaked disaster on tens of millions of workers. If you still think China is socialist, you might be in favor of this economic decoupling. Yet also, if you recognize that China today is another monopoly capitalist power, you will also conclude that decoupling is a good thing.

  5. vk Says:

    Meanwhile, the Eurocommunists and the “center-left”/socialists are getting routed in the European elections.

    And we have to read commenters here point their fingers at China…

    Remember: before pointing fingers at some revolutionaries for not being revolutionary enough, do your own revolution first. Humbleness is a virtue sometimes.

    • jlowrie Says:

      ”before pointing fingers at some revolutionaries for not being revolutionary enough, do your own revolution first Humbleness is a virtue sometimes.” Well, I thought I was ‘pointing fingers’ at counter-revolutionaries. Apparently, for vk increasing the working day from 8 to 12 hours is a revolutionary measure. I humbly suggest he consults first with the intended victims of these life destroying workdays.

      • vk Says:

        Where’s your source that proves China raised its daily working hours from 8 to 12?

        Meanwhile, Tsipras — Eurocommunist hero — has just announced he is calling new elections, after Syriza was drubbed in these by the… wait for it… the neoliberals!

      • jlowrie Says:

        ” “Jack Ma endorses China’s controversial 12 hours a day, 6 days a week work culture”. CNN. April 15, 2019. ” Jack Ma is currently China’s second richest capitalist and a member of the ”Communist” party. Does vk also endorse such work hours? Yes or No?

      • jlowrie Says:

        ” Xue Yujie (2019-03-28). David Paulk (ed.). “Chinese Developers Protest Overwork on GitHub”. Sixth Tone. Archived from the original on 2019-03-31. Retrieved 2019-03-31.
        ^ Denise Hruby (2018-05-08). “Young Chinese are sick of working long hours”. BBC. Archived from the original on 2019-04-02. Retrieved 2019-04-02.
        ^ 赵昂 (2018-06-03). “不接受”996″是不能吃苦?媒体:合法权益应获保障”. 新华网 (in Chinese). 工人日报. Archived from the original on 2019-03-31. Retrieved 2019-03-30.
        ^ Sarah Dai; Li Tao (2019-01-29). “China’s work ethic stretches beyond ‘996’ as tech companies feel the impact of slowdown”. South China Morning Post. Archived from the original on 2019-03-31. Retrieved 2019-03-31.
        ^ Li Yuan (2017-02-22). “China’s Grueling Formula for Success: 9-9-6”. The Wall Street Journal. Archived from the original on 2019-03-31. Retrieved 2019-03-31.
        ^ Nathan King (2017-01-05). “China’s “996” working hours are becoming the norm for many”. CGTN America. Archived from the original on 2019-04-02. Retrieved 2019-04-02.
        ^ Zheping Huang (2019-03-20). “No sleep, no sex, no life: tech workers in China’s Silicon Valley face burnout before they reach 30”. South China Morning Post. Archived from the original on 2019-04-05. Retrieved 2019-04-05.

      • mandm Says:

        Jlowerie, though your sources seem suspect and sensationalist, it’s clear enough that China’s leadership is “capitalist” in terms of ideological orientation and personal interest.

        But, historically there are at least three substantive restraints (contradictions) to consider regarding the direction of the Chinese economy and the state: the immense (including land) public sector which the present leadership must both cannibalize and feed in order to stay in power; the strong resistance of the working population (which must be treated with some restraint); the increasingly evident fact that the imploding imperial system cannot allow China to grow into a full-fledged capitalist/imperialist country.

        China’s choice is socialist or comprador–neither of which would serve the interests of the present “communist” leadership.

        vk is right. We in the belly of the beast should focus on making our own revolution, which would necessarily begin by opposing the imperialist system (capitalism and imperialism are one and the same). That mere focus would do more for socialism in China than all the hectoring of the “socialist” left against China’s fake socialist leadership.

      • vk Says:

        I don’t care about what Jack Ma says. What does the Chinese Law says? Quote it, then we can begin to debate.

        And bring the evidence pre-revolutionary China had a 40h week journey. It’s one thing when there’s a worsening trend; another completely different thing when there’s a betterment trend. Journeys in Industrial Revolution Europe were 16h (per day).

        This “9-9-6” is not encoded in Chinese Labor Law. It’s one thing to say a Law or Code is not enfoced properly; it’s a completely different thing to say the State sanctions it. See this for clarification:

        https://www.chinalawblog.com/2017/04/china-overtime-laws-and-employee-terminations.html

        The objective working conditions are the fruit of the development of productive forces and the struggles of the working classes. There’s no sacred scripture that states 8 hour journey, five-day week is the golden standard for the working class either: what matters is the tendency. It also doesn’t mean that, in “socialist” Europe, the 40h, 5-day workweek is enforced wholly too (gig economy).

      • jlowrie Says:

        May 27, 2019 at 7:47 pm
        ”Jlowerie, though your sources seem suspect and sensationalist, ” Why?

      • jlowrie Says:


        jlowrie Says:
        May 22, 2019 at 6:26 am | Reply
        Chinese labor law declares: “The State shall practice a working hour system wherein labourers shall work no more than eight hours a day no more than 44 hour a week on average.” Me addressing you last week!

        ”What does the Chinese Law says? Quote it, then we can begin to debate.” You this week. We can hardly have a debate, if you pay no attention to the other side. This hardly constitutes a debate; rather you merely hearing echoes of your own assertions.

        But there is a deeper problem here, namely that you confuse economic relationships with juridical categories. The economic relationships that pertain in China are those of dominance and servitude i.e. class relationships. Their juridical status obfuscates these. This can be simply ascertained by examining the nature of Roman slavery. In law all slaves enjoy the juridical status of property( dominium) as being unfree and belonging to a master( dominus). In practice the chief bureaucrat , legally a slave, in charge of the Imperial Treasury at Lyon had nothing economically in common with the productive wretches enslaved in the stone mines. Similarly Mr Ma and co. have nothing in common with the poor wretches who work a 12 hour day in his factories, except this, he is the master and they are the slaves.

      • jlowrie Says:

        The concept of Socialism that you seem to entertain has already been refuted by Engels in his ”Socialism: Utopian and Scientific” wherein he ridicules the notion that nationalisation constitutes a socialist measure by observing that the Royal Pottery Manufacturer or the Regimental Tailor would then constitute socialise enterprises, or as ‘some sly dog’ suggested, nationalising the brothels! Let us carry Engels’ reductio ad absurdum to its logical absurdities. Suppose after a Revolution the new government nationalises the brothels, introducing an eight hour day, health checks, medical care, retirement pensions and one-man (sic) managers, all to be managed according to a state directed plan; not to mention piece work !!! After a time along comes a Mr ‘to get rich is glorious’ Deng Hsiao-ping, who demands the introduction of market forces and individual incentives. The brothels are subcontracted to an enterprising Mr Ma, who increases the working day from 8 to 12 hours, raising the ‘pay’ by 25% and pocketing the rest, after he has paid tax. Are the workers still sex slaves, Yes or No?

      • jlowrie Says:

        I appreciate I have not clarifies sufficiently the main point I wished to make, which is this: though in China an enterprise may have the juridical status of state property, if usufruct i. e. the right of exploitation is granted to a Mr Ma, who pays a rent to the state, does he or does he not appropriate himself a portion of the surplus value extracted from his wage slaves? How else to explain the incredible wealth of the Mr and Mrs Mas of China? The economic relationship pertaining between Mr Ma and his workers is not captured by the juridical status of the property. To argue otherwise, is as if to claim that a person who hires slaves from a slave owner to work in his factory is not exploiting the slaves because legally he does not own them.

        Marx himself emphasises this distinction.”While the denomination of paper is based on gold or silver the convertibility of the note….remains an economic law regardless of what juridical law may say” (” Towards a Critique of Political Economy” p 83).

      • vk Says:

        “But there is a deeper problem here, namely that you confuse economic relationships with juridical categories.”

        And the economic relationships tells us the Chinese working class is gaining, not losing ground. You speak as if old China was a Norway-like paradise before the CCP took over; that’s simply not true: they were treated worse than slaves by the Japanese, millions of them died in WWII. By all standards, the Communists made the lives (and still are) of their people better, not worse.

        You speak as if socialism could be born ready and perfect, like Athena from the head of Zeus. That’s not and will never be the case.

        Socialism is, itself, a period of transition (between capitalism and communism). It has both capitalistic and communistic elements by definition. That’s its scientific definition.

        The Chinese define their system as “Market Socialism with Chinese Characteristics”. By “market socialism” the Chinese themselves define as “the most primitive stage of socialism”, i.e. the transition of the transition, just an embryo. By “Chinese characteristics”, they simply mean that it was built over the old China. At the same time, they (correctly) state there’s no ready-made formula for socialism in the world: each country has its own particularities, and will have to find its own path to socialism. And this is scientifically precise — they surely are not utopian socialists (i.e. Proudhon et al). As the great Deng Xiaoping — whose grandeur is such to the socialist cause you could pile up all the socialist leaderships from Western Europe of the post-war period and it wouldn’t reach his toe — once said: communists don’t have a style, they make things happen.

        You have to consider the Chinese Revolution happened in a very difficult moment for international socialism. They had to give in in order for the Revolution to survive. Central to this was the transition from the second to the third industrial revolution, which the USSR failed to do with their own system.

      • mandm Says:

        .eg: the South China Morning Post represents the interests of well connected private capital in China (It’s humanitarian concerns are liberal and bogus); the BBC has become about as objective as US public radio; the Wall Street journal…? But my point was about honest self-criticism and historical contextualization….

      • jlowrie Says:

        ”And the economic relationships tells us the Chinese working class is gaining, not losing ground. You speak as if old China was a Norway-like paradise before the CCP took over; ” Of course I say nothing of the sort. I do not deny that the standard of living has risen greatly in China as it has in the UK since I was a boy, when food was rationed and houses were bitterly cold and hot water was a luxury. But how can you argue that the increase of the working day from 8 to 12 hours a day is an improvement in the economic position of the working class?

      • jlowrie Says:

        ”There is no sacred scripture that states 8 hour journey ..is golden standard for the working class” So much for working class history then!

        The International Workingmen’s Association took up the demand for an eight-hour day at its Congress in Geneva in 1866, declaring “The legal limitation of the working day is a preliminary condition without which all further attempts at improvements and emancipation of the working class must prove abortive”, and “The Congress proposes eight hours as the legal limit of the working day.”

        Karl Marx saw it as of vital importance to the workers’ health, writing in Das Kapital (1867): “By extending the working day, therefore, capitalist production…not only produces a deterioration of human labour power by robbing it of its normal moral and physical conditions of development and activity, but also produces the premature exhaustion and death of this labour power itself.” This from Wikipedia, a bourgeois source closely censored by the CIA.

  6. Wal Buchenberg Says:

    The May 15, 2019 ban against Huawei is the starting signal for a new Cold War. This new Cold War will (for the time being) not be fought with numbers of nuclear warheads and missile systems, but with license refusal, delivery bans and trade hurdles.
    The short “Globalized Age” is over. There will be new division of the world – initially an economic redistribution, but military threats remain active in the background.

    https://marx-forum.de/Forum/index.php?thread/958-huawei-ein-neuer-kalter-krieg/#post5316

  7. ucanbpolitical Says:

    I will be posting a new article once the profit figures come out in the USA on Thursday. They are likely to be down significantly having fallen quarter on quarter at the end of 2018. It is safe to say the global economy is in a profit recession and will be until the second half of 2019. This makes three quarters which is normally associated with a recession. The only ingredient missing from the Crash of 2019 is the financial aspect. It is wrong to call the period after 2008 a long depression because in such a period one does not get a commodity super cycle as one did up to 2018 because of China’s extraordinary investment boom from 2009. But it is not only a question of being concrete but of perspective. According to the St Louis Fed, China was responsible for 50% of the growth in the recovery. If we add in those countries slipstreaming China like the BRICS and Australia, the figure is more like 60%. Had it not been for China the weak recovery after 2008 would not have exceeded 1.9%. The financial strains in China means it is unrepeatable (perspective). This is what Trump does not understand. China is the heart of global industry and if China falls everyone falls. What makes a depression is a collapse in profitability together with the shearing of the world economy, because together the barriers to capitalism become temporarily insurmountable. This did not happen in 2008.

    • Boffy Says:

      And, if we define growth as lack of growth and recession, and discount any other countries that grow in the global economy on the back of trade with countries that are growing more rapidly, then we could always define the world as in some kind of recession. That way those that have perennially predicted the next recession, long depression and crises would be vindicated in the same way that the soviet economists in the 1950’s vindicated Varga’s Law by “showing” that the massive growth in western capitalism in the post-war period was all a mirage and “fake news”, and that the massive rises in workers living standards in the West during that period were all just imperialist propaganda, and the workers were after all as Lassalle’s followers, Stalin and Varga had predicted being continually impoverished.

      No wonder Marxism and the left has fallen into such disrepute, and like the Malthusians and Endtimers are left hoping for such crises as vindication of their prophesies, in the hope that if only workers can be driven into sufficient abject misery they might listen to those prophesies, and see even their miserable version of “Socialism” as a lesser evil to their reduced condition. Trouble is a) Marx showed why such immiseration doesn’t happen, b) it isn’t happening c) whenever crises do occur, for the reasons Marx, Engels, Lenin and Trotsky describe, it leads to the workers being placed in a weaker position, it encourages competition between workers on an individual, sectional and national basis, and encourages individualist, sectionalist and nationalist ideologies to rise on the back of those conditions, which is the very antithesis of what is required for socialism.

      • Anti-Capital Says:

        Boffy thinks that’s why Marxism and the left have fallen into such disrepute? I don’t think that’s why. I think the collapse of the Soviet Union, after years of sacrificing international workers’ movements to the USSR’s notion of “stability,” after its years of institutionalizing privilege for some and accommodation to reaction (Catholic church in Poland, pre Solidarity) for all, had much more to do with that disrepute.

        And then there’s the throttling of workers’ struggles in France, Spain, Portugal just yesterday and the days before yesterdays. When the bourgeoisie defeat the workers in a struggle, it’s really stupid to blame those who think capitalism can’t go on forever, “self-correcting” a la Boffy, for the defeat.

        And then there’s the disgraceful pandering to Syriza as Syriza panders to the EU, the ECB, and the IMF.

        And even then… the disrepute isn’t quite that severe, as half the younger people of voting age in the US have a positive view of socialism.

        Just shows you how little some “Marxists” grasp the content of historical materialism despite all the quotes they assemble like a curriculum vitae.

      • jlowrie Says:

        Marx’s theory of ‘impoverishment’ has nothing to do with the level of wages; it means ” Separation of property from labour….labour separated from all means and objects of labour….this complete denudation, purely subjective existence of labour, stripped of all objectivity. Labour as absolute poverty: poverty NOT AS SHORTAGE, but as total exclusion of objective wealth” (Grundrisse Pp 295-296).

        There is nothing in Marx that states that wages cannot rise under capitalism; quite the contrary. His talk of ‘misery’ brought by capitalism should not be confused with ‘immiseration.’ China, so beloved by vk, demonstrates the accuracy of Marx’s analysis: rising wages and a higher standard of living, but at the same time the immiseration of the labouring classes , with the dissolution of the communes and the privatisation of the implements of production, and the abolition of the ‘iron rice bowl’ ( ‘ the great Deng Xiaoping — whose grandeur ‘ etc made sure his own children got golden rice bowls!), i.e. the reintroduction of wage slavery with the attendant misery, namely the rise of much longer work hours, horrendous industrial accidents ( the ‘man-eating mines’ of China!), the onset of widespread industrial diseases carrying off millions, the destruction of the environment such that it is doubtful China can support its future population, the separation from their parents of tens of millions of children left behind in the countryside, and the reappearance of child slavery in factories and brothels. As the old Dundee Mill song put it,

        ”Those that work the hardest
        Are the least provided.”

        But ‘to get rich is glorious,’ in fact redolent of ‘grandeur.’

      • Boffy Says:

        J,

        Quite right. In the Grundrisse, Marx makes this distinction between wealth and affluence, and their opposites. Wealth refers to a stock, where as affluence, as the derivation implies refers to flow. You can in theory, be wealthy but not affluent, for example, you might own a very expensive house, and yet have no income. You can be affluent, but not wealthy, i.e. you might have a large income, but spend it all, so that you have no stock of wealth.

        By poverty, as you say, Marx in the Grundrisse, means lacking capital. Indeed, in the passage he describes capital as “not labour”, and labour as “not capital”. These are two extreme poles. The question is how this opposition is negated. In Capital III, and elsewhere, he gives the answer. Socialised capital, is the transitional form of property, Marx says, where this contradiction between capital and labour is negated.

        The socialised capital takes the form of the cooperative or joint stock company/corporation. In the former its obvious as the workers in Marx’s words become their own capitalist. That is objectively true in the case of the joint stock company too, but is obscured by the juridical relations of the company form, i.e. the capital of the joint stock company is the property of the company itself, it is socialised capital that can only be owned by the “associated producers” in the company (its workers and managers), and yet the juridical form determined by laws of corporate governance gives control of that capital to shareholders, who do not own that capital, any more than do the bondholders, or other creditors of the company.

        As Marx says, in Capital III. Chapters 23 and 27, this is the inevitable consequence of the process of capital accumulation, and of the concentration and centralisation of capital. The capitalists having expropriate the means of production of the independent producers, then saw the bigger capitalists expropriate the small capitalists, then as this monopoly of private capital became a fetter on further capitalist development, even these big private capitalists are expropriated by the even bigger socialised capital – the expropriation of the expropriators as Marx terms it.

        As Marx describes,

        “It is the abolition of capital as private property within the framework of capitalist production itself…

        This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions.”

        (Chapter 27)

        So, although, as Marx describes the individual producer can never be in a position to own their means of production, the process of capitalist accumulation, brings about the condition whereby all individual private ownership of capital is ended (well not entirely, because small private capitalists continue to exist in their millions, but the economy is dominated by the large socialised capitals, and the small private capitalists exist in antagonism to it, subordinated to it, and constantly under threat of being absorbed by it) and the only rational means of owning and controlling this socialised capital is by the “associated producers” themselves.

        The former large capitalists are thereby reduced to being mere coupon clippers, lenders of money-capital, and owners of fictitious capital in the shape of shares and bonds, and other financial assets and derivatives. As Marx sets out in Capital III, Chapter 23, the owners of this fictitious capital stand in direct opposition to the socialised capital, as they seek to extract interest and capital gains from it, at the cost of real capital accumulation.

      • jlowrie Says:

        ”“It is the abolition of capital as private property within the framework of capitalist production itself…’

        As a transitional form consider Osaka Gas, as it was around 1980 when I lived in Japan. It was a private, monopoly company, but neither a state nor a municipal nor yet a capitalist company in the sense that it did not issue shares. Employees joined the company after school or college and worked there till retirement. Senior executives were those who had worked for the company into their fifties. There were no golden handshakes or early retirement, and retirement pensions were dependent on company performance. All employees received bi-annual bonuses, being a multiple of their salary. When these were publicly judged excessive by other companies which were their customers, they were adjusted downwards. Now what in the world would be gained for society by having such an enterprise taken over by the state and integrated into the so-called public sector? Would it be more efficient? more able to address social need?

        According to vk. ‘But, historically there are at least three substantive restraints (contradictions) to consider regarding the direction of the Chinese economy and the state: the immense (including land) public sector which the present leadership must both cannibalize and feed in order to stay in power; ‘ Yet again vk and those who share his stance cannot see that nationalisation per se is only a juridical measure. Take the legal status of ‘public land’. What good have such’ bits of paper’ done the peasants when the state decides to hand it over to be exploited by ‘enterprising business people’? What good did the copyholders of England gain from their bits of paper? The Law said one thing, but the landowners controlled the state. It comes down to a question of who holds state power? In China as elsewhere this is the bourgeoisie.

      • Boffy Says:

        J,

        Quite right, and of course, Marx and Engels spoke out on numerous occasions against nationalisation by the capitalist state, and were very dismissive of it even by a post-capitalist state. After all they both talked about the state withering away.

        As Marx states in the paragraph prior to that quoted, in discussing the growth of socialised capital, as such a transitional form of property,

        “An enormous expansion of the scale of production and of enterprises, that was impossible for individual capitals. At the same time, enterprises that were formerly government enterprises, become public.”

        Engels similarly talked about,

        “Above all this will depend on what kind of aims the workers’ party, i.e., that part of the working class which has become aware of its common class interests, is striving for in the interests of that class.

        It seems that the most advanced workers in Germany are demanding the emancipation of the workers from the capitalists by the transfer of state capital to associations of workers, so that production can be organised, without capitalists, for general account; and as a means to the achievement of this end: the conquest of political power by universal direct suffrage.”

      • jlowrie Says:

        ” After all they both talked about the state withering away.”

        And this surely is only possible on a world scale, but in the meantime…..

        As for Osaka Gas, since its good is used by intermediate and end users, it could be transformed into a socialist enterprise by having its board of administration consisting of workers elected on a 3 in 1 combination of 1/3 Osaka Gas workers, 1/3 workers from enterprises supplying Osaka Gas and 1/3 from workers from intermediate and end users, thus enabling genuine social coordination and planning. No need for state actors!

        ”By poverty, as you say, Marx in the Grundrisse, means lacking capital. Indeed, in the passage he describes capital as “not labour”, and labour as “not capital”. These are two extreme poles.” Exactly, as I understand Marx, immiseration and the accumulation of capital are dialectic opposites.

  8. ucanbpolitical Says:

    Actually Boffy I have been quite accurate. I was the first to describe the last quarter of 2015 and first quarter of 2016 as a pseudo recession. I then described the subsequent period as one of rising animation. I then called the end of this phase towards the end of 2018 when I began to use the term the “Crash of 2019”. Strikes me that is what is actually underway. Historically we do not see an unbroken six weeks of market falls everyday.

  9. Boffy Says:

    “I was the first to describe the last quarter of 2015 and first quarter of 2016 as a pseudo recession.”

    Well congratulations in creating the new definition of growth as being a “pseudo recession”. Unfortunately, for those who think that such recessions and stagnation are a means of removing the blinkers form workers eyes, and getting them to accept their miserable version of socialism, which actually differs from that of Marx, in the same way that night differs from day, your “pseudo recession” didn’t even result in a corresponding “pseudo rise in class struggle.”

    Instead the political events that marked the subsequent months were the thoroughly reactionary rise of nationalism symbolised by Brexit, and the inevitable rise of xenophobia it released, along with the election of Trump, and the same outburst of xenophobia, mysogyny and reaction!

    It gives a taste of what would be in store were that a real rather than simply pseudo recession, let alone a depression such as that of the 1920’s, in Europe, which led to workers struggles being defeated left, right and centre, as workers economic, social, and industrial position was weakened by it, and which led to the rise of fascism in Italy, Germany, Spain and other parts of Europe.

    • ucanbpolitical Says:

      Biffy how tiresome. Anyone who grasps data as reported in the NSA is aware that because of imputations the first 1% of GDP growth is statistical noise. So growth of 0.5% per quarter is in fact contraction. My final comment.

      • Boffy Says:

        Tincan, how subjective. The statistical noise could also mean that growth was actually higher rather than lower. The likelihood of that is indicated by the continued growth that occurred in the period that followed, and especially given the phenomena that the statistics continually show lower growth in the first quarter of each year that is then corrected in the following quarters. It is backed up by the continued strong growth in employment over the period.

        Either way, if it was a recession, pseudo or otherwise, it failed to have the desired effects the catastrophists hope for from such events of somehow magically leading to workers engaging in some epiphany, and militant opposition to capitalism!

  10. Wal Buchenberg Says:

    For a long time left-leaning theorists had argued that the difference between the countries of the North and the South would increase steadily, that the countries of the capitalist periphery could never catch up economically with the countries of the capitalist core zone.
    This left underdevelopment theory is refuted by the facts. Nevertheless, the results are contradictory. Compared to the USA, southern Europe and above all Southeast Asia have caught up economically. Southern Europe reached over 50% of US living standards in 2010, Southeast Asia 40%. Latin America in general has lost ground like sub-Saharan Africa.

    https://marx-forum.de/Forum/gallery/index.php?image/1090-aufholende-entwicklung/

    Wal Buchenberg, Hannover

  11. Xavier Server Says:

    Agreed with all the points mentioned. Mobile technology is the next big thing because it now caters 70% of the audience online as per Hostnoc’s statistics. The great write up I have also subscribed to your blog as well.

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