by Michael Roberts
The World Bank published its economic growth forecasts for 2012
and beyond today. The bank has lowered its forecast for 2012 from its
estimate back last summer. Now it expects the world economy to grow at
just 2.5% this year compared to 2.7% in 2011 and 4.1% in 2010. So the
recovery from the Great Recession of 2008-9 is beginning to slow down.
The bank’s forecast confirms that the world is not slipping back into a
‘double dip’ recession (see my post, Double dips, deficit and debt, 24 August 2011), but even so economic growth is so slow that capitalism is really in a long depression (see my post, It feels like a depression,
18 September 2011) where unemployment will continue to rise or, at the
very best, stay at highs since the world collapsed in 2009.
When you break down the growth forecasts by region, the bank expects
that the advanced capitalist economies of the OECD will grow just 1.3%
this year, down from a poor 1.4% in 2011 and 2.8% in 2010. There will
be a small pick-up to 1.9% in 2013. So by the end of 2013, the
advanced capitalist economies will have grown by less than 2% a year in
real terms on average since 2009, a rate that cannot restore jobs or
losses in living standards from the Great Recession. Indeed, in 2012,
the bank predicts that the Eurozone will fall into recession, while
Japan will make a mild recovery from the damage caused by the earthquake
and tsunami of 2011. Only the US economy will achieve a higher growth
rate this year (2.2%) than last year, but even so, its average growth
rate of about 2.3% for the four years from 2010-13 is way lower than in
previous recoveries from capitalist slumps.
Even more worrying is that growth in the developing capitalist
economies, the so-called emerging markets, will drop to just 5.4% this
year, down from 7.3% in 2010. That means that unemployment in the poor
capitalist economies will rise because these economies need at least 6%
real growth a year to absorb the growth in the workforce and the influx
into the cities of rural workers. The World Bank also expects world
trade growth to slow sharply to 4.7% this year from 12.4% in 2010,
forcing exporters to cut their prices by up to 4.5% on average. At the
same time, international capital flows will rise only 3.3% , one of the
lowest rates on record. All this means is that globalisation of capital
has been paralysed. Profitability for capitalist investment abroad
will fall, squeezing overall profitability.
Indeed, if we look at corporate profit growth in the major capitalist
economies, we can see that it has slowed sharply from the high rates
achieved in the immediate recovery from the Great Recession. US
corporate profit growth has slowed to 7.5% a year rate, while corporate
profits in the UK, Germany and Japan are contracting. This suggests
that investment growth will stay weak and employment will hardly recover
over the next year or so.
The latest unemployment data for the UK confirm that prospect.
Unemployment has reached its highest level in 17 years and it’s going to
get worse this year. As well as the Eurozone, the UK economy is
contracting again. This may not last more than a couple of quarters, but
the downward pressure of fiscal austerity, weak corporate profit growth
and poor export growth has pushed the UK economy down (see my post, The best laid plans of mice and George Osborne, 29 November 2011). And the UK economy was weakened by the Great Recession more than most. On his blog, John Ross(http://ablog.typepad.com/keytrendsinglobalisation/2012/01/the-incredible-shrinking-uk-economy.html)
shows the UK nominal GDP (measured in dollars) has fallen more than any
other European economy up to 2010 except Iceland, as a contraction in
real national output was combined with a very sharp fall in the value of
So the UK’s standing in the capitalist world (as measured in market
dollars) dropped the most. Indeed, as I have mentioned before in this
blog (The weakest recovery since 1918, 18 October 2011), the
UK’s recovery from the slump of 2008-9 has been the weakest in over 100
years. The UK’s NIESR think-tank produces a nice graphic showing the
weakness of the UK recovery since 2009.
Having said all this, we must not go too far in the direction of
expecting a new slump now. The world economy may be growing very
slowly, but it is growing. Indeed, if we look at the indicators of
activity in the US, the US economy has marginally improved from last
summer. The combined ISM index of manufacturing and services activity
(my invention) shows that the US economy is well above recession levels,
but not in the boom area.
The highest frequency indicator of the state of the US economy is the
ECRI’s weekly leading indicator. This is a useful forecaster of future
growth by about six months or so. It shows that the US financial
conditoons have slipped from the end of 2010, but they are still well
above the depths reached at the end of 2008. So it seems to confirm the
World Bank’s forecasts for US economic growth.
Capitalism is weak, but the patient is not having a relapse and going back into intensive care.
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