4 January 2019
The term “decoupling,”
referring to the severing of trade ties between the United States and China,
has, to quote one commentator, become the “talk of Washington.” The two
countries are embroiled in what has been widely described as a “new cold war,”
in which, in the words of former Treasury Secretary Hank Paulson, an “iron
curtain” has descended over the Pacific.
In place of what the Washington
Post called a “bipartisan consensus in favor of broad engagement with
China,” substantial sections of the American foreign policy establishment are
supporting the Trump administration’s policy of disentangling the myriad
economic links between the world’s two largest economies amid the growth of
protectionism and military conflict.
But Thursday’s events have
given a hint of what such a “decoupling” will look like in the 21st century
globalized economy. Amid bear markets in Germany, China and Japan, a relentless
fall in commodity prices, signs of slumping consumer spending and mounting
layoffs and plant closures in auto and other industries, the American ruling
class fears that the global slowdown is spreading to the United States.
For the first time in 16
years, Apple Inc, the world’s most profitable company, was forced to cut its
sales projections for the coming year, citing the deepening economic slump in
China and attributing it to the US trade war.
The announcement prompted a
660-point selloff on the Dow. After closing the worst December since the 1930s,
the US markets have had their poorest two-day start for a new trading year
since the collapse of the dot.com bubble.
Apple CEO Tim Cook wrote,
“While we anticipated some challenges in key emerging markets, we did not
foresee the magnitude of the economic deceleration, particularly in greater
China.” He continued, “We believe the economic environment in China has been
further impacted by rising trade tensions with the United States.”
A trader cited by the Wall
Street Journal was more direct: “All of it is coming home to roost more
directly in the United
States… the slowdown is here
and happening.”
The speed of the reversal in
sentiment is striking. “Just weeks after Federal Reserve officials penciled in
two interest rate increases in 2019, half of investors now expect the central
bank to cut rates this year, up from about 10 percent a day earlier,” wrote
the Wall Street Journal.
The same day as Apple’s
warnings, the ISM manufacturing index for the US posted its biggest one-month
fall in factory activity since the 2008 financial crisis.
These figures have prompted
warnings that US growth will not merely see a gradual slowdown over the course
of several years, as is broadly predicted by global institutions, but could
follow China and other developing countries into a sharp and deep recession.
Such a recession, international in scope and intensified by trade war, could
spark a global financial crisis on the scale of, or larger than, the 2008
crash.
This is because none of the
fundamental causes of the 2008 crisis have been addressed. The holes in the
banks’ balance sheets were simply filled with money spit out by central banks
through quantitative easing and ultra-low interest rates. The economic
“recovery” since 2008 has been financed by an expansion of global debt, which,
according to figures published by the International Monetary Fund last month,
has hit an all-time high of $184 trillion.
Meanwhile, events like
Malaysia’s 1MDB scam, in which global financial institutions such as Goldman
Sachs extracted hundreds of millions of dollars in fees to facilitate the theft
of billions of dollars, show that the types of large-scale fraud that led to
the 2008 financial crisis remain prevalent.
But unlike the 2008 crisis, in
which the major economies vowed to cooperate and pledged to avoid trade war,
the United States has initiated trade war measures against not just China, but
also against dozens of other countries, including its European NATO allies. As
in the 1930s, these trade conflicts have the potential of magnifying the scale
of a global recession.
The growth of “great power
competition,” and the resulting trade and military conflicts do not arise from
the mind of US President Donald Trump. Rather, they represent the assertion of
a fundamental and insoluble contradiction of capitalism: the conflict between
global production and the nation-state system. That is why, despite the
unprecedented worldwide integration of economic life, communications and
scientific research, the ruling elites all over the world are pursuing
nationalist trade policies and military rearmament.
Writing just months after the
collapse of Lehman Brothers, WSWS International Editorial Board Chairman David
North observed:
“The most essential feature of a historically significant crisis is that it
leads to a situation where the major class forces within the affected country
(and countries) are compelled to formulate and adopt an independent position in
relationship to the crisis.”
The ruling elites in the
United States and all over the world responded to the 2008 financial crash by
seeking to make the working class bear the full brunt of the crisis. The
investments of the financial oligarchy were made whole, then doubled and
tripled, as a result of bank bailouts, deregulation and tax cuts.
Meanwhile, the working class
faced a decade of stagnant and declining wages, spearheaded by the expansion of
low-wage production at the US automakers as part of their restructuring carried
out by the Obama administration and its trade union partners.
With the eruption of a new
global recession, the ruling elite will operate on the basis of the same
playbook—intensifying the ruthless policy of austerity it has pursued since the
financial crisis.
But the past decade has not
been in vain. The year 2018 saw a substantial growth of the class struggle,
including a wave of strikes and protests by teachers in the United States,
strikes by delivery and logistics workers, airline pilots, auto workers and others
on virtually every continent, and explosive protests by workers from Iran to
Latin America. The year concluded with the eruption of mass anti-austerity
protests in France, independent of the trade unions, and moves to form
rank-and-file committees by auto workers in the United States and plantation
workers in Sri Lanka.
The ruling elites, with their
legitimization of trade war and “great power conflict” and their efforts to
rehabilitate the fascist legacy of the 1930s, are paving the way for a repeat of
all the horrors that characterized that decade.
Only the independent
revolutionary movement of the working class offers humanity a way forward out
of this morass. In the face of renewed attacks by the ruling elite, workers all
over the world must enter into struggle under the banner of socialist
internationalism, with the aim of overthrowing the capitalist system and
securing a peaceful and prosperous socialist future.
Andre Damon
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