The Summit of the Economy and Finance ministers and the presidents of the central Banks of the G-20 members carried out in Buenos Aires just ended. An immediate consequence of their conclusions was the drop in the Europe and Japan Stock Markets.
By: Alejandro Iturbe
As president of the host country, Mauricio Macri carried out the closing statement of the meeting. He used a language named by an Argentinian opposition newspaper (linked to Kirchnerism) called “climatic/nautical/aeronautical”, filled with terms such as “storms”, “turbulence” and “troubled waters” [1]. Actually, it was a speech destined to the “internal market”, to explain why its government is not responsible for the current disastrous economic situation in Argentina, rather than contributing to the debate done by economists present. However, the terms he used describe well the current situation of world economy (“stormy” or “turbulent”).
The final document issued by the summit also refers to this reality and its consequences, with the cryptic and “neutral” language used by bourgeois economists in these cases:
“The growth has been less synchronized recently and short and long term risks have increased. These include growing financial vulnerabilities, increase of commercial and geopolitical tensions, global unbalances, inequality, and weak structural growth, specifically in some advanced economies” [2].
What do they mean? Without naming it, the center of the statement is the “trade war” begun by the Donald Trump administration by collecting taxes from the import of some commodities to the USA, particularly industrial products from China. The Chinese government answered with tax collection from the import of agricultural North American products like soy and derivatives.
The dynamic of the battle between both countries (the great commercial partners of the world in the last decades) is to worsen. At the same time, other fronts may open, since Trump’s tax policy begins to affect several countries and threatens to do it more (like taxing cars with German, Japanese or Korean origin), with the possibility of symmetrical answers on their behalf. In other words, if the storm front that already exists continues to grow, it threatens to take the capitalist economy into a sort of “world trade war”.
A New International Division of Labor
Trump’s measures unleashed the current storm. However, the “cloud accumulation” and the factors that affect it and push it are much deeper. They have been preparing for the last decades.
The first process began with the deep world economic crisis of the late 1960s and early 1970s, which marked the end of the “post war economic boom”. One of its expressions in 1917 was the unilateral decision on behalf of President Nixon to end the gold-dollar parity ruling since the Breton Woods Agreements (1944), the bases of world economic stability during those years. The dollar continued to be an actual “world currency”, but the monetary-financial markets became more fragile and volatile.
Another expression was the strong increase of the oil barrel price, pushed by the OPEC (Organization of Petroleum Exporting Countries) to obtain most of the petroleum profit. This generated an increase in the cost of energy used in industry and led imperialist countries to transfer the production of the most polluting industries and those with the greatest energy consumption (like steel and aluminum) to the periphery countries.
Several industrial sectors began to “emigrate”, like textile, small steelworks and electronic product assembly, to countries with much lower wages and harder labor conditions like the Asian Tigers (Malaysia, Singapore, Taiwan and Hong Kong) and India.
This process took a leap in the 1990s, with a waterfall of imperialist investments in China, a country where capitalism had been restored in 1976 and where the dictatorship of the “Communist” Party, after the defeat of the Tiananmen rebellion, guaranteed solid “stability” and a very high level of surplus extraction. China became the “factory of the world” with growingly complex products, like cellphones, computers, automobiles, construction machinery and trains, which were exported to the entire world, specially the United States.
A new international division of labor was established. Until then, the imperialist countries concentrated the industry and the semi-colonial countries supplied raw materials, fuel and foods. Now, there are still semi-colonial countries that supply these materials, but most of the industrial production is done in China and other Asian countries (or the Latin American maquilas). On the meantime, the imperialist countries and companies continue controlling the process through technology production and the trade chain. Therefore, they obtain most surplus value. World economy was pushed by what we have called the “USA-China tandem”, with the first as a dominating locomotive and the second as a subordinate one.
Let us see two examples: in 2008, the North American supermarket chain, Walmart, controlled around 15% of the Chinese exports (almost 225,000 million dollars per year), with a production of industrial consumption articles, through different “Chinese” companies (like small four-cycles to mow the lawn), which they then sold in their place in the world chain. And Apple IPod was sold internationally for 200 dollars. These and other products were manufactured in China by the giant enterprise Foxconn. However, this country only held 4% of the value, the rest was appropriated by imperialism through technology control and the marketing chain. [3]
An important part of the functioning of this new international division of labor was “free trade” without tax obstacles, established through agreements like the European Union, the NAFTA, the Pacific agreement, Mercosur and bilateral agreements.
This world process was reflected in the North American “macroeconomic accountability” through a very high structural and chronic deficit in China’s trade balance. At the same time, it affected some bourgeois sectors of the USA and other imperialist countries (which had not joined “productive globalization”), which saw their market space dramatically reduced. Consequently, so was a sector of the traditional North American white working class, linked to these industries.
The Growth of Speculation and Parasitism
The tandem USA-China was completed because a significant part of the favorable trade balance obtained by China was invested by its government in buying North American Treasure bonds, in order to have international monetary reserves. The USA had a double and combined objective in selling its bonds to China and other countries (increasing the public debt). On one hand, it worked as a “surplus value vacuum cleaner” of the entire world; on the other, it allowed maintaining the gigantic “twin deficits” (trade and fiscal) on which the North American economy worked.
This was the bases over which imperialist North American (and world) capitalism tended to be more speculative and parasite. A real operation (like the buying of petroleum or cereals) became a speculative operation (the “buying for the future”) increasing artificially the demand and betting on price increase. Based on another real operation (the building and selling of properties and mortgage credit to finance the purchase) many “derivative operations” were established, which actually multiplied a tenfold the actual bases.
Therefore, “bubbles” were formed as part of an artificial “financial building”, largely formed by fictitious capital (which did not express new produced value), but disputed with other capitals the surplus value extracted from production. At first, this process encouraged the demand and the dynamics of economy, but it went on to be sustained over much more fragile and volatile bases. At a certain point, a bubble “burst” and begun to “deflate”, which shook the entire building. This happened when the property market bubble burst in the USA in 2007, beginning the international economic crisis, which still influences us today.
Crisis worsens Everything
The crisis did not burst only due to “pure” economic-financial causes. It had the framework of the defeat of the “New American Cycle” project and the policy of the “War against terror” by George W. Bush, in Iraq and Afghanistan. These defeats generated in the political ground what analysts have called “the Iraq syndrome”, whose expression in the financial grounds is the “lack of investment trust” of the world bourgeoisie.
The crisis had entered a dynamic of “a downhill snowball” and threatened to bankrupt the entire world banking-financial system. The answer of the imperialist governments and other national governments were the “mega-packages” of help to the financial sector (the famous “liquidity injections”). They acted like insurance companies covering the losses of the great speculators. But they did so compromising their monetary reserves and with over indebtedness.
They did achieved to avoid the bankruptcy of the world banking-financial system and they stopped the downhill dynamic. However, they achieved this objective maintaining intact (actually recomposing) the capital excess that had been in the origin of the crisis, therefore preparing new and superior ones (today it is spoken of “indebtedness bubble”). At the same time, they spent most of the “ammunition” that they would need today to face a new open and intense episode of the “storm”.
On the other hand, the governments and companies carried out hard attacks to jobs, wages, labor conditions and public services. With these attacks, they have achieved many triumphs and the living conditions of the workers and masses are constantly lowering. However, they have not managed to defeat their permanent struggle and resistance to these attacks. This struggle wears and erodes the bourgeois governments and regimes of all types, and it has stopped the bourgeoisie from achieving the exploitation level needed to obtain sufficient surplus value to satisfactorily value of the grown volume of existing capitals.
It is true that imperialist capitalism sometimes manages for a piece of the sky to appear with a ray of sunshine. Then, it claims, “The worst has past”. However, the storm front that opened in 2007 continues and it threatens to take on worse expressions.
The Trump Factor
In this framework, Donald Trump appeared as the president of the USA, the most powerful country in the world. For such a character to reach office there is a set of reasons we analyzed in International Courier N 15 (January 2017) and in several articles published in this website. [4]
Among other elements, he expressed sectors of the North American bourgeoisie that have lost weight in the new international labor division and have been displaced. It was not the only case: the same was expressed in the British bourgeois sectors that pushed the “Brexit” or the growth of the right wing bourgeois “euro-skeptic” parties.
In Trump’s case, he posed that the USA was “weakening before the world” and “other countries are taking advantage of it”. It was the moment to overcome this “weakness”. For this, they had to reformulate the new international labor division and restrain free trade with tax barriers for the products imported to the country.
However, these measures by Trump go against the current deeper tendencies of imperialist capitalism in general and North American in particular. Specially, against the great multi-national enterprises that have factories directly in or associated with China. It also goes against the policy and dynamic of other imperialist sectors and countries [5].
Therefore, he acts as an “elephant in a shop” in the heart of the main leaders of imperialism and its most important agents, not just in economic, but also in political grounds. His proposals and measures, added to his personal rudeness, have achieved his enmity with all those who should be the natural allies of North American imperialism, like the German Angela Merkel, the British government, the Chinese government, the Canadian premier…
One might say imperialism is living a “leadership crisis”, with the leadership (the government of the countries of the G-7) divided and Trump opening a “trade war” as a future “perfect storm” in world economy.
A climate of “every man/woman for his/herself” begins to prevail. By the end of last year, Germany repatriated a part of the gold stock deposited in the USA “just in case” (The Netherlands and Austria followed their lead) and is afraid of taxes on import of German automobiles (the main source of income of the country). Germany is also withdrawing the gold deposited in France [6]. The Putin administration sold 85% of its North American Treasure bonds (which went from a 95 billion dollar stock to 15,000) [7]. Everything is moving in this dynamic.
Some Conclusions
This reality had a dim expression in the G-20 summit statement. After the analysis of reality, the statement said there is not much to do but “monitor” the consequences and attempt to mitigate them. At the same time, it said that the attacks on employment, wages, labor condition and the cut in public service budget would continue.
It is necessary for the workers to double their fight against these attacks. We must seize the crisis and the division of our enemies in our favor to fight harder and defeat them.
Notes
[1] https://www.pagina12.com.ar/130274-macri-el-oso-carolina-de-la-economia-mundial
[2] http://www.ambito.com/928232-estos-son-los-13-puntos-del-documento-de-la-cumbre-de-finanzas-del-g20
[3] On this subject, see: https://litci.org/es/menu/mundo/asia/china/certezas-e-interrogantes-que-plantea-la-crisis-economica-en-china/
[4] See, for example: https://litci.org/es/menu/mundo/norteamerica/estados-unidos/trump-y-la-burguesia-estadounidense/
[5] See: https://litci.org/es/menu/mundo/norteamerica/estados-unidos/las-sanciones-comerciales-trump-china/ and https://litci.org/es/menu/economia/esta-detras-la-amenaza-guerra-comercial-trump/
[6] https://www.hispantv.com/noticias/economia/351492/alemania-retirada-reservas-oro-extranjero
[7] https://www.cronista.com/finanzasmercados/Putin-ordena-vender-el-stock-de-bonos-del-Tesoro-de-Estados-Unidos-20180723-0012.html
