Behind stock market swings: World capitalist slowdown looms
Oct. 19 — A global capitalist slowdown has sent world stock markets into decline, from Wall Street to London, Berlin and Tokyo. This slowdown is a sure sign of world capitalist overproduction, and should be of deep concern to the working class.
In the U.S., the stock market just had its fourth consecutive week of losses. The Dow Jones Industrial Average plunged for four days. Brokers and speculators sold off stocks wildly until the bloodbath finally stopped on Friday, Oct. 17.
The main reason the slide stopped was that two Federal Reserve Bank presidents, James Bullard of St. Louis and John Williams of San Francisco, made statements to the effect that the Federal Reserve Board should reverse its announced policy and instead continue its program of buying Treasury bonds and mortgage-backed securities. The Fed program of printing money, which has pumped trillions of dollars into the banking system since August 2008, is scheduled to end this October. The Fed’s gravy train for Wall Street has driven stock prices high, despite anemic economic growth. That gravy train is about to be over.
Fears of new global recession
The Dow Jones Industrial Average is a compilation based on 30 large corporations that represent huge amounts of capital. Other stock indexes in the U.S., Europe and Asia also saw sharp declines and wild swings.
This decline also comes as a reaction to the reported slowdown of the European capitalist economy as a whole, especially of the big capitalist powers on the continent — Germany, France and Italy. Japan, the second-largest economy in the imperialist world, is also slowing. In addition, the Brazilian and Russian economies are losing steam and China’s growth is beginning to slow.
All technical explanations by financial pundits and journalists aside, the countries facing slowdowns are all areas where U.S. big business exports massive amounts of goods and services. And they are all areas of investment for U.S. capital. Any slowdown in these strategic markets threatens to further aggravate the stagnating condition of U.S. capitalism.
In the year 2013, the U.S. exported close to $2.3 trillion of goods and services. This was up from $700 billion in 2009, the year the capitalist “recovery” began.
It used to be that German and Japanese imperialism were dependent on exports while the U.S., with a home market of over 300 million people, did not have to rely on selling abroad to keep its economy going. But now exports have tripled because selling abroad is the only way for the U.S, capitalist class to ease its crisis. Consumption by the workers and oppressed in the U.S. has been down because they haven’t had money to spend. In other words, the home market is saturated.
In order to keep the system going, the capitalists have to go abroad. And globalization of capital has made this dependence on exports by all the bosses more and more pronounced.
According to the National Export Initiative report by the federal government on May 13, increasing exports “will help the U.S. economy continue to rebalance from one mostly driven by domestic consumption to one increasingly engaged with the 95 percent of customers who live outside our borders. … Exports have driven nearly a third of U.S. economic growth since mid-2009, and now account for nearly 14 percent of our economy.”
That is why the U.S. government forced “free trade” agreements on Mexico, Canada and Central America and is now trying to force the capitalist world to join its Trans-Pacific Partnership and TransAtlantic Trade and Investment Partnership. These organizations are designed to clear the way for the giant multinational corporations to invade other countries, force open their markets and demolish all national obstacles to exports and investment.
“Rebalancing,” as the NEI report puts it, means finding ways to sell at a profit abroad while tens of millions of people in the U.S. live with unemployment, underemployment, low wages, hunger, poverty and economic insecurity.
This same NEI states that 11.3 million jobs depend on exports — up 1.6 million since 2009. The government claims to have created 8 million jobs since 2009. That would mean that 20 percent of those jobs depend on exports.
That is just one reason the stock market gyrations must be of concern to the workers.
What stock sell-offs mean for workers
Financial wheeling and dealing on Wall Street may seem remote. It appears to be of concern only to the rich. But in fact the bankers, brokers, hedge fund managers and other gamblers are selling off stocks because they are fearful about a threat to their future profits.
Their fear of a global recession ahead should be a danger signal to the workers. The losses of the rich in a renewed recession will still leave the bosses sitting pretty, but the losses to workers will mean jobs, unions, pensions, benefits (of those fortunate enough to have them) and perhaps survival.
The International Monetary Fund, the principal world organization of finance capital, issued a World Economic Outlook report on Oct. 7 that lowered its estimate for world economic growth in 2014. The head of the IMF characterized the world economy as “weak” and “brittle” and described Europe as in danger of sliding into a third recession. (Wall Street Journal, Oct. 7)
The Organization of Economic Cooperation and Development — thoroughly misnamed — comprises the 18 biggest capitalist countries. It declared that the eurozone’s leading indicators had fallen for three straight months, a development it said points to “growth losing momentum.”
The leading indicators, reported the Wall Street Journal, “follow a series of data releases that have intensified concern that the eurozone’s biggest economy may struggle to grow at all in the third quarter. Figures released Tuesday showed industrial output in Germany fell 4.0 percent in August. The figures came a day after a surprise decline of 5.7 percent in manufacturing orders for August, also the sharpest since January 2009, when the world was mired in financial crisis.” (WSJ, Oct. 8)
World capitalist overproduction and scramble for markets
Not just the U.S., but all capitalist countries — Germany, Britain, France, Japan — operate along the same patterns. The corporations produce more and more commodities and services at faster and faster rates. They all try to pay the lowest wages possible. Thus they expand production while shrinking the market at home. To get out of this contradiction, they scour the earth for customers abroad. Then over-exporting takes over.
The competition for market share, which begins at home, gets transferred to a struggle for market share abroad because the masses of workers here are too poor to buy all that they produce. Globalization of capital has greatly intensified this process.
In a contracting world capitalist economy, the corporations are going to cut each others’ throats in order to steal the shrinking number of customers from their capitalist rivals in the export race.
When international and domestic markets can no longer absorb the huge quantities of sales, then profits fall, workplaces close and workers are either laid off or put on part time. That is what happened when 7.5 million workers in the U.S. were laid off for 18 months during the last crisis.
Wall Street sees the handwriting on the wall. It is trying to protect the interests of the rich parasites who live off the wealth created by the workers.
The workers must likewise move to protect their own class interests and organize to put the burden of any new crisis on the backs of the bosses — where it belongs.