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Monday, 9 September 2013

Green shoots of recovery or another false start

? There is certainly a growing mood of optimism in the business world that a recovery is under way. Is this something as socialists we should be pleased for or not ? We must always remember workers and boss's interests are not the same. Its a tricky one. It’s true, however, that employment is a lagging indicator – it looks backward to what has happened and not forward to what will happen. And the consensus is that faster growth is on its way, and along with it, a rise in real incomes and employment. This optimism is based on the significant rises in the Purchasing Managers Indexes (PMIs) around the globe in the last few months. The PMIs, are the best high-frequency measures of the level of activity in capitalist economies that we have. They are really measures of what company managers think about the state of their industries and markets. They are not measures of actual sales or production. Thus they show what might happen in the future. ). For the first time, in August, that indicator (data from the ISM) went close to what is considered boom territory So perhaps the US economy is finally on its way up? Similarly, across the globe, PMIs rose in August. But let’s be careful. This does not mean every region of capitalism is expanding. It means that each region is now doing better (or less worse than before), according to the PMI indicators. Also, the OECD announced its latest update for forecast real GDP growth in the advanced economies of the OECD, revising up their measures slightly. Many of the forecasts for capitalism are tentitively confident of the coming period. Even during longer term trends of a recessionary period or slow growth there can be smaller trends almost micro trends within a trend. The OECD reckoned that growth was “proceeding at encouraging rates in North America, Japan and the UK” and the Eurozone was “out of recession, although output remains weak in a number of economies”. But, although some advanced economies looked like growing faster in the rest of this year than previously thought, some larger emerging economies were slowing down: “the numbers for advanced economies are a tad higher, and for France and the UK more than a tad higher”, but the average rate of growth in emerging economies would be about 1% point a year lower than in the recent past. And remember what the OECD is talking about is growth of about 2% a year or less for the major economies , hardly a ringing endorsement of economic strength. It would seem contary to what was previously thought the more advanced economies appear to be returning to growth all be it on a small scale and the emerging economies are slowing down especially China and India now. The IMF has also begun to raise its forecasts a little for the advanced capitalist economies. But the IMF has dropped its rosy view of the emerging economies which it had considered were the ‘dynamic engine of the world economy’, instead noting that “momentum is projected to come mainly from advanced economies, where output is expected to accelerate”. It is now admitting that the faster growth in economies like Brazil, India, China etc was partly a product of a flow of cheap credit (fictitious capital as Marx called it) into the emerging economies. The huge expansion of credit generated by central banks printing money had not gone into new investment in the productive sectors of the advanced economies, but instead into buying financial assets (bonds and equities) The fact that optimism about UK recovery is based on its services sector is no accident. What has been recovering is the property market. Residential property prices are rising at over 10% a year in London and around 3-5% a year elsewhere. It is the same phenomenon in the US, where home prices are rising at over 12% a year. The boom in these economies is concentrated in the unproductive sectors of finance, property and the stock market, not in investment and employment in manufacturing, industry and exports. Indeed, UK industrial output was completely flat in July And exports to non-EU countries fell by over 16% in July, the largest monthly decline since January 2009. As much of the UK’s ‘better’ real GDP growth in the last quarter came from exports this does not suggest that this current quarter will deliver much faster growth. I get the sense that the slight boom we are seeing in the UK and teh US is a fictitious boom based on credit and the housing market will have to crash at somepoint it is simply unsustainable forever. There is not a permenant slump in capitalism it is a much more complex thing than that there is growth in some areas all be it slow and contractions elsewhere too. Recent optimistic noises from the capitalists and their industrial voices is unconvincing to me as a longer term thing as there still remains the case that the rate of profit has still not recovered to its pre 2007 levels. There is still a lot of capital in the system which is being a barrier to new capital and further investment. For me, the key indicators of sustained recovery in capitalism would be rising rates of profit, a sharp pick-up in business investment and substantial falls in unemployment. There are little signs of any of this. with extracts and sections from Michael Roberts at

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