A spectre is haunting the West — the spectre of crisis!
It is apparent where the line is borrowed from. Is the situation so as well? Let us take a look. Inflation in the West, especially in the leading nations of globalized capitalism, i.e. those belonging to G-7, is already at stake. The inflation in the past decade was only 2-3% or less on an average in each of such nations; however, the last financial year has already exhibited an inflation of 9% in USA, 8.1% in Canada, 11% in UK, 8.8% in Germany, 6.2% in France and 12% in Italy [1]. Even after tightening the monetary policy by their central banks, the inflation has come down to only ~5-7% by now. Evidently, the ‘spectre’ is natural!
Interestingly, Claudio Borio, the head of Monetary and Economic Department of the Bank for International Settlements is confessing: “We don’t know for sure why inflation suddenly reemerged, and with such vigor, after being dormant for so long” [2]. The “inflation surprise was global”, says Jonathan D. Ostry, the former acting director of IMF’s Asia-Pacific department, disclosing that “Fed [Federal Reserve] was not alone in misreading the implications… The IMF… described the inflationary surge in a blog by its (then) chief economist, Gita Gopinath,… pointing to transitory causes and taking comfort in the anchoring of inflation expectations” [3]. The same misreading is admitted by Greg Kaplan from University of Chicago, Benjamin Moll from London School of Economics and Political Science, and Giovanni L. Violante from Princeton University in an article published by IMF [4]. Nevertheless, all of them have attributed such catastrophe to the COVID-19 pandemic followed by Russian invasion to Ukraine.
But, is this the story?
Factually, neither the so-called ‘pandemic’ nor the Russian invasion to Ukraine is the ‘cause’ of the crisis; rather, they are the very ‘effects’. Just before the pandemic-game started (now majority of the common people understand this, although we have been claiming this from the very beginning), in October 2019, the IMF chief Kristalina Georgieva clarified that they were expecting a “slower growth in nearly 90% of the world” and the global economy were to exhibit “a synchronized slowdown” [5]. However, since then we had loudly expressed our concern on the concern of the bourgeoisie economists who were “demanding serious makeover of the current economic policies” [5]. And very soon it came, through the world-wide lock-downs in the name of COVID-war. Astonishingly, it is possibly the first global pandemic in the history of mankind that did not exhibit any death rate surge over the yearly averages! But more amazingly, can anyone believe that GDP can observe a surge through such lock-downs! In fact, it has happened (except in Germany, possibly due to its older resistance from its eastern bloc). The GDP growth rate in 2021 has become 5.9% in USA, 4.5% in Canada, 7.5% in UK, 2.6% in Germany, 6.8% in France and 6.7% in Italy, all being only £2% over the last decade [1].
Therefore, it is evident that lock-down did not stop the production. In fact, it just shifted the paradigm of production toward ultra-neoliberalism. Here, by neoliberalism we mean, as we have already described in [5-7], the trend of “producing costly commodities in relatively smaller numbers but repeatedly by updating or remodeling” (i.e. the ‘temporal mode of production’) leading further to the tendency “to make profit out of those commodities which are not even produced presently” (i.e. derivative trading). Such paradigm of production evidently needs to be based upon enormous collection and manipulation of information. Lock-down has contributed to this through engulfing everything into an ‘on-line’ system with a gigantic volume in an extremely high speed. Eventually the effect has been observed in the wealth of the few topmost capitalist owners. For instance, we have shown in the following figure how the wealth of the capitalist owners, who became richest five around the world in 2021, have varied with time in last 10 years [8]. It is apparent from the figure that firstly, the owners of Amazon, Tesla, LVMH, Microsoft and Facebook, who are in the business of costly and/or information related commodities, could make the highest profits within the period of lock-down; and secondly, the wealth of each of them exhibited a jump in 2021. What a blessing of coronavirus!
Such speeding up of neoliberal profit making through lock-downs led to the astonishing GDP growth in 2021, which has been followed by the unexpected (according to mainstream economic theories) inflation in 2022, which is still annoying the global capitalist system. However, we had already explained in [7] that “in the era of such temporal mode of production, the GDP growth rate and inflation are tied together in a manner so that one follows the other… if the growth rate increases, it suffers from greater inflation; and if it tries to lessen the inflation, growth rate falls down. Thus fortune never comes alone in the current neoliberal phase of capitalism, rather, brings with it an unavoidable misfortune”. It was also shown in [7] that since the abolition of Bretton Woods system, such inflation, nevertheless, can be transported from one nation to the other by cross-border trading. However, the ‘export of inflation’ from the West has been significantly interrupted by the surge of shipping cost due to Russian invasion to Ukraine. The UN Conference on Trade and Development (UNCTAD) has made it clear: “The war in the Ukraine is stifling trade and logistics of Ukraine and the Black Sea region… This has increased global vessel demand and the cost of shipping around the world” [9]. On the other hand, Russia has been successful through this war (in fact a war not against Ukraine but a trade-war with the West) to control its inflation from 18% in April 2022 to 3.5% by this March. However, be it Russia, be it the West, or be it any of the hundreds of nations in the trade chain, the crisis is not going to die.
As we have pointed out in [5] that, the “repetitive scheme of production with newer applicative quality in this temporal mode of capitalism has led to generating enormous numbers of contracts regarding production and trade in future” which obviously leads to “the ‘overproduction in time’ in the current neoliberal regime” that “is manifested as the global stocks trades overshooting the real world GDP resulting to periodic financial crises”. We have shown a ~8 years period for such cycles of crises along with its continuously increasing baseline. We are predicting the next d-day to come in around 2024 with an enormous amount of public debt completely transforming into non-performing assets on the date of maturity of the contracts.
And what about the effects? Not any Marxist but Harold James, the IMF historian, is telling us: “In the ensuing spiral, increased spending led to more demand, which led to more shortfalls. Another vicious spiral may follow. Rising food and fuel prices could spark discontent, protests, even revolutions and government breakdowns around the world” [10].
You don’t need to be a Marxist; reality will make you one.
References:
- https://tradingeconomics.com.
- Claudio Borio, “Monetary policy under test”, IMF publication (March 2023).
- Jonathan D. Ostry, “The costs of misreading inflation”, IMF publication (January, 2023).
- Greg Kaplan, Benjamin Moll, Giovanni L. Violante, “The very model of modern monetary policy”, IMF publication (March 2023).
- https://jabardakhal.in/english/neoliberalism-no-reformist-solution-to-its-crisis/.
- https://jabardakhal.in/english/chapter-02-neoliberalism-the-temporal-mode-of-production/.
- https://jabardakhal.in/english/chapter-03-impact-of-temporal-mode-of-production-on-gdp-and-inflation-transportation-of-inflation/.
- https://www.forbes.com/real-time-billionaires/#fa142693d788.
- https://unctad.org/publication/maritime-trade-disrupted-war-ukraine-and-its-effects-maritime-trade-logistics.
- Harold James, “In Defense of Globalization”, IMF publication (March 2023).
