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Global Capitalist Economy in Structural Crisis

by Liu Dan, Yang Lina, Chen Zhi

BEIJING, Oct. 15, 2012 (Xinhuanet)--

 

The whole global capitalist economy is suffering a chilly winter as its stock market has been a losing proposition and debt crisis has compelled mass dissatisfaction to spread.

Some experts in the west have started to reflect and try to search for a fix, saying the global capitalism has fallen into structural crisis.

STOCK MARKETS LOSING PROPOSITION

As more and more investors are giving up investing in stock markets, gloomy investment climate became hot topics of western mainstream media.

In an article in Financial Times, investment editor James Mackintosh wrote, "Economists are starting to accept the Great Recession has permanently damaged growth. Investors are more pessimistic.”

On the same line, The New York Times ran a story which stated: "[Investors] have also been put off by a market that has delivered almost no returns over the last decade because of asset bubbles and instability in the global economy."

As for why investors have left the stock markets, Andrew Ross Morkin, a columnist with The New York Times, offered a straightforward explanation, “it [stock market] has been a losing proposition. An entire generation of investors hasn't made a buck."

The global economy, mainly capitalist economy “entered into a long stagnation”, which is marked by growing indebtedness, unemployment and retreat from the stock markets to safer investment channels, said Immanuel Wallerstein, a senior research scholar in the Department of Sociology at Yale University.

However, on the other side of the economic spectrum, a small group of banks and hedge funds earned good money by “manipulating worldwide financial operations” without producing much value.

Instead, they brought about a much polarized world, lower real wages and government revenue, and one debt crisis after another, said Wallerstein in his article titled “The Economic Recovery That Isn't Happening”.

Wallerstein pointed out that the structural crisis stem from the fundamental nature of capitalism, i.e., “what maximizes income for the most efficient players in the short run squeezes out buyers in the longer run.”

"NO CURE FOR VICIOUS CIRCLE"

Among the capitalist economies, the European economy is facing the most rigorous situation after the 2008 global financial crisis. Speculation has been understandably on the rise over the double-dip recession and possible falling apart of the euro.

Greece, Ireland and Portugal, the first three European nations feeling the pinch of their own debt problems, have asked for outside bailouts from the European Union and International Monetary Fund, crumbled under mountains of public debts.

But the debt problems are not consequently resolved, instead they spread to Italy and Spain, the third and fourth largest economies in the euro zone, triggering the banking crisis and hurting the real economy.

Most notably, the 2008 financial meltdown and the euro zone debt crisis disclosed that neoliberalism in dealing with debt problems has inherent incurable defects and contradictions.

The core of neoliberalism lies in complete marketization, absolute liberalization and thorough privatization. It holds that the market is almighty and opposes any form of government intervention and regulation.

Now some of these countries are discovering the defects and contradictions and trying to correct the injustice by adjustment on taxes and, more forcefully, on a high social welfare system. But this kind of attempt is hard to succeed -- the overall situation during global financial crisis and debt crisis precisely tells the truth.

The unsustainable debt has led to a vicious circle, and there is no easy or acceptable way out. This is what some experts called the structural crisis of capitalist economy, said Wallerstein.

Mozzle Octonary, a senior lecturer in economics at Middlesex University in Britain, elaborated the viewpoint in her article "The crisis of capitalism in Europe, west and east."

Economically, capitalism became unable to sell the output produced or extract surplus value from workers, she wrote.

"The dramatic deterioration in wages limited consumption, forcing workers to resort to increased borrowing... however, debt-led growth could not be sustained. Beginning in the summer of 2007, this solution collapsed, and the capitalist economy has come to face a major systemic crisis," she added.