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Capitalist economists contemplate the abyss

Anther step in global economic crisis

By Fred Goldstein

For the first time in the post-World War II period, the capitalist establishment is seriously contemplating the prospect of a global economic collapse.

Since the Asian crisis began, the Clinton administration, Treasury Secretary Robert Rubin and Federal Reserve Board Chair Alan Greenspan have repeatedly attested to the sound state of the U.S. economy. But the confident words sound more and more hollow against the backdrop of the decline of the yen, sharp drops in stock markets worldwide-and, most important, the economic news from Japan.

The crisis entered a new and dangerous phase on June 12 when Japanese officials announced that Japan's economy had slid into a recession. "The world's second-largest economy," wrote Sheryl WuDunn in the June 13 New York Times, "sank at a stunning rate of 5.3 percent in the first quarter of this year, according to official figures ... that painted an even bleaker picture than many economists had expected."

It was the second consecutive quarter of economic decline-thus meeting capitalist economists' definition of a recession. It was the first such decline since the oil crisis of 1974, and the worst one since the end of World War II.

"Such dismal numbers," wrote WuDunn, "contributed to a further fall in the yen, sent shock waves throughout Asia and heightened fears that the economic crisis could spread from Asia to the United States and Europe."

World Bank uses D-word

On June 16, World Bank official Jean-Michel Severino went further. He used the D-word for the first time. "This depression could be very long lasting," he told a trade conference in Australia.

For the past year the U.S. stock market, global markets and currencies have been oscillating up and down, touching off either optimism or pessimism with each gyration. But the recession in Japan-the breach in the so-called "fire wall" against a global downturn-crosses the threshold.

It puts an end to all optimistic speculation about a quick turnaround through financial manipulation by the International Monetary Fund.

There is a decline in production, a decline in profits and a decline in the production of value by the working class, which underlies all the value of the stock market, the currencies and all corporate values.

And this decline is due to the profit system, which leads inevitably to capitalist overproduction.

By every measure the $4.6 trillion capitalist economy of Japan is headed downward. It is taking the working class and the middle class with it.

Industrial production was down 6 percent from a year ago April. Corporate profits plunged 25 percent from the previous year. Prices are falling steeply, which will bring down profits and spiral into layoffs and more unemployment.

Capital spending fell 5.1 percent in the first quarter. That is the steepest decline since 1965. And Japanese manufacturers have indicated they plan more cutbacks in the coming year.

Exports also declined 3.8 percent in the first quarter-the first drop in 12 years-as the crisis-ridden economies of such countries as Indonesia, south Korea, Thailand, Malaysia and the Philippines, as well as Hong Kong, cut back their imports.

All this adds up to record unemployment in Japan. Official unemployment was almost nonexistent. Now it has shot up to 4.3 percent. According to the June 13 Washington Post, "unemployment among adult males in Japan is higher than that of adult males in the United States."

So-called lifetime employment is supposed to be the rule in Japan. Unemployment there is highly underreported, particularly because of the early age of forced retirement.

"Personal bankruptcies may top 100,000 by the end of this year," reported the Post, "up from 70,000 last year. ... Bankruptcy attorney Kenji Utsunomiya said he's been swamped with phone calls and visits from bleary-eyed, exhausted people who cannot pay their debts. ... In the past most clients were poor but he's getting many from the middle class."

The number of suicides has jumped 18 percent in the last year-to 3,556.

The Asian crisis has spread in less than one year from Thailand to south Korea to Indonesia. At first capitalist economists predicted a quick six-month- to-one-year turnaround. It was to come through financial manipulation and mass suffering imposed by the International Monetary Fund.

But with Japan's crisis, it's beginning to sink in that the overall crisis is much deeper.

"Japan's economy is twice as large as the rest of Asia combined, so its problems have reverberated through the rest of the region," wrote the Post. Countries such as south Korea and Thailand hoped to export to Japan and raise cash "to grow their way out of their economic troubles." But Japanese imports from Asia were down by 14 percent in the first quarter, according to a Morgan Stanley economist in Hong Kong.

"Furthermore," continued the Post, "Japanese banks, the largest source of foreign capital in the rest of Asia, have been pulling back at a time when other Asian banks are too weak to lend. ..." The result is a downward spiral unimaginable only a year ago.

The working class in the United States must start talking and thinking about this crisis as a prelude to organizing against corporate layoffs when the crisis hits here.

Already giants such as IBM, Minnesota Mining, Ford Motor, Boeing, National Semiconductor, Compaq, Intel and many others have announced that their profits are going to decline. Without the intervention of the working class, the bosses will try to shift the crisis onto the workers' backs.

U.S. corporations have been hiding their stake in the Asian crisis. Information comes out in bits and pieces. For example, the June 16 New York Times revealed that Toys 'R Us has 111 stores in Asia, including 64 in Japan. IBM is one of the biggest corporations in Japan. Walmart is all over Asia.

The Asian crisis threatens global production of everything from cosmetics to airplanes.

Vultures may become dead meat

After the crisis hit, stock speculators and financiers in the United States and other imperialist countries swooped in to make a killing on the Asian stock markets.

"Just a few months ago, eager fund managers piled into what appeared to be rapidly recovering Asian markets," wrote the June 15 Wall Street Journal. "After months of declines in Asian share prices and in the currencies they are quoted in, stocks seemed cheap."

But the Japanese phase of the crisis has put an end to these investors' fantasies, threatening billions of dollars in mutual funds that flowed in for the killing. In the wake of Japan's announcement of its recession and the decline of the yen, stocks in Thailand fell 12 percent; in Hong Kong, 7.6 percent; in Singapore they fell to a nine-and-a-half-year low; in south Korea 12 percent. Taiwan's currency plunged to an 11-year low against the U.S. dollar.

It is little wonder that for the first time in the post-World War II period, Wall Street, Paris and London are seriously contemplating a global collapse. The Western imperialists, led by Robert Rubin and the Clinton administration, want to place the blame for the crisis on their Japanese rivals.

Rubin spoke about the Japanese announcement of recession in Mobile, Ala., on June 12. According to the June 13 New York Times, he "characterized the economic data as 'worse than expected.' He reiterated his view that Japan needs to embrace fundamental reforms of its financial structure and to vigorously stimulate its economy."

Rubin said that economies are slumping throughout Asia as well as in Russia and in Eastern Europe. He added that "the center of the problem is Japan and it's very serious for the world."

Rubin's explanation is both self-serving for the U.S. ruling class and completely fallacious.

The problem is not Japan's need to restructure. Restructuring will not change the overwhelming fact of capitalist overproduction.

Too much of everything-from a profit point of view

No amount of opening up the Japanese economy will change the fact that there is a world glut of semiconductors, automobiles, computers, airplanes, steel, chemicals, oil, clothing, toys, real estate and other commodities.

The currency wars and the all-around fear of currency devaluation in China just reflect capitalist overproduction. When markets become saturated, each national capitalist class turns to depreciation and devaluation as a weapon. Each hopes to gain markets by cheapening its commodities in relation to others.

Japanese banks are reputed to have $600 billion in bad debts. Wall Streeters are demanding that the Japanese ruling class force weak banks into bankruptcy and bail out the strong ones, in the manner that the United States did. This, they say, would lead to a recovery.

But it wasn't just government bailouts that overcame the savings and loans crisis and the Latin American debt crisis of the 1980s. The banks recovered on the basis of a huge global expansion of U.S. imperialism after the collapse of the USSR.

They recovered on the anticipation of vast profits that would flow into Wall Street and the multinational corporations through the plunder of the former USSR and Eastern Europe. They also expected to fill their coffers from intensified exploitation of countries all over the world that had been partially shielded from complete U.S. takeover by the existence of the USSR.

That is what brought U.S. finance capital back to life after the Latin American bailouts and the bursting of the Reagan-era real-estate bubble.

It is a cover for economic aggression for the United States to promote the argument that Japanese capitalism, by forcing massive bankruptcies, will somehow revive in a period of worldwide overproduction and growing unemployment.

The Japanese government is about to embark upon a vast $110 billion stimulus package of public-works spending and tax cuts. The free marketers in Wall Street disapprove. At the same time, however, they are also praying that it keeps the Japanese economy from going under.

But these Keynesian solutions are no more likely to save Japanese capitalism from the crisis of overproduction than they saved the U.S. economy during the Great Depression. President Franklin D. Roosevelt initiated massive public-works spending. Yet the country went through a second economic collapse in 1937.

It was the industrial mobilization for World War II that finally brought capitalist production back to its feet.

It is ironic that, just two days before the announcement of Japan's recession, Alan Greenspan was testifying before the Joint Economic Committee of Congress. "In his testimony," reported the June 11 New York Times, "Greenspan said the Fed remained uncertain about whether Asia was stabilizing or whether further economic deterioration there could wash up in the United States later this year."

This far-seeing pundit should have waited two days to catch up to the crisis. It is in front of his nose. He could have sounded much wiser.

There is no stabilization in Asia because there is no stabilization in the current phase of cutthroat competition among the imperialist monopolies to capture markets and profits.

And, yes, this crisis will inevitably come home.

(Copyright Workers World Service: Permission to reprint granted if source is cited. For more information contact Workers World, 55 W. 17 St., NY,NY 10011; via e-mail: ww@workers.org. For subscription info send message to:info@workers.org. Web: http://www.workers.org)

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