IMF scares capitalists with world problems, and Trotskyists call for revolution
The “Report on Global Financial Stability” for October 2016 of the International Monetary Fund demonstrates the financiers' concern about the instability of the global financial system and problems in both the economies of developed countries and those that continue to build a market economy. The threats are the growth of debts, the precariousness of the pension systems, the weakness of the banking sector, and political instability.
Nick Beams (Nick Beams) on World Socialist Web Site spoke about the "existential crisis." At the International Monetary Fund, they experience “serious” problems: at the next meeting of the Fund, financiers noted the growing protectionism in the world economy and the growth of hostility around the world to the economic and political world order that until now was considered “dominant” on the planet.
The meeting decided to designate their concerns as Trump's “longing”. The presidential candidate of the American Republicans became for them a kind of Volan de Mort (the villain from the Harry Potter books, whose name "is pronounced only in a whisper and behind closed doors"). Trump serves as a "particularly vulgar" spokesman for "the collapse and disintegration of the economic order that has developed since the end of World War II." This man also demonstrates a complete break with the official policy of the White House, which has been conducted so far.
IMF Managing Director Christine Lagarde raised some of the major problems, but could not give any guidance on how to solve them.
Developed economies, she noted in her speech, “are stuck on a cycle of low growth, low investment, low inflation.” At the same time, emerging markets showed growth. As for exporters of raw materials, low prices hit them.
Growth was “too long too low,” she continued, and this led to social and political consequences that stem from high inequality. This problem "becomes too obvious."
Recalling the principles on which the IMF was created in 1944, in the face of economic difficulties resulting from the depression and World War II, she noted that “if the founding fathers were here today, they would certainly be concerned.” The principles of open trade and openness in general are under threat today. It is the multilateral dialogue that is the key to the stability of the world economy, Lagarde said. “Now, these principles are being subjected to the most serious tests in recent decades,” she believes.
Suma Chakrabarti, President of the European Bank for Reconstruction and Development, agrees with Lagarde’s remarks about threats to the fundamental principles of the IMF: “In my life I can’t recall such skepticism about these fundamental values that we are witnessing today.”
Some of the major problems of global economic and political order were the subject of a column for former US Treasury Secretary Lawrence Summers, who published his opinion in the Financial Times last Monday.
Summing up the IMF meeting, he pointed to the "ghost" of insufficient economic growth, on the one hand, and growing populism and global disintegration, on the other. Here is a common problem: "... traditional leaders have lost their orientation on the road, and the world economy has entered uncharted and dangerous territory."
Nick Beams points out that Summers does not believe in the financial crisis as the main cause of the current "stagnation." Most likely, low interest rates today reflect a surplus of savings compared to investments that began to form in the middle of the 1980-s. And this is the main reason for the failure of predictions about the restoration of economic growth for several years after the 2008 crisis of the year. “After seven years of economic over-optimism,” he pointed out in his column, “there is a growing awareness that the problems were not so much inherited from the financial crisis, but from profound structural changes in the global economy.”
From here and political crisis: the population of the countries ceased to trust the leaders. It is not surprising that as the economic growth slowed down year after year, the beneficiaries were a small number of individuals, and the electorate lost confidence "both in the competence of economic leaders and in their desire to serve the general public, and not in a handful of the global elite."
Mr. Summers himself is a Keynesian (in the current interpretation of Keynes’s ideas).
In a capitalist economy, production is motivated at a fundamental level by not the need for economic growth or the desire to satisfy social needs, but the pursuit of profit, and nothing else, Beams writes. If the rate of return shows a downward trend, investments are reduced, which, in turn, leads to a decrease in economic growth rates, and this leads to a further decrease in investment expenditures. As a result, for a long-term perspective, lower growth rates are being laid, and even “age-old stagnation”.
These basic considerations are crucial in evaluating the recommendations proposed by Summers and his associates regarding a potential reform of the capitalist system. According to Summers, the challenge is to find a way forward, which will strengthen international cooperation. This means focusing on “concerns of a wide middle class, not global elites”. Accordingly, the ideas of "austerity in the economy" should be rejected in favor of the "investment economy." The focus of international economic cooperation should shift from the opportunity for capital to better labor outcomes.
However, these two goals are incompatible within the framework of a capitalist economy, reminds Beams.
The only solution to the problem of the deepening crisis, he believes, is not at all reforms that are still impossible. Most likely, the task is to transform the energy of “increasing anger and hostility towards the global economic and political order” into a “conscious political movement”. This movement could be based "on a program of international socialism based on the overthrow of the most outdated capitalist profit system." It was this “political lesson” Beams derived from the results of the IMF meeting.
Concerning IMF reportthen another problem that was noted in it is the reduction of financial stability in the banking sector.
Low profitability over time can reduce the reserves of banks and undermine their ability to support economic growth. Over 25% of banks in countries with developed economies (with a volume of assets of approximately 11,7 trillion. Dollars) will remain in a weakened state and will face serious problems.
Debts are another source of instability, especially in emerging market countries. Approximately 11% of enterprises' debt (over 400 billion dollars) is today found in companies with low debt repayment potential. At the same time, the preservation of fast credit growth rates in China and the increase in the volume of shadow banking products there are sources of increasing risks for financial stability.
Problems threaten and pension systems. “Strengthening the position of life insurance companies and pension funds remains a critical task,” the IMF document says. - A long period of low growth and low interest rates creates significant difficulties for organizations engaged in long-term investment and savings, such as insurance companies and pension funds. Regulators and supervisors should take immediate action to maintain strong balance sheets of insurance companies and pension funds, including by identifying insolvency risks and funding gaps over the medium term while strengthening the reform program to tighten standards on internal models and capital bases and increasing transparency. ".
The report shows that the recommendations of the IMF are rather general in nature and that the currency authorities show some tendency to panic worldwide. It is also obvious that the Chinese do not fully agree with the conclusions of the IMF, since they spoke about their problems in the Fund before, and Beijing continues to smile sweetly. They probably have their own programs and recommendations that Lagarde did not bring to the notice.
As for the ideas of Comrade Beams, the “overthrowing” of the capitalist system looks like an even more vague version of the amendment of the situation. If Beams proposes a world revolution, then he should be recognized as the new Trotsky (at the World Socialist Web Site, Comrade Trotsky is just honored). However, the dream of such a socialist revolution appears in the transnational century and the century of the middle class much more unrealizable than in the days of Lenin.
Nick Beams (Nick Beams) on World Socialist Web Site spoke about the "existential crisis." At the International Monetary Fund, they experience “serious” problems: at the next meeting of the Fund, financiers noted the growing protectionism in the world economy and the growth of hostility around the world to the economic and political world order that until now was considered “dominant” on the planet.
The meeting decided to designate their concerns as Trump's “longing”. The presidential candidate of the American Republicans became for them a kind of Volan de Mort (the villain from the Harry Potter books, whose name "is pronounced only in a whisper and behind closed doors"). Trump serves as a "particularly vulgar" spokesman for "the collapse and disintegration of the economic order that has developed since the end of World War II." This man also demonstrates a complete break with the official policy of the White House, which has been conducted so far.
IMF Managing Director Christine Lagarde raised some of the major problems, but could not give any guidance on how to solve them.
Developed economies, she noted in her speech, “are stuck on a cycle of low growth, low investment, low inflation.” At the same time, emerging markets showed growth. As for exporters of raw materials, low prices hit them.
Growth was “too long too low,” she continued, and this led to social and political consequences that stem from high inequality. This problem "becomes too obvious."
Recalling the principles on which the IMF was created in 1944, in the face of economic difficulties resulting from the depression and World War II, she noted that “if the founding fathers were here today, they would certainly be concerned.” The principles of open trade and openness in general are under threat today. It is the multilateral dialogue that is the key to the stability of the world economy, Lagarde said. “Now, these principles are being subjected to the most serious tests in recent decades,” she believes.
Suma Chakrabarti, President of the European Bank for Reconstruction and Development, agrees with Lagarde’s remarks about threats to the fundamental principles of the IMF: “In my life I can’t recall such skepticism about these fundamental values that we are witnessing today.”
Some of the major problems of global economic and political order were the subject of a column for former US Treasury Secretary Lawrence Summers, who published his opinion in the Financial Times last Monday.
Summing up the IMF meeting, he pointed to the "ghost" of insufficient economic growth, on the one hand, and growing populism and global disintegration, on the other. Here is a common problem: "... traditional leaders have lost their orientation on the road, and the world economy has entered uncharted and dangerous territory."
Nick Beams points out that Summers does not believe in the financial crisis as the main cause of the current "stagnation." Most likely, low interest rates today reflect a surplus of savings compared to investments that began to form in the middle of the 1980-s. And this is the main reason for the failure of predictions about the restoration of economic growth for several years after the 2008 crisis of the year. “After seven years of economic over-optimism,” he pointed out in his column, “there is a growing awareness that the problems were not so much inherited from the financial crisis, but from profound structural changes in the global economy.”
From here and political crisis: the population of the countries ceased to trust the leaders. It is not surprising that as the economic growth slowed down year after year, the beneficiaries were a small number of individuals, and the electorate lost confidence "both in the competence of economic leaders and in their desire to serve the general public, and not in a handful of the global elite."
Mr. Summers himself is a Keynesian (in the current interpretation of Keynes’s ideas).
In a capitalist economy, production is motivated at a fundamental level by not the need for economic growth or the desire to satisfy social needs, but the pursuit of profit, and nothing else, Beams writes. If the rate of return shows a downward trend, investments are reduced, which, in turn, leads to a decrease in economic growth rates, and this leads to a further decrease in investment expenditures. As a result, for a long-term perspective, lower growth rates are being laid, and even “age-old stagnation”.
These basic considerations are crucial in evaluating the recommendations proposed by Summers and his associates regarding a potential reform of the capitalist system. According to Summers, the challenge is to find a way forward, which will strengthen international cooperation. This means focusing on “concerns of a wide middle class, not global elites”. Accordingly, the ideas of "austerity in the economy" should be rejected in favor of the "investment economy." The focus of international economic cooperation should shift from the opportunity for capital to better labor outcomes.
However, these two goals are incompatible within the framework of a capitalist economy, reminds Beams.
The only solution to the problem of the deepening crisis, he believes, is not at all reforms that are still impossible. Most likely, the task is to transform the energy of “increasing anger and hostility towards the global economic and political order” into a “conscious political movement”. This movement could be based "on a program of international socialism based on the overthrow of the most outdated capitalist profit system." It was this “political lesson” Beams derived from the results of the IMF meeting.
Concerning IMF reportthen another problem that was noted in it is the reduction of financial stability in the banking sector.
Low profitability over time can reduce the reserves of banks and undermine their ability to support economic growth. Over 25% of banks in countries with developed economies (with a volume of assets of approximately 11,7 trillion. Dollars) will remain in a weakened state and will face serious problems.
Debts are another source of instability, especially in emerging market countries. Approximately 11% of enterprises' debt (over 400 billion dollars) is today found in companies with low debt repayment potential. At the same time, the preservation of fast credit growth rates in China and the increase in the volume of shadow banking products there are sources of increasing risks for financial stability.
Problems threaten and pension systems. “Strengthening the position of life insurance companies and pension funds remains a critical task,” the IMF document says. - A long period of low growth and low interest rates creates significant difficulties for organizations engaged in long-term investment and savings, such as insurance companies and pension funds. Regulators and supervisors should take immediate action to maintain strong balance sheets of insurance companies and pension funds, including by identifying insolvency risks and funding gaps over the medium term while strengthening the reform program to tighten standards on internal models and capital bases and increasing transparency. ".
The report shows that the recommendations of the IMF are rather general in nature and that the currency authorities show some tendency to panic worldwide. It is also obvious that the Chinese do not fully agree with the conclusions of the IMF, since they spoke about their problems in the Fund before, and Beijing continues to smile sweetly. They probably have their own programs and recommendations that Lagarde did not bring to the notice.
As for the ideas of Comrade Beams, the “overthrowing” of the capitalist system looks like an even more vague version of the amendment of the situation. If Beams proposes a world revolution, then he should be recognized as the new Trotsky (at the World Socialist Web Site, Comrade Trotsky is just honored). However, the dream of such a socialist revolution appears in the transnational century and the century of the middle class much more unrealizable than in the days of Lenin.
Observed and commented on Oleg Chuvakin
- especially for topwar.ru
- especially for topwar.ru
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