Welcome to a zero world-Big slowdown is in the Western economies
The facts do not support the repeated assertions that the Chinese economic slowdown is leading the world economy to slower growth. China is undoubtedly slowing. But the data for 2015 show that the slowdown in the United States is more pronounced. At the same time, other Western economies have either failed to reignite since the global recession, or, in the case of Britain have slowed even more than the US.
At the beginning of 2015 the US economy was growing at a rate of 2.9% compared to the same period in 2014 while the Chinese economy was growing at a 7.0% pace. Both economies slowed over the course of 2015. But in China this was from 7% to 6.8%. In the US the slowdown was from 2.9% to 1.8% in the initial estimate. As a consequence, the growth gap between the US and China widened in favour of China over the course of the year from 4.1% to 5.0%. For 2015 as a whole, compared to 2014 US real GDP grew by 2.4% and China grew by 6.9%.
The situation is not any better in the other Western economies. The Euro Area economy has not achieved a growth rate of more than 2% in any quarter since the beginning of 2011. In Japan, ‘Abenomics’ the policy of creating money to devalue the currency, which aimed to boost Japanese business at the expense of China and the living standards of Japan’s workers has already failed and the Bank of Japan has adopted negative interest rates. In Britain the growth rate has slowed continuously from 3.0% in mid-2014 to 1.9% in the final quarter of 2015.
None of the Western economies is growing strongly and none is growing at anything like China’s pace. One fund manager recently told the Financial Times (£), “We are heading for a world of zeros: including zero inflation, zero growth in per-capita GDP and zero growth in productivity.” This accurately describes the general outlook for the Western economies.
How Labour will improve living standards
With May’s elections just three months away, now is the time to set out positively the case for voting Labour. The key themes that won Jeremy Corbyn the Labour leadership need to be put forward as specific policy commitments so people can see how their living standards would improve under Labour. It would also help if a slogan is promoted that captures the difference Labour in government would make – for example ‘Better off with Labour’ or something conveying a similar message.
Corbyn and McDonnell’s attacks on the government have been very effective. On a number of issues, including tax credits, police service cuts, the prison deal with Saudi Arabia and Google’s tax bill, the Tories have been put on the defensive. These negative attacks undermine Tory support, but for Labour itself to gain, and not other opposition parties in particular the Lib Dems, it also has to put forward positive alternative policies.
Whilst Ed Milliband’s promise in 2013 to freeze energy bills was a relatively small measure, it did illustrate how campaigning for a progressive policy can shift support towards Labour. That year opinion polls registered Labour support falling (from the low 40s) by about six per cent following announcements that it would adopt the Tories’ spending plans, cap welfare spending and end universal winter fuel payments. But after the pledge to freeze energy bills support shot back up by three per cent.
Unfortunately Labour did not sustain this approach and develop its ‘cost of living’ campaign agenda. Instead the austerity framework took an overall grip over policy, ensuring the subsequent fall of Labour support till the General Election.
Corbyn and McDonnell are putting forward a distinct break from that failed approach. They propose to end austerity and improve public services. Labour should set out clearly and campaign on some of the measures it will introduce, across key areas including pensions, housing, health care, transport and welfare.
Regrettably the Blairite Scottish Labour Party is still pursuing a pro-austerity agenda. It is proposing to increase the basic rate of tax. Even taking into account the proposed £100 rebate for those earning less than £20,000, this is a regressive measure. It puts a disproportionate onus on low and middle income groups, to replace a small portion of public funds cut by the Tories. This will not aid Labour’s electoral recovery. To win, voters need to see how they will be better off with Labour, not worse off.
The forthcoming public meeting organised by the Labour Assembly Against Austerity, will provide an opportunity to discuss Labour’s alternative policies:
* ‘Better Off With Labour – the Alternative to Osborne’s Cuts’ 6.45pm Weds 9 March House of Commons. Speakers: John McDonnell MP, Diane Abbott MP, Cat Smith MP, Helen Goodman MP, Maya Goodfellow, Shelly Asquith & Steve Turner.
The anti-austerity movement is helping set the agenda into May’s elections
With the British economy slowing down again the Tories are desperate to avoid May’s election contests becoming focused on living standards as these come under increased attack. They are fanning reaction and fear to push an agenda on immigration, Muslims and security. If these issues become the main battleground it will be disadvantageous for Labour.
The Tory leadership is also putting the European referendum firmly on the agenda now, aiming to inflict maximum damage on Labour as was achieved in the Scottish referendum.
The EU referendum will be used to emphasise Labour-Tory unity and minimise the contradictions over austerity and other issues. Overall the referendum is a farce as Britain is not going to leave the EU. Cameron has had to accept whatever concession suited Merkel. Big business intends to throw everything necessary into the referendum campaign, to overcome Tory infighting and Eurosceptic newspapers, and win the vote to stay in. In the very unlikely circumstance that the referendum produces the ‘wrong’ result this year, as elsewhere in Europe voting will be repeated till the desired outcome is achieved. It is all hype that Britain’s membership of the EU is really at stake in the referendum.
Labour is being pressed to position itself alongside the Tory leadership for this referendum campaign. Corbyn is right to attack Cameron over negotiating for the ‘wrong goals’. But, as in Scotland, the Labour right is tying itself to Cameron’s framework – weakening the strength of campaigning against the Tories, with consequent risks to Labour support.
Labour’s electoral strength is maximised when it puts forward its own proposals in a clear fight with the Tories on such issues as public services, living standards and welfare. Framing the political agenda into May on this terrain objectively assists Labour.
The NHS is a key issue for voters. The NHS struggle and forthcoming doctor’s strike is an important anti-austerity fight. Junior doctors have significant public support and are driving the health service up the political agenda. They should be backed by Labour, which would gain from taking a clear stand in solidarity.
The struggle against austerity helps focus public attention on the decline in living standards. The 16 April march called by the Peoples Assembly Against Austerity will be an important mobilisation that also helps set a progressive agenda for May’s election. It is to Labour’s advantage for the political terrain to be shifted towards living standards and austerity.
Trident is a gigantically expensive irrelevance – all out for 27 February!
Trident is a hugely expensive weapons system, irrelevant to any real military issue and it will not be used.
The Ministry of Defence estimates suggest that the whole-of-life cost of building and running the Trident submarine system will be a staggering £167bn in total, including the £31-£41bn set aside for the initial capital costs. The running costs are estimated to be around 6% of the total defence budget.
From a military point of view Trident is a complete diversion. It would have been useless in the real military conflicts British imperialism has engaged in – such as the bombing of Iraq, Libya and Syria. ISIS and other such forces should undoubtedly be enthusiastically in favour of Trident as it substantially reduces the amount of military resources that Britain can actually deploy against them.
It is not an ‘independent’ nuclear deterrent but purely one that can technically operate with the permission of the US.
Trident’s sole real function is to tie Britain firmly into a subordinate political/military relation with the US.
In the run up to the British parliament debating the renewal of Trident it is important that CND’s 27 February demonstration is as large as possible.
* Assemble 12 noon • Saturday 27 February 2016 • Marble Arch, London
March to Trafalgar Square rally with contributions from political & celebrity speaker
See the CND website for full details.
The Tories’ electoral strategy this year has a central focus on a number of scapegoating issues. They are positioning themselves as a mainstream anti-immigrant patriotic party, that constrains Muslims and guarantees security against terrorism.
Cameron’s reference to the camp at Calais as a ‘bunch of migrants’, the campaign to discriminate against migrant workers in welfare provision and the vile rhetoric against Muslims – these are just some of the current elements in that situation.
With this offensive intensifying the anti-racist movement needs to step up its activity. Two important events that should be widely promoted are:
* Unite Against Fascism National Conference Saturday 6 Feb 9.30-4.30 London
* Stand up to racism & fascism – National Demo Saturday 19 March Assemble 12 noon London
China’s policy choice – capital controls
The Western hyperbole regarding the Chinese economic slowdown serves as a distraction from home-grown economic woes. But China does face important policy choices. This is not because of the stock market fall which is economically insignificant in China, but because of substantial capital outflows, perhaps as high as US$1 trillion.
Under current policy China faces what is sometimes called in a mainstream economics a ‘trilemma’. It is attempting simultaneously to maintain a controlled exchange rate and an independent monetary policy while having relaxed capital controls. But if capital is free to be spirited abroad, simply in order to maintain the value of the currency it is necessary to adjust interest rates.
As both the official interest rates and the exchange rate are key macroeconomic policy tools it is evident that control of these should be maintained by the People’s Bank of China. Therefore the experiment with looser capital controls should be reversed.
This is important not just for China but also for the world economy. The capital inevitably flows to the US, which consumes 80 per cent of its income. By contrast China invests about half of its national income, and so it contributes far more to global growth. Tighter capital controls would benefit the Chinese economy, the motor of the world economy.