Forecast 2023: the impending slump

At the end of every year, I attempt to make a forecast on what will happen in the world economy in the next year.  Of course, forecasts are wrapped in error, given the many variables involved that drive economies.  Weather forecasts are still difficult to make and here meteorologists are dealing with physical events and not (at least directly) with human actions.  Nevertheless, weather forecasts up to three days ahead are now pretty accurate.  And longer term climate change forecasts have been broadly borne out over the last few decades.  So if we consider that economics is a science (albeit a social science), and I do, then making predictions is part of testing theories and evidence in economics too. 

How did the predictions I made last year for 2022 work out?  In 2022, the world economy was expected to grow around 3.5-4.0% in real terms – a significant slowing compared to 2021 (down 25% on that rate).  Actually, 2022 looks like being worse than that consensus forecast, at just 3.2%.  The advanced capitalist economies were expected to grow at less than 4% in 2022 – it now looks as though these economies will only manage 2.4%.  The so-called emerging economies were expected to achieve an average 4% rise in 2022 – again a touch too optimistic with the likely result being 3.7%.  So the major economies did much worse than in 2021 – and worse than the consensus forecasts.  Indeed, the drop in growth in 2022 compared to 2021, was one of the deepest on record.

My own real GDP growth forecast for 2022 was also too high.  But at least I recognized why there would be a significant fallback.  Last year, I argued that “the ‘sugar-rush’ of pent-up consumer spending,engendered by COVID cash subsidies from fiscal spending by governments and huge injections of credit money by central banks were over.”  That was an understatement.  As we know, by mid-2022, central banks were engaging in a series of interest-rate hikes that has driven up the cost of borrowing for consumers and businesses dramatically.  The reversal from monetary easing (QE) to tightening (QT) was quick and sharp because of the fast rise in inflation rates for the prices of goods, commodities and services globally. 

I have discussed the reasons for the inflationary spike and the reaction of central banks in many posts this year.  Weak low productivity economies, global supply chain blockages from COVID and the energy crisis, enhanced by the Russia-Ukraine conflict, were the drivers of inflation – not ‘excessive demand’, as the Keynesians argued; or too much ‘cheap money’, as the monetarists argued.  As a result, central banks have been powerless to stop inflation, except by destroying incomes, driving up debt costs and so intensifying the likelihood of an outright slump in the major economies in 2023.

Indeed, last year I expected a global debt crisis to come to a head: “such was the size of corporate debt and the large number of so-called ‘zombie companies’ that were not even making enough profit to cover the servicing of their debts (despite very low interest rates), that a financial crash could ensue.”  That has not happened yet in the advanced capitalist economies, partly because of inflation which has lowered the ‘real’ burden of borrowing costs.  The global debt-to-GDP ratio will reach 352% by end 2022, according to the latest Global Debt Monitor from the Washington-based Institute of International Finance (IIF).  That includes financial sector debt, usually owed within the sector.  Excluding that, global debt is over 250% of world GDP according to the BIS.

But as I forecast, the so-called emerging economies are facing a major credit crisis – with defaults on debt already happening in Sri Lanka, Zambia, Ghana and others like Egypt and Pakistan on the brink.  A very strong dollar through 2022 has made debt servicing of dollar debt for many of the poorest countries virtually impossible.  According to the BIS, there is some $65trn of dollar debt owed by non-banks in emerging economies.  About half of Low Income Economies (LIEs) are now in danger of debt default.  ‘Emerging market’ debt to GDP has increased from 40% to 60% in this crisis.  There is little room to boost government spending to alleviate the hit. 

The world’s poorest countries are expected to pay 35% more in debt interest bills this year to cover the extra cost of the Covid-19 pandemic and a dramatic rise in the price of food imports, according to a World Bank report.  Latin America faces ‘prolonged crisis’ following pandemic. A UN report on Latin America and the Caribbean warns that nearly 45 percent of youth live below the poverty level. The report by the Economic Commission for Latin America and the Caribbean (ECLAC) found that 56.5 million people in the region were impacted by hunger. An estimated 45.4 percent of people aged 18 or younger in Latin America were living in poverty.

Contrast that with the huge profits made by the energy producers in 2022.  Profits at the seven biggest oil firms soared to almost $175bn.  

I said in my 2022 forecast that “this year could be the one for a financial crash or at least a severe correction in stock market and bond prices, as interest rates rise, eventually driving a layer of zombie corporations into bankruptcy.”  Well, we have not had the crash and the bankruptcies yet, but we have had the severe correction in financial markets.  The stock and bond markets of the major economies have plummeted in line with the sharp reduction in growth and the rise in interest rates. 

There were two notable casualties of this tightening of credit and liquidity: the death of cryptocurrencies; and the sharp fall in stock prices of such heroes of ‘tech’ speculation like Tesla and Meta.  2022 has been the year of crypto catastrophe. More than $2trn in notional value has vanished into thin air as the total market capitalisation of crypto tokens has plunged 70 per cent from its peak in November 2021.

Starting with the Tether scandal and ending in the Sam Bankman-Fried’s FTX empire with his arrest on criminal charges, the Ponzi-like crypto craze has been exposed.  Speculation is inherent in capitalism, but it increases, as other financial activities, in times of economic malaise and crises, i.e. when profitability falls in the productive sectors and capital migrates to unproductive and financial sectors where the rate of profit is higher. This is the reason for the emergence and rise of the crypto market. What the fall of this market now shows is what happens when investors start to expect a fall in profits from an impending slowdown and even recession in the ’real’ economy.

And then there is Tesla and its monstrous head, Elon Musk.  The rise in the share price of this ostensibly world leader in electric cars made Musk the richest billionaire in the world.  But his fraught purchase of Twitter and the significant downturn in Tesla production and sales have destroyed nearly half his wealth in paper.  Tesla was worth $1.2trn in market cap at the beginning of 2022, but now Tesla value has fallen to $400bn, a fall equivalent to the combined current market capitalisation of more than 80 of the smallest companies in the S&P 500 index.

In my 2022 forecast, I reckoned that “the current high inflation rates are likely to be ‘transitory’ because during 2022 growth in output, investment and productivity will probably start to drop back to ‘long depression’ rates.   That will mean that inflation will also subside, although still be higher than pre-pandemic.”  That was written before the energy crisis really set in and Ukraine conflict started.  So inflation rates did not subside in 2022 and on the contrary continued to rise to peaks in November. That did not seem so ‘transitory’.

But headline inflation rates are now beginning to fall, as energy and food price rises subside (although remaining at all-time highs).  Having reached over 7% as an average in 2022, global inflation could slow to under 5% in 2023 – if still much higher than the 3%-plus average in the 2010s.  In that sense, high inflation will prove ‘transitory’ in 2023 (but still higher than pre-pandemic)., if only because the world economy is heading into a new slump only three years after the pandemic slump, which was the deepest and widest in impact in the history of capitalism (some 200 years!).

Never has an impending recession been so widely expected.  Maybe that means it won’t happen – given the record of mainstream economic forecasters!  But this time the consensus looks set to be right.  Sure, there are some forecasters in the US who continue to claim that the US economy with its tight labour market, slowing inflation and strong dollar will avoid a slump. But that is not what all the international forecasting agencies think. 

Take the IMF first.  It reckons that global real GDP growth will be just 2.7% in 2023.  That is officially not a recession in 2023 – “but it will feel like one”. US growth will slow to 1%; the UK to 0.5% along with the Eurozone, while Germany will go into recession at -0.3%. “Risks to the outlook remain unusually large and to the downside,”. And the IMF’s forecast is the most optimistic. The OECD reckons global growth will slow to 2.2% next year.  “The global economy is facing significant challenges. Growth has lost momentum, high inflation has broadened out across countries and products, and is proving persistent. Risks are skewed to the downside.” Then UNCTAD, in its latest Trade and Development report, also projects that world economic growth will drop to 2.2% in 2023. “The global slowdown would leave real GDP still below its pre-pandemic trend, costing the world more than $17 trillion – close to 20% of the world’s income.”

The World Trade Organisation (WTO) joins the other international agencies in forecasting a global slump.  “World trade in goods is projected to slow sharply next year under the weight of high energy prices, rising interest rates and war-related disruptions, raising the risk of a global recession”, according to the WTO.  Its forecast for global economic growth in 2023 is 2.3% and the WTO warns of an even sharper slowdown should central banks raise interest rates too sharply in their efforts to tame high inflation.

The mainstream private sector Peterson Institute forecasts recession for the Eurozone, the US, the UK and Brazil next year, with world economic growth dropping to a low of 1.8%.  And the Institute for International Finance (IIF), a research body funded by major international financial institutions, forecasts an even deeper drop in global growth next year.  “We forecast global recession in 2023. Adjusted for base effects – likely around +0.3% next year (green) – global growth will be only +1.3%. That’s as weak as 2009, when headline growth was lower (+0.6%), but carryover was -0.7% (yellow). Another “Great Recession.”

So it seems most leading forecasters are agreed – a slump is coming in 2023, even if they hedge their bets on the depth and in which regions.  However, some mainstream economists dismiss this slump forecast on the grounds that the world economy will still be growing in 2023. “While the Organisation for Economic Co-operation and Development and International Monetary Fund expect global growth to plunge to 2.2-2.7% in 2023, from 6.1% in 2021, that still leaves the world economy unlikely to shrink for consecutive quarters.” (Jeffrey Frankel). But remember, if global real GDP grows at about 2% next year (that’s for a world economy including the US, fast-growing India and Indonesia and a China recovering from the COVID lockdowns), that means that per capita GDP growth will be just 1%, a rate as low as in the Great Recession of 2008-9.

Can the US escape a slump? In December, US business activity was contracting at its fastest rate since the depth of the pandemic in 2020. The US composite PMI, which surveys business activity, fell to 44.6 in December from 46.4 in November – anything below 50 means contraction and the lower the figure, the faster the fall. This is a clear sign that the US economy is heading into a slump in 2023.  JP Morgan economists report that its global manufacturing output index fell in November “to a level rarely seen outside of recessions”. This points to a hard-landing in global factory output in 2023.

The ECB now reckons the Eurozone economy is already in a recession, with output contracting in this current quarter and in Q1 2023. But it hopes the recession will be “relatively short-lived and shallow”.  Even if that were the case – and I doubt it – EZ real GDP growth is forecast at just 0.5% next year and annual growth will remain under 2% a year for the foreseeable future.

Whether the major economies go into an outright slump in 2023 or just avoid it is only an issue to discuss for economists. Either way, it has dire consenquences for the livelihoods of the millions in the Global North and the billions in the Global South.  The UK’s Financial Times summed it up.  “As we reach the end of the year, it’s hard to argue 2022 has been a good one for workers. Labour shortages have persisted and wage growth has picked up quite strongly in some countries like the US and the UK. But pay hasn’t kept up with surging prices.  As a result, global wages fell in real terms this year for the first time since comparable records began, according to the International Labour Organization.  Labour’s share of global income has also declined, by the ILO’s calculations, as productivity growth outstripped wage growth by the biggest margin since 1999.  In the UK, a decade of stagnant wage growth before the pandemic is now set to be followed by the steepest fall in household living standards in six decades, according to official forecasts.”

In the US, the average decline in real wages was just over 2 percent year-on-year in the third quarter of 2022. In Europe, Germany and Spain saw even more pronounced declines in purchasing power, with real incomes falling by just over 4 percent and 5 percent, respectively, nationwide.  Real wages in the Eurozone have fallen by 8% since the end of the pandemic slump in 2020. In Germany, real earnings have plunged by 5.7% in the last year, the largest real wage loss since statistics began.

The question to be asked is why the major economies are dropping back into a new slump after such a short time since the COVID slump.  In previous posts, I have highlighted two factors (two blades of ‘scissors’ which are about to close and cut output and investment).  The two factors are slowing and even falling profits and the rising cost of servicing record high debt.

As I have shown before in previous posts in some detail, that, contrary to claims by mainstream politicians, central bank governors and economists, there is no ‘wage-price’ spiral.  Wages are not driving prices up.  Indeed, it’s profits that have risen sharply as a share of value since the pandemic. But as we come to the end of 2022, low productivity growth, still rising prices of raw materials and components and increased unit labour costs, are eating into profit margins.  Falling profit margins will eventually lead to lower profitability and even a falling mass of profit.  And falling profits is the formula for an eventual investment and production slump. 

Productivity growth continues to fall in the US. Q3 2022 saw a -1.4% yoy fall, making three consecutive quarters of yoy decline, the first such instance since the deep slump of 1982. So even though wages are rising at only just over 3% compared to US inflation of 8% plus, falling productivity is starting to squeeze company profits, as labour costs per unit of output rose by over 6% yoy.

In the US, corporate profits fell in Q3 2022, according to the latest released data. Total profits fell 1.1% compared to the previous quarter. Indeed, non-financial corporate profits fell nearly 7% on the quarter. Non-financial corporate profits have slowed to 6.4% yoy. The profits contraction has started as wages, import prices and interest costs are now rising faster than sales prices. Profit margins (per unit of output) have peaked (at a high level) and unit non-labour costs and wage costs per unit are rising as productivity stagnates. The post-pandemic profits bonanza is over. 

That’s one blade of the scissors of slump. The other blade is the rising cost of borrowing. Many corporations are debt-loaded and heading for trouble as borrowing costs rise and banks tighten liquidity.  Remember the large number of what are called ‘zombie companies’ that do not get enough profit to cover even their debt servicing commitments; and also ‘fallen angels’, those companies which have borrowed too much to invest in risky assets that now face blowing up.  Maybe those bankruptcies that were put off in 2022 as inflation spiralled will emerge in 2023.

While central banks and governments are reluctant to admit a slump is coming, especially in the US, financial investors are not so sanguine.  Another strong and reliable sign of impending recession has been so-called ‘inverted bond yield’ curve.  An inverted bond yield curve is when the yield on long-term bonds (10yr) is lower than short-term interest rates (3m or 1yr).  I have explained why this is a good indicator of a coming slump  in various posts. Currently, the US bond yield curve is really, really inverted, which really, really predicts a recession. All four of the other times this curve broke below the zero line, a recession followed in short order.

So for a change, it seems that the consensus will be proven right and the world economy will see a sharp drop in real GDP growth with many major economies going into recession – with all the dire consequences for the living standards of the many.  After ‘the cost of living crisis’ will come the crisis of living.

34 thoughts on “Forecast 2023: the impending slump

  1. “Can the US escape a slump?”

    It may avoid one in 2023, but eventually reality will catch up and another collapse a la 2008 will happen. I agree that it will come from where no one in the Empire expect, a betrayal like no other: the jewels of the Crown, the big corporations. Here the focus on private debt is absolutely correct, as there will be a moment revalorization will be impossible – this is not a question of the Government forgiving or covering the debt or not.


    “And then there is Tesla and its monstrous head, Elon Musk.”

    The rise of this new generation of oligarchs is very interesting, because it gives us a glimpse of the new composition of capital of the USA, which is the HQ of capitalism.

    Capitalism definitely reached its apex during the end of classical liberalism, somewhere between the 19th Century and the beginning of the 20th Century (up to WWI or so). It was the moment capitalist development and advancement of science coincided, and to become rich a lot of times meant innovating on the development of the productive forces (one can deduce that by comparing the quality of the Nobel Prize winners from the beginning of the 20th Century up to Einstein in the late 1930s with today’s winners, which are all scientists of outright inferior quality).

    Nowadays, America’s greats are mainly tied with finance. Their greatness and condition of being billionaires are not tied to scientific innovation anymore, but with the ability to game with the financial architecture. The best innovator is the best player in the system, not the brightest scientific mind.

    But even before this generation of oligarchs, we can already observe a decline in innovation of the capitalist elites. If we take the late postwar billionaires, we can see that they are usually not great innovators, but escalators: they take an already existing technology (usually invented by the Government) and bring them to massive scale. And they usually do that in an essential sector, e.g. the Waltons (supermarket), Bill Gates (personal computers, which are just miniaturized main frames), Steve Jobs (cellphones).

    Elon Musk – for whom there already is a cult of personality in the USA – is a very illustrative example of this new “grifter generation” of oligarchs: he became rich with the creation of Paypal (1998), which is not an innovation of the development of the productive forces, but just a clever way to use an already existing technology. He then became very rich thanks to the de facto privatization of NASA, which gave its most lucrative sector to a private contractor which was Musk’s recently founded SpaceX (2002), gifted by the USG. He the became extremely rich with Tesla (2003), which obviously didn’t invent the electric car. Now he ascended to the status of an oligarch with the purchase of the USA’s main newspaper, Twitter (founded 2006).

    From this trajectory we can see in Elon Musk the nature of the USA’s present-day composition of capital: from finance to the Military-Industrial-Complex to outright grifting (Tesla is a farce) to raw monetized political power. This is a picture not of a fraud, but of the American economy.

  2. The liquidity tightening isn’t really matching up, the US was able to provide loads of liquidity through repo’s and swap lines, so how are these zombie corporations going to go bankrupt?

    1. You answered your own question: “zombie”.

      Debt in itself is not the problem, as it is fictitious capital and can be forgiven. The problem is the valorization of capital: as the USG keeps bailing out its capitalists, it will continue to degrade the material base of the American society in general. The companies will still be alive, but in a perpetual and crescent zombie state, while the USA as a whole (societally, that is: culturally, morally, materially, spiritually, intellectually) will continue to be dilapidated.

      The state of zombification of capitalism is nothing more nothing less than the state where society in general goes bankrupt in order to save the capitalist sector from going bankrupt, that is, the American people will go “bankrupt” before its capitalist sector. In a sense, this is the Hegelian paradise, where the society is put upside down – the system put before the people who make the system.

      We can now joke that the USA went from being the capitalist/liberal superpower to being the Hegelian superpower.

  3. Economy is a matter of energy and raw materials, not of human moral qualities. The anti-Semite Henry Ford created the automobile industry out of nothing because he had newly discovered oil fields and mines brimming with minerals and metals at his disposal. Can Elon Musk repeat his achievement with electric vehicles one century afterwards? By no means: oil, minerals and metals are NON-RENEWABLE resources, they are almost exhausted now.

    1. The problem with electric cars is that they do not represent an advancement of the productive forces: they are merely the car in an electric version; a car with a battery instead of a combustion chamber.

      When combustion automobiles were invented, they clearly represented an advancement of the productive forces: their nearest competition was the horse carriage and the individual horse. There was and is no doubt the car is better than the horse in terms of use value for transportation in almost any scenario possible.

      Even in such favorable scenario, it took some 50 for the combustion automobile to become an everyday reality – and even then only in the advanced capitalist nations and its “emerging” inferiors. It really took almost 100 years for it to become what we could consider “universal”, and even today most people don’t own a car – but they probably use and depend on other combustion automobiles such as buses.

      The only legitimizing argument for the electric car is that fossil fuels reserves are depleting and global warming. There are no arguments for it from the development of the productive forces viewpoint. Philosophically, we say that this is a negative argument: the electric car should substitute the combustion car because it isn’t the combustion car, not because it is something else entirely.

      That’s why the socialist solution – which China is already implementing – is to simply eliminate the most possible the necessity of an average person to own a car in the first place, while eliminating fossil fuels from public transport, while expanding and diversifying public transport.

      1. The “socialist solution”, as in how China has dealt with the coronavirus pandemic? The only purpose of “lockdowns” is to buy time to get as much of the vulnerable population vaccinated as is possible. That can be done with Sinovac or the mRNA vaccines – the technology is not the issue. Yet after years already, we learn that only some 25% of China’s older population has been vaccinated! And this in a labor force that continues to age on the average!

        As for the the transportation example: First, mass auto use is a form of public transportation, for without the massive publicly funded buildout of surface streets and ribbons of highway, the individual auto would be useless and without value unless you own a Hummer. Hence the real distinction is between collective versus individual modes of consumer transportation. In the face of the climate emergency, clearly consumer transport would need planning along two axes: 1) Increase the ratio of more centralized producer transport in the distribution of consumer goods, reducing the need for individualized transport to cover the “last kilometer” to the point of final consumption; 2) Decentralize the intermodal connections between the centralized and individualized points of distribution (the consumer “shops”) to minimize that last kilometer, ideally to the point that routine daily shopping tasks can be conducted on foot. Both would greatly minimize the need for individual autos, EVs or not.

        The USA of course has done the exact opposite on both scores. It is clear that reliance on centralized local transport with smaller (EV) trucking would be more energy and economically efficient than playing bumper cars in a vast parking lot filled with “big box” stores 5-10 miles away. But it has been highly profitable for the commercial capitals invested in this sector, offloading the ” final kilometer” costs onto the consumer, as well as this inefficiency providing a niche for other commercial capitals such as Amazon, an example of a “micro” productive capital sprouting from a “macro” parasitism. This is due to the profound inefficiency of much of the US urbanscape , much of which would have to be scrapped and replaced in any planned system.

        However what I’ve seen of China in this sector looks like a (rational choice!) clone of what was developed in capitalist Japan, where indeed one does not need to own an automobile, where supermarkets and other shops are concentrated in and around the (often massive) train stations, typically 5-10 mins away by foot. Nothing “socialist” about it, though it does squeeze the space for monopoly commercial capitals and profits. By itself, it is merely a rationalized reformist re-sort of capitalist sectors.

        Finally, at the “mega-macro” level, China is presently a standout as it brings more coal power generation online, and is now way overshooting the rest of the world in the rate of per-country aggregate CO2 emissions. China is therefore also rapidly using up its “historical climate justice credits” and will soon join the ranks of “historical climate debtors” along with the USA and Eurozone. For an analysis of why, see “China’s Engine of Environmental Collapse” by Richard Smith available on the leftist publisher Pluto Press

        From what I can see, this is the result of the irrationalities of rule by a bureaucratic stratum whose political stability requires a “decentralized” distribution of power generation to keep the provincial bureaucracy – a potential social basis for capitalist *political* restorationism a la Russia – onside with Beijing.

        At the risk of being “brutal”, can we at last stop lying to ourselves and the world, and stop disgracing the name of socialism, through the promotion of a so-called “socialist” China? A lie that is furthermore reactionary and counterrevolutionary, given the nature of the Chinese political regime? China is no more socialist than the USA is politically “democratic” just because it is ruled by a “Democratic” Party.

      2. “China is no more socialist than the USA is politically ‘democratic’ just because it is ruled by the ‘Democratic’ Party.”

        Bradley, your comparison between the US and China is based on a categorical error. You forget the Republicans because they and the Democrates are substantially the same party, politically and economically, and in their foreign policy.

        As for China, the CPC does not hide its opposite: Chinese capitalism or its capitalists. It tries to control it/them–by actually, opening up markets and subsidizing it/their activities!–which, for the time being, makes China’s form of capialism more viable than the crisis/war capitalism in the US. On the other hand, China’s public sector is driven by production for need (ecological, for instance), not private profit. How long this contradiction between China’s socialism and capitalism can be sustained is anybody’s guess. Capitalism, innately contradictory, has lasted a couple of hundred years.

        Maybe China represents a transitional revolutionary resolution of capitalism’s contradictions.. Mao spoke of imperialism’s exploited “proletarian countries”.

        Your skepticism is justified in the abstract, but not its one-sidedness that deals only with China’s capitalist sector. That’s not very “marxist” of you.

      3. corrections: paragraph 2: “substantively” for “substantialy”/3: “capitalism” for “capialism”/5. “dialectical” for the smart-alecky “marxist”

      4. @ Bradley L Mayer

        As for the handling of the pandemic, I have good news: what you’re reading on Western media about China’s “failure” on the abandoning of Zero Covid is fake news. There is not a pile of corpses in hospitals and crematoria; there will almost certainly be no 9,000 deaths per day. This is all sourced either from absurd extrapolations by some Western models or by some guy from a think tank.

        Sure, the COVID-19 is a force of nature, so anything can happen (even socialist planning cannot defeat nature). But the chances China fail on this relaxation of Zero Covid is remote.

        Your rationalization that trains are not better than cars because train stations occupy too much space is absurd, to say the least. Everything occupies space.

        As for the centralization vs decentralization debate, well, you Westerners must decide between yourselves if centralization is good or bad, because the USSR was shat on for decades for being too centralized – now China is being shat on for being too decentralized?

        As for the environmental debate, I have an exercise that is very good for measuring bias: imagine a given policy by the CPC is done by the Democratic Party (if you’re a leftist American) or by your local social-democratic party (if you’re a leftist Western European). Would you consider it leftist/socialist? My bet is they would be instantly considered socialist. In fact, the right-wing would consider them outright communist.

        If one leftist governor builds one factory in his state or city that is a fraction of what the CPC builds every day, he would certainly be guaranteed reelection and would be canonized. I doubt you would complain about environmental issues from you country if your president/PM generated more than 1 million jobs per month every year of his government. The British people deified Clement Attlee and the American people deified FDR for a lot less than what the CPC has done, so I don’t understand the criticism.

      5. “The problem with electric cars is that they do not represent an advancement of the productive forces: they are merely the car in an electric version; a car with a battery instead of a combustion chamber.”

        Right, sure thing. All that control and “smoothing” of the electric force made possible only through the advances in microprocessors and integrated circuits, all the techniques of miniaturization — why that’s no real advance over the tubes, capacitors, and soldering used in previous applications of electric technology.

        “That’s why the socialist solution – which China is already implementing – is to simply eliminate the most possible the necessity of an average person to own a car in the first place…”

        which of course is directly counter the reality of the marketplace where China accounts for half of the total global sales of light-duty electric vehicles, and why EV makers continue to focus on China for consumer sales.

        What EVs don’t represent is the transition to socialism. No kidding, Sherlock. Neither does China.

      6. VK: “As for the handling of the pandemic, I have good news: what you’re reading on Western media about China’s “failure” on the abandoning of Zero Covid is fake news. There is not a pile of corpses in hospitals and crematoria; there will almost certainly be no 9,000 deaths per day. This is all sourced either from absurd extrapolations by some Western models or by some guy from a think tank.”

        This is like, no, not like, IT IS arguing with someone who has stepped directly out of Orwell’s 1984 and comes with a Ph.D in newspeak.

        IF there is no risk of the healthcare system being overwhelmed and death rates soaring because that care can’t be provided, then what the @#$% was the reason for the “no-covid” policy that caused such resistance and rebellion? And I’m sure 3 or 4 weeks ago VK would have been, was praising the remarkable socialist promethean vision of Xi and the CPC in maintaining the no-covid policy despite Western sabotage and agitation among the less enlightened population, producing an artificial crisis. Right?

        Yeah but that was 3 or 4 weeks ago and who can remember that, especially when memory is a crime, a capital crime? Right, Big Brother(s)?

        Look I don’t want to spoil VK’s and mandm’s “Xi’s our man” party, but you’re supposed to drink Champagne or another sparkling wine at this time of year, not Jonestown flavored Kool Aid.

        Me? I’m having at the Prosecco right now, with Cava to come. Happy New Year. Stay away from the Kool Aid.

      7. @ Anti-Capital

        All the technologies you mention were not invented by the necessity of having an electric car – they were all old technologies by the time Tesla et al came into existence. Therefore, my argument stands: electric cars do not represent any development of the productive forces.

        The key here is that China had an even worse healthcare system before the CPC came into power. Your argument would only be valid if the pre-Popular Republic China had a better healthcare system. As it stands now, it is simply the case the CPC is doing the best possible in the concrete conditions given to it.

      8. Retired science teacher button pushed: The rationale for electric cars is that internal combustion engines are inherently less efficient because the combustion is internal, where oxygen can’t easily get into the reaction, as opposed to external Because it’s less efficient, in the end the power generation will end up putting more carbon dioxide into the air. (Yes, steam engines for cars are more efficient and their return was debated.) Additionally, any carbon recapture technology is likely to be more effective with economies of scale at power plants. The catalytic converters in individual internal combustion engine cars for another harmful waster product (oxides of nitrogen) are a notable cost precisely because they are small-scale. Internal combustion engine (largely cars and trucks) produce less power but more NOx than external combustion (largely power plants.)

        Undergraduate history major button pushed: Capitalism as the predominant mode of production in a large social formation has been spreading since the breakup of the feudal mode, which is to say, since the fifteenth century. Capitalism was not born the master and for a long period the rising class collaborated with the feudal classes in the absolutist state while pressing for mercantilist policies. The notion “capitalism” is only two centuries old inadvertently redefines capitalism by limiting its history to when it was most successful. It’s the equivalent of pretending that Haiti or Nepal or Rwanda aren’t part of the capitalist world, so capitalism’s success can be judged by looking only at the imperialist metropoles. Similarly, the notion that the US is not democratic covertly redefines democracy as some sort of ideal that previous people have failed to live up to but “we” superior people can decently reform, or at least denounce to feel better about. The whole attitude (can’t really call it an idea) blends inextricably with bourgeois opposition to socialism or social democratic opposition to Communism.

        Common reader button pushed: George Orwell is an ant-Communist propagandist whose work is promoted for indoctrinating high school students for good reason. Taking Orwell seriously is a symptom of bad judgment in my opinion.

      9. @ stevenjohnson

        The technology per se is irrelevant. The question is economic: are electric cars cheaper and faster enough than their combustion counterparts to justify the substitution?

        Note the “enough”: it is not a matter of if electric cars are just some mph faster or some units of energy more efficient and cheaper. In order for a new technology to trigger a revolution in the development of the productive forces, it has to “wipe the floor” with its predecessor technology. Combustion engines did that against their predecessor, which was horse pulled mechanisms; I’m sure electric cars won’t do that.

        The only legitimizing arguments I hear for electric cars is that fossil fuels will eventually be depleted and global warming. Those are both negative justifications (negative in the philosophical sense of the word, not in the moral/ethic one), which implies that, best case scenario, electric cars will allow things to work how they did before, only for a little bit longer.

        It is different than e.g. bullet trains, which are much faster than their predecessor to the point it makes constant dislocation of people and resources from a large-sized country (a 7 million km² +) consistent and economically viable. The use value is here is the shortening of space of a country the size of China or larger, not the fact that bullet trains are a new technology.

      10. No one in this subthread believes electric cars are going to revitalize capitalism, not in this slump or longer-term. The issue is why? Jose Mercado believes there’s not enough oil, steel and other minerals (lithium? rare earths?); vk because electric vehicles aren’t an increase in the productive forces; Bradley Mayer because socialist people walk; Anti-Capital because in Anti-Capital’s world the main and most hateful enemy of socialism is China, the world’s worst strikebreaker. China is using electric cars, therefore electric cars are anti-socialist.

        Personally, I think electric vehicles are not going to be magic technology that launches a new Kondratiev cycle/wave (if such exists,) because the electricity to charge the batteries has to come from somewhere.

        I think Mercado is over-excited about resource depletion in gross quantitative terms, rather than the damage to the biosphere, therefore partly wrong.

        I think Mayer is overly doctrinaire, tending to barracks communism which polices consumption rather than production, thus partly wrong. Also, I suspect that abolishing cars in low population density areas, that is, large areas with few peoples, would exercise a tremendous hardship on people there. Trains in rural areas are not very efficient in material terms so far as I can tell.

        I think vk is wrong because the atmosphere is a resource. A technology that improves the quality of the air by reducing carbon dioxide in the long run by greater efficiency is therefore an increase in the productive forces. A better climate is as much a productive force as soil or iron ore. Again, if the electricity generated in power plants produces less net carbon dioxide net than internal combustion engines, then it may justify the introduction of electric vehicles. Electric vehicles do not have to be faster and/or cheaper for the individual consumer to serve as an advance in the productive forces. In this use, the phrase “productive forces” seems to be getting a mystical sheen.

        I think Anti-Capital is wrong because a state which does not intervene in the labor market to lower wages for the unpropertied; that does not allow a market in capital; that prevents free movement of capital abroad; that does not struggle to conquer the capitalists of other countries; that does not have a privileged role for the bourgeoisie in the state….that’s a workers’ state, however imperfect. Every workers’ state is in effect a strike, a mass strike against capital. Not one capitalist in the imperialist world truly believes the Chinese state is a good place to put their money or buy real estate for a retirement or the proper culture for their children to get educated in. Perhaps Anti-Capital should wonder why this is? Or give some evidence that the bourgeoisie—not even the ethnic Chinese bourgeoisie of Taiwan, Hong Kong and Singapore etc.!—really does feel that the People’s Republic is just another rival. As is, I don’t understand why Anti-Capital hasn’t preached about how the Bolsheviks betrayed socialism and restored capitalism when they capitulated to the imperialists at Brest-Litovsk or tyrannized over the Socialist Revolutionaries and Mensheviks or murdered socialists en masse at Kronstadt or openly surrendered with the New Economic Policy. Oh for a time machine to go back and give Fanny Kaplan a good gun?

    2. Oil reserves are most definitely not almost depleted. We have enough to last centuries.

      We have far less lithium for all these electric cars everyone want to start building.

  4. Aprovecho la ocasión para desearle larga vida salud y éxito a Michael Roberts, y que nos siga iluminando el camino de la lucha de clases desde Marx con su notable excepcionalidad y acertados análisis. Felices fiestas. Happy New Year.

  5. What I am about to say about China is part of the prospects for the global economy. The unplanned, unprepared, abrupt and chaotic U-turn over lockdowns shows this is not so much a surveillance regime as a survivalist regime confronting over 700 million workers. The state sector’s relation to the private sector is not driven so much by plan as by fear, fear that its excesses and inadequacies will disturb the social peace and intensify antagonisms. This said, this XInapartist regime is therefore likely to embark on a significant stimulus of the economy which will be supportive of the global economy in the first quarter. Add to this the various Biden support packages, as well as what is now a global arms race (what a f..k..g waste of our labour time) and there is a degree of support (as will lower than expected energy prices). Seems the price cap, as I predicted, is not so much a ceiling for consumers as a floor supporting energy company profits. This is a fraud engineered by the scaremongering of the energy companies and their media mouths.

    However these measures will be overwhelmed over the course of the year by the underlying contraction. 2023 will mark the maturation of the global crisis meaning this will also be the year when the financial crisis finally hits. While GDPNow predicts 3.7% growth in the USA for Q4, the fall in pending house sales at a rate faster than the lead up to 2008, the collapse in trucking to levels below 2019, the mass layoffs in the most dynamic part of the economy, proves otherwise.

    I predicted the collapse in share markets in 2022, but I estimated the slump would hit no later than April when in fact it hit in September. I also predicted more financial turbulence which did not occur. Will this year be the year when workers finally turn on their capitalist masters, if so then happy new year comrades.

    1. I’ve never heard of any example in History of a civilization or government to be moved exclusively by fear (except maybe Sparta against the Helots?). It is certainly not a dialectic materialist view of History. Your depiction of China seems very cartoonish.

    2. UCBP, regarding China’s early covid policy and its U turn, I think we have to consider the good possiblility that China has been guarding against real or possible biological warfare. It is not only surrounded by US nuclear bases but bio-warfare facilities. The US has employed both means of mass destruction. China’s U turn is in reaction to economic warfare that leaves itself open to possible biological attack, which might explain the U turns “chaotic” quality.

      In general you do not give either China or Xi the benefit of the doubt, which puzzles me….

      …The Chinese state is the product of a revolution that has been more or less successfully struggling against all kinds of aggression and attempted coups, but it has not yet been successfully subverted. Xi is a marxist. The programs of the public sector have been planned. Its unplanned interventions simply reflect the state’s ability to react to real, difficult, conditions….

      1. I’d take these “dialectical view” for what they are worth– almost nothing, without the answer to the question our China boosters studiously avoid: Which side are you on when workers protest oppression, forced labor, etc? Workers or cops?

      2. I am not a “Chinese booster” but I “studiously avoid” reading the corporate press.

    3. Late noticing this: “The unplanned, unprepared, abrupt and chaotic U-turn over lockdowns shows this is not so much a surveillance regime as a survivalist regime confronting over 700 million workers.” This seems to mean that the central government was compelled by the opposition of the 700 million workers to set them free from the tyranny masquerading as health measures? Presumably due to the massive popular uprisings?

      The thing is, the real popular resentment so far as I can tell, is against things like the government starting to charge individuals for Covid tests and cutting budgets and lack of financial support for people prevented from working. The riots to me seem to me to be relatively small, not very widespread and most of all, the general lack of police response suggests to me they are sponsored by a faction within the state and party. But it’s almost certainly the group that wants Xi to deliver on his ritual promises of continued Reform and Opening Up, not anyone intimidated by the Canadian convoy-inspired masses. The Great Barrington policy is much more to my eyes a capitalist roader delusion that letting Covid rip is better for business. And if anything, this absurdly irresponsible and cruel policy is as triumphalist as its predecessors, starting with Trump, not “survivalist.”

  6. Happy New Year ! And so pleased to find this article in my Inbox from the author of “The Great Depression “ . Let’s start the new year with a positive attitude – full sails ahead to the unknown

    V 😁


  7. If the Federal Reserve does not raise interest rates, then the demand for gold by money capitalists will accelerate, manifesting itself as a soaring price of gold. This would lead to runaway inflation. Under the contradictions of capitalism, the fed is forced to allow interest rates to rise to prevent this from occurring.

    1. To me this reads like Sam Williams at Critique of Crisis Theory. I can imagine “money capitalists” (are these bankers? stock brokers?) wanting to buy and hoard gold when the credit/financial system collapses, but then, I can imagine them wanting to buy real estate and oil leases and other rare metals too. But the scenario here seems to be, the soaring price of gold causes the collapse of the fictitious capital. Isn’t this putting the cart before the horse? The idea that the Fed lowering the discount rate doesn’t expand the economy because it’s pushing on a string seems to be correct. King Gold causing hyperinflation to avenge lese majeste (central banks not raising their discount rates) seems to me to get things backward. Even worse, this theory implies that hyperinflation is pretty much the inevitable result of demonetizing gold…whereas so far as I can tell hyperinflation, the real thing, is historically associated not with central banking and fractional reserves but with defeat in war and/or open economic warfare by a vastly superior foreign power.

      In Williams’ latest, there’s a paragraph where Williams inadvertently make sit sound as if the Bretton Woods system was set up to resolve the crisis after the end of the long post-WWII expansion (the so-called Trentes Glorieuses.) Except of course “Bretton Woods” was set up in the later stages of WWII and thus a foundation of said long-expansion. The general proposition that hard money is the physical and spiritual foundation of freedom and justice and by the way wealth seems to me to be contradicted by historical experience. Like anarchism, whatever it intends, the looking backward into an idealized past inevitably misleads. Then in the end reaction prevails.

      1. So much to respond to, I don’t know where to begin.

        “I can imagine ‘money capitalists’ (are these bankers? stock brokers?) wanting to buy and hoard gold when the credit/financial system collapses, but then, I can imagine them wanting to buy real estate and oil leases and other rare metals too.”

        Money capitalists (i.e. any capitalist engaged in money lending) don’t “buy and hoard gold when the credit/financial system collapses”. That’s a gross misunderstanding. A financial system collapse that leads to a soaring demand for bank notes and U.S. Dollars would lead to capitalists dumping gold and buying/hoarding cash to repay their debts. Money capitalists buy and hoard gold when their currency loses value in terms of gold. It is gold that they will buy should the currency devalue significantly. Not silver. Not real estate. Not oil. The money capitalists do this because they sense that gold achieves the highest rate of profit over every other field of investment. They aren’t conspiring with each other to buy gold. They buy gold because they are incentivized to reek out the highest rate of profit.

        “But the scenario here seems to be, the soaring price of gold causes the collapse of the fictitious capital.”

        A soaring price of gold, i.e. a currency crash, would be disastrous for the United States Dollar and would lead to a far worse outcome than a “collapse of fictitious capital”. It would threaten the entire dollar system and potentially bring down the foundations of the U.S. Empire.

        “Isn’t this putting the cart before the horse? The idea that the Fed lowering the discount rate doesn’t expand the economy because it’s pushing on a string seems to be correct. King Gold causing hyperinflation to avenge lese majeste (central banks not raising their discount rates) seems to me to get things backward.”

        No, it is not putting the cart before the horse. And “King Gold” is not avenging anyone. Simply put, during periods of overproduction of commodities relative to the production of gold, the demand for gold rises. This causes an upward pressure on interest rates. In the short term, central banks can hold down interest rates by accelerating the growth of the monetary base, but over the long run the growth of the monetary base outpacing the growth of the production of gold material will lead to currency depreciation and fuel a run into gold. Interest rates would then gravitate strongly upwards unless the central bank decided to keep holding it down. To hold down interest rates, however, the central bank would have to accelerate the rate at which it is expanding the monetary base. This would result in hyperinflation inevitably. In the 1970s, however, while the fed was expanding the monetary base at a fast rate, they didn’t accelerate it at a sufficient rate to hold down interest rates and as a result, interest rates naturally shot up. So no, this isn’t backwards but absolutely correct.

        “Even worse, this theory implies that hyperinflation is pretty much the inevitable result of demonetizing gold…whereas so far as I can tell hyperinflation, the real thing, is historically associated not with central banking and fractional reserves but with defeat in war and/or open economic warfare by a vastly superior foreign power.”

        Wrong. This explanation implies that under the paper dollar system, interest rates will rise higher over the long run and cyclical crises will become more severe than under a gold standard. Hyperinflation caused by a cyclical crisis would only occur if, for instance, Jerome Powell decided to hold down interest rates indefinitely even AFTER runaway inflation begins. It is caused not by a single action, but by a commitment to hold down interest rates after the price of gold is soaring. Central banks do not set interest rates, but only manipulate them by controlling the monetary base. And yes, even Sam Williams stated your historical observation. That’s why he said that a genuine hyperinflation event tied to a cyclical crisis of capitalism would be unheard of in history and would be a first. That doesn’t mean it can’t happen.

        “In Williams’ latest, there’s a paragraph where Williams inadvertently make sit sound as if the Bretton Woods system was set up to resolve the crisis after the end of the long post-WWII expansion (the so-called Trentes Glorieuses.) Except of course ‘Bretton Woods’ was set up in the later stages of WWII and thus a foundation of said long-expansion.”

        Except he didn’t make it sound that way. He said that the ENDING of the Bretton Woods system by Nixon in 1971 was an attempt to overcome the legal barrier imposed by the gold standard. It was a desperate attempt to end the boom-bust cycle. The Bretton Woods system (1944-1971) wasn’t set up to resolve any crisis and Sam never claimed it did.

        “The general proposition that hard money is the physical and spiritual foundation of freedom and justice and by the way wealth seems to me to be contradicted by historical experience.”

        Nice strawman. The proposition has nothing to do with “freedom” or “justice”. Rather, Sam is merely pointing out that capitalism, and any system based on commodity production, necessitates the existence of a money commodity and that capitalism cannot be reformed under any circumstances because of its internal contradictions that ensure its inevitable breakdown. Rather, Sam Williams is proposing a working class revolution. A proletarian revolution.

        “Like anarchism, whatever it intends, the looking backward into an idealized past inevitably misleads. Then in the end reaction prevails.”

        Sam Williams never idealized the past or personally advocated for the return of the gold standard. He is merely pointing out the cyclical nature of capitalism and how it actually works. Descriptive =/= Prescriptive.

  8. UCBpolitical, we’ve had our debate and I’m not going to repeat it here. But I think my understanding of “stalinism” (a term which is central to your argument) is the correct one and should be repeated here:

    “So…China should be contained/destroyed before its “stalinist” CPC turns on its workers?

    “Stalinism” is neither a man nor a political order. It’s a name liberalism gives to a revolutionary regime it isolates and attacks, which then necessarily mobilizes to resists its aggressions. It’s the opposite of fascism. Roosevelt, Churchill, and De Gaul cleared the road for Hitler’s invasion of the Soviet Union. Fascists/Nazis murder workers: 27 million of them in the “stalinist” Soviet union. Japanese fascists murdered a similar number of Chinese.”

  9. Can’t help myself, sorry. De Gaulle wasn’t a political player until well after the German invasion of the USSR. For that matter, Churchill can’t be said to have played the decisive role compared to Chamberlain, who was the one who preferred Hitler to any effort at collective security that involved the Soviet Union. And Roosevelt, due to the smaller international role of the US in those days of the British and French empires mostly contributed by “neutrality” in the Spanish Civil War. Pretending the road to WWII began in 1939 rather than years earlier is the key to the imperialist apologetics. In truth, the fascist war began in 1937 with Japan’s attack on China, if not earlier in Ethiopia in 1935 and Spain in 1936.

    But I have to agree that “Stalinism” borders on being a counterrevolutionary swear word. So-called “Stalinism” at various times means Cold War *or* peaceful coexistence; central planning *or* markets; Comintern *or* nationalism; Third Period *or* Popular Front; party purges *or* stability of cadres. People who will abuse dialectics as worthless will nonetheless spout this mass of contradictory twaddle. My experience has been, the more they abuse the dead Communists, the more they detest the living working class.

    1. I can’t disagree about the almost comic multiple reactionary use of the term, nor when the war started. The point is that Hitler was obviously assured that he needn’t fear a two-fronted war.

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