Wed Sep 27, 2023
September 27, 2023

The World Economy: An Anemic and Troubled Recovery

Last August, the US economy created far fewer jobs than expected[1]. For bourgeois analysts, this data and that of inflation have turned on the caution light, in this country and in the world, on the character and dynamics of the ongoing recovery of the world economy.

by Alejandro Iturbe, translated to English by John Wolf

Let us begin by placing this current moment in a broader context. In the article “Where is the world economy headed?”, published on this site in November last year, we analyzed the major fluctuations that had occurred in 2020[2].
In that article, we sequenced the dynamics of world GDP in the first three quarters of 2020. In the first quarter, the world economy fell by about 1.2%, reflecting the slowdown and recessionary dynamics that had already been underway since the previous year. In the second quarter, due to the impact of the pandemic and restrictive measures, an average drop of close to 10% was recorded, a figure whose magnitude had not been seen since the 1929 crisis, with historical setbacks in many countries, including the imperialist powers. The third quarter showed a slowdown in the fall and the beginning of a recovery in practically all countries. This change of dynamics was essentially influenced by the lifting of the pandemic restrictions (the hypocritical and criminal policy of “the new normal”) and the reflection of the “aid packages” of the imperialist governments to companies and families. This dynamic continued in the fourth quarter. But the overall balance in world GDP was very negative: -3.2% according to the IMF and -3.6% according to the World Bank[3].
This recovery continued in the first two quarters of 2021, with an annual projection of +6% world GDP growth according to the IMF, +5.6% for the World Bank and +5.8% for the OECD[4]. It is the general dynamics of the US and Chinese economies that are pushing upwards, as other central poles, such as Europe and Japan, are going through a much slower and more difficult process. Also economies such as those of Latin America, for example Brazil[5].

A broken recovery

It is within this framework of a general upward dynamic but with many inequalities that both international financial organizations and economic analysts have begun to introduce a new letter (K) to refer to the characteristics of this recovery. What does it mean? It means that simultaneously one sector of companies is “going up” and another is “going down”. In terms that we have used in other circumstances: a “scissors” development. In a very interesting article in a Spanish media, it is explained: “But what some say we are experiencing is not that [V format or Nike pipe], but a K-shaped recovery, which implies a decoupling of the different sectors of the economy, an economic rupture. After the crisis we see winners and losers, especially in the US stock market“[6].
As described by the IMF in last April’s report: “Economic recoveries are diverging across countries and sectors, due to the diversity of pandemic-induced shocks and the degree of policy support. Prospects depend not only on the outcome of the battle between viruses and vaccines, but also on the extent to which economic policies deployed amid great uncertainty can limit the lasting damage caused by this historic crisis.
In the latest of the IMF’s reports (“Gaps in Global Recovery Deepen”), the IMF notes that the “scissors” development between countries is accentuated: “Economic prospects have diverged further between countries since the projections published in the April 2021 edition of the ‘World Economic Outlook’. Access to vaccines has become the main gap along which the global recovery is divided into two blocks: countries that can expect further normalization of activity later this year (almost all advanced economies) and those that still face a resurgence of infections and an increase in the number of COVID victims. However, recovery is not assured even in those countries with very low levels of infection as long as the virus is circulating in other countries.
Read also: Global economic trends after the 2020 recession

“Winners and Losers”

We have said that, at least in nominal terms, the US and Chinese economies have the best prospects for recovery in 2021. This means that the world’s two largest economies will tend to accumulate an increasing fraction of global GDP.
At the large corporate level, there were and are also winners and losers. In June 2020, the Financial Times published a list of twenty companies that were “shining” during the pandemic, according to their share price growth since February 2020[7]. In this list, Amazon, Microsoft, Apple, Tesla, Tencent and Facebook stand out at the top of the list.
This chart may be somewhat out-of-date as there have been some changes of location and revenue of other companies to the “top 20”. But it does mark for us some trends that remain. Most of them are companies that use new technologies, some of them specialized in e-commerce. At the same time, within the list there is a clear predominance of US companies, followed by a certain presence of Chinese companies and, to a much lesser extent, of other imperialisms.
One conclusion is that this divided dynamic of the different sectors accentuates to the extreme the process that Marx called “centralization of capital”; that is, the control of ever larger fractions by a smaller number of bourgeoisie. As a clear expression of this leap, it is estimated that today 50 companies control 28% of world GDP[8]. Furthermore, the rate at which they make profits, that is, at which they reproduce their capital in an expanded way (although there are speculative factors that exaggerate this fact) determines that this concentration will increase at an accelerated rate[9].
On the other hand, other large companies, which use aging technologies (such as internal combustion engines in the automotive industry), must face restructuring and downsizing plans. The hardest hit have been millions of small and medium-sized companies. Suzanne Clark, president of the U.S. Chamber of Commerce, stated on that institution’s website that: “there are four million small businesses in the U.S., 13% of the 31 million small employers in the U.S., that have exhausted the aid they were given to stay afloat and need new help“[10]. This is what has been called “ghost companies”, and it is not yet clear how many of them will survive with the aid package being pushed by the Biden administration.
If this happens in the U.S., it is reproduced with greater impact in countries with much less capacity for intervention by the State and governments. An article published last July quotes an ECLAC forecast that the economic effects of the pandemic would cause “the closure of 2,700,000 companies” in Latin America and that the most affected would be the SMEs[11].


One of the problems of the current recovery that most worries bourgeois economists and international organizations is the inflationary dynamics it presents, both in the imperialist countries and in the rest of the world. Some of them even warn about the risk of stagflation. Let us explain this concept.
Historically, in capitalism, the first moment of the upward phase of a short cycle tended to be inflationary (price increasing) because the growing demand exceeded a supply that was lagging as a result of the previous downward phase. Conversely, the downswing tended to be deflationary (falling prices) because of excess supply.
In the 1970s, a new phenomenon occurred: a stagnant (or falling) economy combined with persistent inflation (stagflation). The “orthodox” monetarist economists of the so-called Chicago School (such as Milton Friedman) argued that this was the result of several decades of monetary and credit injections of Keynesian policies to bolster demand[12] and that it was necessary to rebalance the mass of circulating money and credit to levels commensurate with output. This was the theoretical basis that led to the abandonment of Keynesian policies and guided the fierce adjustment plans that governments began to implement from the end of that decade.
Since the very strong international economic crisis that began in 2007-2008, neo-Keynesian bourgeois economists such as Joseph Stiglitz and Paul Krugman gained new prestige, especially in the US, and influenced Barack Obama’s government, although the latter did not apply a classic Keynesian policy (aimed at boosting investment and consumption to break the dynamics of the crisis), but concentrated on saving the big banks in bankruptcy dynamics and companies such as GM, financing the cost of this aid through an increase in public debt (issuing Treasury bonds).

Biden’s neo-Keynesianism

The main economic measure of Donald Trump’s administration was a major tax reform that lowered the flat rate paid by companies and higher-income sectors from 35% to 21%, at the end of 2017[13]. With an “orthodox” perspective, which had already been applied by Ronald Reagan in the ’80s, he claimed that this “savings” would be converted into an increase in investment that would boost the growth of the economy. However, the recessionary dynamics of the world economy that began in 2019 and the leap in the downward dynamic generated by the impact of the pandemic have dashed those expectations. Complicating the panorama even more, in 2020, anti-racist rebellions broke out all over the country and, although less widespread, an important wave of strikes put him on the ropes.
Democrat Joe Biden won the election and, faced with this scenario, took on the task of dismantling it. His response was to present Congress with a Keynesianist policy, through several staggered packages[14]. In the article cited, it was stated: “Biden is combining a large injection of credit with government spending financed through the deficit and destined both for investments and direct payments to businesses and households“.
In an in-depth analysis, Biden’s policy and its various stages had three levels of objectives. The first, contained in the initial $1.9 trillion package, sought to respond to the profound economic and social crisis expressed by the anti-racist rebellions and strikes; to contain the pandemic and its impact; and to slow down (or at least attenuate) the dynamic of bankruptcy of millions of small and medium-sized businesses, to which we have already referred.
The second level is to reinforce the economic recovery and to promote the beginning of an upward wave of investment. Within this framework, the third objective is more strategic: to renew the country’s infrastructure – in the sense of a partial reconversion of the productive and technological matrix in the United States – within the framework of the dispute with Chinese capitalism.
So far, what has taken place in the US is the application of the first part of the plan which, although it has promoted a certain recovery over the fall of 2020, presents problems such as inflation which, as we have seen, produces concern and intense debates among bourgeois economists.

The debate on inflation

The latest IMF report states, “U.S. producer prices rose sharply in August, suggesting that high inflation is likely to persist for some time.” Some estimates indicate that the cumulative annual rate may reach or exceed 5%; the highest rate in the last 30 years[15]. Something that is repeated in the European imperialist economies: it is estimated to range between 3 and 4% (the highest rate since 2011), although with much higher increases in the cost of energy[16]. In the rest of the world, the prospects are higher: in Brazil it will exceed 10% in 2021[17] and in Mexico, last July it already rose to almost 5%[18].
These inflation levels raise two questions. The first is to consider the true dimension of the recovery of the US economy, a country in which the calculation of GDP is not distorted by exchange rate fluctuations with respect to the dollar. This means that, if nominal GDP growth is estimated at 7% and 5% is determined by inflation (rising prices of products and services), real growth in material production will be only 2%.
The second issue concerns the ongoing debate among bourgeois economists. Some of them consider that, given a specified nominal growth, if the inflationary component exceeds in percentage terms the real growth of production, an element and dynamics of stagflation are already present.
This is what the heterodox economist Nouriel Roubini characterizes as such: “The threat of stagflation is looking more and more likely. The current economic policy, which combines monetary and credit expansion… will lead to inflationary overheating. Combined, such supply and demand dynamics may generate stagflation, a general rise in prices and recession, in the style of what happened in the 1970s“[19].
On the contrary, the neo-Keynesian economist Joseph Stiglitz dismisses this perspective. He characterizes the current situation as “Slight increases in the inflation rate in the United States and Europe“, and feels that fears of stagflation “are premature“. He believes that “much of the current inflationary pressure arises from short-term supply-side bottlenecks, which are inevitable when restarting an economy that has been temporarily shut down…especially when considering the general excess capacity around the world.“[20] In other words, a normal non-inflationary growth process would quickly resume.
This view is shared by the latest IMF report: “Recent price pressures largely reflect unusual pandemic-related developments and transitory mismatches between supply and demand. Inflation is expected to return to pre-pandemic ranges in most countries by 2022, once these shocks are reflected in prices“.
Economist Jayati Ghosh, President of the Center for Economic Studies and Planning at Jawaharlal Nehru University (New Delhi, India), also sees stagflation as a real threat, but mainly for less developed countries and emerging markets.
Reality will define who is right in this debate. For our part, we believe that, for a combination of reasons, the most likely perspective is the one outlined by Roubini. In the aforementioned article by Orlando Torres, it was anticipated: “If stimulus fails to restore profitability and, therefore, capitalist investment, the low cost of capital will eventually raise inflation“.

Investment and profitability

For Marxism, the analysis of the present situation and the possible dynamics of the capitalist economy are based on criteria different from those of bourgeois economists. We consider that the motor of this economy is the search for profit or, in other words, the accumulation of new capital. Therefore, what defines this dynamic is the amount of productive investments and, intimately linked to it, the profitability of the invested capital (what we call “rate of profit”, based on the relation between extracted surplus value and invested capital).
Biden’s first package was almost $2 trillion, more than 8% of the country’s nominal GDP in 2020. We have seen that the estimated nominal GDP growth for 2021 is 7%, that much of it (5%) is the result of inflation, and that real wealth growth (new value produced) will be only 2%.
The first explanation for this difference is that the vast majority of this money was not destined to productive investments. Among its beneficiaries, families used it to cover some accumulated debts and maintain a minimum level of consumption. Small and medium-sized companies also covered debts and “plugged holes”. Those companies and investors that could invest continue to opt, for now, for speculative investments, such as the stocks that make up the S&P 500 of the New York Stock Exchange and, even, variants such as cryptocurrencies.
Only a smaller part of the package went to productive investments. Looking at quarterly reports from the US Bureau of Economic Analysis (BEA) shows that, “The increase in [national] GDP in the first quarter reflected continued economic recovery, the reopening of establishments, and the continuation of the government’s response related to the Covid-19 pandemic.” In its usual analysis of how that increase was generated, it highlights the increase in “personal income” and “consumption” as a result of the above two elements. In other words, so far, there is no perceived increase in private investments.
Why are the companies that have the capacity to do so not making productive investments? As we said, this is deeply related to the profitability of the invested capital. In the aforementioned article of November 2020, we referred to the study carried out by the British Marxist economist Michael Roberts on the dynamics of the rate of profit in the USA and reproduced a chart showing, on the one hand, the historical trend of the rate of profit to decline and, on the other hand, an abrupt fall in 2020. Roberts concluded that the profitability of capital in productive investments was still “too low“[22].
The profitability relates to two factors. On the one hand, the total volume of circulating capital; on the other, the total mass of surplus value extracted in production (the new value produced in a given cycle). The first factor presents a profoundly deforming element: the increasingly speculative and parasitic character of capitalism, already analyzed by Lenin more than a century ago. This means an obstacle to the recovery of the average rate of profit because it accentuates the proportion of non-productive capitals in the volume of total capital. That is, the proportion of capital that does not help to generate new surplus value but disputes (with advantages) its appropriation[23].
For its part, the mass of surplus value extracted in production is a function of the productivity of labor. Measured in monetary terms, it is expressed by how much each worker produces for each dollar received in wages. The difference between the total value produced and the wage is the surplus value appropriated by the bourgeoisie.
The truth is that the productivity of labor in the U.S. has been rising steadily in recent decades. By way of example, between March 2020 and March 2021 it leapt over previous years and grew 5%, among other elements due to the application of new technologies[24]. Other factors that increase real productivity are the loss of labor conquests and precariousness, and the loss of purchasing power of wages in the face of inflation.
This increase in productivity is expressed, of course, in an increase in the mass of extracted surplus value. However, capitalist profitability does not recover to “satisfactory levels” because the ever-greater volume of circulating capital, with the growing weight of speculative and parasitic capital (which does not produce new value but disputes its appropriation) “devours” ever greater masses of surplus value and, with it, pulls down the average rate of profit. A speculative and parasitic tendency that only seems to be reinforced.
The truth is that Biden’s first package of measures, although it has so far succeeded in calming the explosive social situation in 2020 and slowing down the negative dynamics of the economy, has not succeeded in triggering a “wave of economic growth“.

Who will foot the bill?

At this point, it is worth asking who will pay the cost of the Biden administration’s plan and its different stages. In this first package, the answer is clear: it was mainly financed through an increase in the fiscal deficit by means of the issuance of Treasury bonds, a mechanism by which US imperialism “sucks in” wealth from all over the world[25].
The US public debt reached 102.3% of GDP in the fiscal year that began on 10/1/2020 and ends on 9/30/2021. That is, it happened during the term of the last federal budget voted for during the Donald Trump administration and does not include the stimulus package voted for by the Biden administration, last February. That is why the Congressional Budget Office (CBO) forecasts that this public debt will continue to grow in the coming years to 107% of GDP[26]. In other words, it ends up being paid for by the workers and peoples of other countries through the purchase of U.S. bonds by their governments and bourgeoisies.
However, this traditional mechanism of financing the US government would only cover a part of the total of the packages proposed by Biden. For this reason, he has also proposed a modification of the current flat tax rate paid by corporations (reduced by Trump from 35% to 21%). This flat taxation would be replaced by a graduated structure: companies earning less than $400,000 per year would pay 18%, those with profits up to $5 million 21% and those above $5 million 26.5%[27].
This tax rate for the largest companies is below the 28% that Biden had talked about in his election campaign (and even more so than that existing before Trump: 35%). But it still represents an increase over what they pay now. The truth is that most of these large companies are not willing to pay more or, at least, want to reduce this increase as much as possible.
This is expressed in the opposition of both “orthodox economists” and Republican legislators, and even the right wing of the Democrats. Therefore, in order to obtain congressional approval, the Biden administration must negotiate every step of its plan and offer the reduction of objectives, such as this tax rate[28]. A reduction that erodes the effectiveness and strength of the plan as a whole.
One of the first victims of these negotiations has been the increase in the minimum wage to 15 dollars an hour, promised during the election campaign. A demand that has been very present in the last decade in the struggles of numerous workers at the lowest rung of the wage structure and of various unions[29]. Let us clarify that, due to inflation, if it were achieved today, this minimum hourly wage would represent a much lower purchasing power than when this demand was launched.
But, even so, important sectors of the U.S. bourgeoisie refuse to grant it and the minimum wage continues at $7.25 per hour. The Biden administration abandoned its promise, and the increase to 15 dollars was eliminated in the approval of the first package, last February[30]. Many analysts consider that, in reality, this was an electoral promise for the base because he knew that it would not be approved in Congress.
Apart from this, what is certain is that a second “payer of the bill” for the packages appears here: US workers, especially the lowest paid, whose purchasing power is increasingly deteriorated by inflation.

China: storm on the horizon?

China is one of the main drivers of the recovery: it was the only major economy to finish with nominal GDP growth in 2020 (2.3%) and has one of the best forecasts for 2021 (8.1%, second only to India).
This is expressed in a large growth of its foreign trade in 2021 (24.5%, the highest in 10 years), both in its exports (which thus cover part of the supplies that, as we saw, are “stuck” in other countries) and in imports which, in this way, help to alleviate the situation of the countries supplying food and raw materials. It also maintains a good level of attraction for foreign investments as well as the realization of its investments in other countries, especially in the so-called “Silk Road”. The imperialist media and analysts celebrate this dynamic with headlines such as “China will continue to be the stabilizer of the world economic recovery”[31].
However, behind this silver-lining there are thick storm clouds. The main one of all is the crisis of the Evergrande Group, the second largest real estate developer in the country by sales, specialized in housing for the middle and upper sectors[32]. From this sector it spread to other branches, such as electric cars, health, and even a soccer club. The explosive growth of this group was financed with liabilities (debts) that today is a record for a single company: 300 billion dollars.
The truth is that the group cannot pay even its short-term debts with its assets, and its shares have already lost 80% of their market value. In this context, it holds the record number of lawsuits filed by its contractors in Chinese courts[33]. At the same time, it was estimated that around 1,500,000 clients could lose their deposits on houses that Evergrande has not yet built, if the company collapses[34].
Let us look at some data: the civil construction and real estate sector directly accounts for 7% of China’s GDP, a figure that rises to almost 25% if direct and indirect suppliers are considered. It has been one of the driving forces behind the growth of the Chinese economy and job creation[35]. Many analysts consider that the sector has, in fact, been artificially inflated through state and private credits and loans. Something that had already been expressed in the crisis that this sector experienced in 2015[36].
In reality, the problem is much bigger than contractors who do not get paid or clients who will not have their houses. On the one hand, the fall of Evergrande may have a cascade effect on the entire real estate and construction sector. On the other hand, most of the group’s debts are with Chinese banks and financial institutions, so a general default on its debts (even more so if it extends to other large real estate companies) could impact the country’s entire financial system.
For this reason, many believe that a collapse of this group could have the same effect on the Chinese economy as the collapse of Lehman Brothers bank in the US in 2008[37]. Because of its size and importance, such a crisis would not contain its impact to China alone but would be a very hard blow to the entire world capitalist economy and to the current weak recovery underway.
All the world’s bourgeoisie are waiting to see what the Chinese government will do. In that framework, analysts see three possible scenarios. The first is that of a full collapse with the potential consequences we have already analyzed. The second is a cushioned fall, with help from the Chinese government to reduce the damage (this seems to be the most likely scenario). The third is a full intervention by Xi Jinping’s government to rescue the group. Whichever alternative is given, these charged clouds are on the horizon and the storm is a real possibility.

Pandemic and Afghanistan

Let us now look at how two “external” factors affect economic dynamics. The first of them (the pandemic) already showed an impact last year similar to that of a war, which imperialism and the bourgeoisie sought to reverse through the criminal policy of “new normality”. In various articles we have denounced the lie of the announcement of the “end of the pandemic” and, more recently, its replacement by that of its “mitigation” (reducing it to “tolerable” levels for society)[38].
But the truth is that the pandemic persists, not only at very high levels in countries where vaccination is very scarce, but also in the imperialist countries themselves, where it returns like a boomerang through new strains of the virus. For this reason, even the international financial organizations are warning about the impact this will have on emerging economies and are calling for the creation of an international fund for the development of a global vaccination plan, because: “A slower than expected vaccination rate would allow the virus to mutate even more“. All of which adds uncertainties to the dynamics of the world economy.
The other major development in the international reality has been the recent consummation of the military and political defeat of the US and other imperialist powers in the war in Afghanistan. As pointed out in the declaration of the IWL-FI, this defeat weakens imperialism and can encourage struggles of the mass movement in the world[39]. It is impossible to measure the economic impact that this fact will end up having. However, using the language of the IMF, it is unquestionable that it adds uncertainties to the beginning of a strong investment wave of the capitalists and to the general dynamics of the world economy.
Let us go deeper into the issue of the class struggle in the world. Let us start from a consideration: the pandemic generated a leap in the worsening of the living conditions of the mass movement in the world. One of its most serious expressions is the increase in “extreme poverty” (misery) and “food insecurity” (hunger): according to a World Bank study carried out in October 2020 (that is, when the recovery had already begun), that year would end with a balance of 150 million people in the world falling into this category[40].
Without reaching such an extreme, poverty, unemployment, loss of purchasing power of wages, deterioration of working conditions, and precariousness increased worldwide. A reality that has hardly been reversed by the current recovery: let us recall the refusal of the US bourgeoisie to raise the minimum wage.
This situation we have described has had contradictory consequences on the working class and the masses. In some cases, it has led them to retreat and move clearly to the defensive. In other cases, the feeling of intolerability on the part of the workers and the masses has generated explosions against governments and regimes, as happened in Paraguay and Colombia.
How will these two contradictory tendencies combine in the near future? What is certain is that the bourgeoisie is deeply afraid that the explosive tendency will prevail: in several articles of its blog, the IMF warns of the danger of “a great social unrest” leading to “a social explosion”[41].
As in other issues we have left open in this article, it will be reality that will show us which of the alternatives will occur. What is certain is that the class struggle (even more so if it extends in the coming period) can be a “stick in the wheel” in the bourgeois need to recover its rate of profit and push forward a new cycle of investments. In its results (victories and defeats) a great part of the dynamics of the economy is at stake. At the same time, there is the possibility of more generalized and deeper struggles, which advance on the road to the destruction of this increasingly retrograde and inhuman imperialist capitalist system and its replacement by a much more rational and humane system, through socialist revolution.
The original Spanish version of this article can be found here.


[1] and
[3] and,1%2C6%25%20new%20year.
[4], and
[5] See table included in the latest IMF quarterly report in the reference cited in note [4].
[10] Cited in the article referred to in note [6].
[12] John Maynard Keynes (1883-1946) was a British economist whose work guided world economic and monetary policy in the second post-war period, especially his book The General Theory of Employment, Interest and War.
[14] See the article “Imperialist Keynesianism in times of pandemic” by Orlando Torres, in the magazine Correo Internacional no. 25 (April 2021), available at
[19] ROUBINI, Nouriel, The stagflation threat is real. Project Syndicate, August 30, 2021, at:,be%20alleviated%20in%20due%20course.
[21] GHOSH, Jayati; Specter of stagflation hangs over emerging markets; Foreign Policy (August 5, 2021), at
[22] The table is taken from For a more general overview of Roberts’ analysis see the interview published on this page at:
[23] On this subject, we suggest the book O sistema financeiro e a crise económica mundial by Alejandro Iturbe, Editora Sundermann, São Paulo, Brazil, 2009.
[25] On this point, we recommend reading Chapter 8 (USA, epicenter of the current crisis) of the book cited in note [23], especially the subtitle “The twin deficits”.
[29] See, for example, the 2014 article:
[32] On this subject see the article by Marcos Margarido at
[33] See Financial Times article at
[36] On this subject, we recommend reading:
[38] See, among other articles published on this site:
[39] See, among other articles published in this site:

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