Socialist Action /May 2001
Japan's Economy Faces Collapse; a Harbinger
of World Crisis?
By JEFF MACKLER
Tokyo trader nurses a headache as board indicates 351 point drop in
stock prices.
Japan, the world's second largest economy and a
major provider of capital to the rest of the world, is in crisis. On March
22, the Japanese government announced it faced the worst economic slowdown
since World War II. Its stock market is at a 15-year low. The yen is at
a 15-month low.
According to a March 8 statement by Japan's Finance
Minister, Kiichi Miyazawa, "Japan's public finances are very near collapsing."
And the U.S. economy may not be far behind. The
March 26 Los Angeles Times, in an article titled, "Global Slowdown
Will Hit Home," warned: "Not since the oil crisis of 1973 has
the world had all its engines sputtering at once. With currencies tumbling
from London to Bangkok and slowing growth in the U.S. and Japan, which represent
40 percent of global domestic product, the real danger is a downward spiral
with no one to pull the brake."
After 11 stimulus packages and a decade of recession-shrunken
tax revenues following the bursting of the financial bubble at the beginning
of the 1990s, Japan's public debt is now almost 130 percent of its GDP,
the worst in the industrial world.
Japan's debt stems from unprecedented Keynesian-style
government deficit spending to prime the pump of a capitalist system whose
profit rates, under constant pressure from foreign competition, are ever
declining.
But the Japanese government's massive subsidies
to Japanese corporations has failed to revive the economy. And the world's
most accommodating monetary policy has proven to be equally ineffective.
At virtually zero percent interest rates, the reality of rapidly declining
profit rates has led few if any corporations to borrow for the purpose of
investment in new technologies and industry.
This is a striking fact of capitalist production
long ago predicted by Karl Marx, not to mention by capitalism's historic
economic mentor, Lord John Maynard Keynes.
Keynes recognized that without government loans
and other subsidies to industry, declining profit rates resulting from worldwide
competition would inevitably lead to collapse, as was the case with the
1929 worldwide Depression. His remedy was for governments to encumber themselves
with large-scale debt by borrowing from banks and other lending institutions.
When the economy was turned around, Keynes believed, the debt could be repaid.
Today, Japan has emerged as the world's largest
debtor, but not too far ahead of the United States, whose economic woes
are similar. But contrary to Keynes, in the face of worldwide competition,
there are no better times ahead and Japan's debt looms as unpayable. Government
loans to Japan's failing and bankrupt industries cannot be repaid. In consequence,
Japanese banks have registered increasing numbers of failures.
Keynes was asked about what would happen when the
governments of the world reached the point when their debts became unpayable.
His response is instructive. "By that time," he said, "we
will all be dead."
That was more than 70 years ago, and Keynes and
his generation are literally dead. But the specter of the crisis he predicted
is taking form as virtually every nation has encountered the largest debt
levels in their history.
The U.S. proposes to pay a portion of its debt
by looting the Social Security and Medicare systems. Similarly, the world's
other capitalist governments are attempting to solve their crises at the
expense of their own workers. The economic "miracle" of yesteryear,
the Asian Tigers, stands in ruin, as are the nations of the underdeveloped
world more generally.
Protectionism in a "free trade" world
Japan's economy continues to not only stagnate,
but is falling once again into a recession. Industrial production in January
posted its largest fall in more than five years. With the increasing saturation
of world markets, even the world's second largest economy cannot escape
the fact that the very technology that allowed Japan to rise to world prominence
a decade ago has in several key areas been surpassed by its world competitors.
Cutthroat competition, wherein machines constantly
replace human labor power, has reduced profit rates not only in Japan, but
worldwide. This is the chief factor that drives the current process of capitalist
globalization, the frenzied search for new markets and higher profit rates,
no matter the human cost.
The world's leading competitors are keenly aware
of the tendency of each nation to protect its own markets from products
that are produced more efficiently and cheaply elsewhere.
No nation is exempt from this process, from the
U.S. computer and high technology industries, which are the most advanced
in the world, to the U.S. automobile industry, whose technology lags behind
that of Japan. U.S. car production has dropped by 600,000 units over the
past year few years.
In the face of Japan's looming catastrophe, the
Bush administration sternly warned Japanese capitalists against trying to
"export their way out of its crisis." Instead, Bush advised massive
"restructuring" of Japanese industry-the code word for mega-mergers,
plant closures, and massive layoffs and social cutbacks.
Bush, who generally styles himself a spokesperson
for "free trade," warned Japanese carmakers and other capitalists
to keep their commodities out of the United States or pay the consequences.
These would include retaliatory measures such as exporting foodstuffs to
Japan to destroy its internal agricultural industry and similar measures
with other products where Japan lags behind U.S. technology.
The world's trade organizations and financial institutions,
from NAFTA and the WTO, the World Bank and International Monetary Fund,
to the more recent FTAA, are designed to try to mitigate this inherent contradiction
in the world capitalist economy.
Capitalism fundamentally operates on the basis
of each nation state protecting its own corporations at the expense of its
world competitors. The state tries to achieve this by government loans and/or
direct subsidies (corporate welfare), monetary policies, and anti-working-class
policies including assaults on social services and anti-labor legislation
and actions. All are designed to thwart the inherent tendency of the rate
of profit to decline.
And when these measures prove insufficient to solve
capitalism's problems, the most powerful nations will result to war to conquer
the markets they have been denied-as happened in the first two world wars.
We are today witness to a worldwide armaments race
and unprecedented military spending designed to both prime the pumps of
failing corporations and to back up economic threats with military force.
In a world marked by the highest technology levels
and greatest industrial capacity in human history, we are witness to the
massive ruination of workers and peasants worldwide, including the closing
of plants in every nation at record levels.
Free trade is the language of nations whose technology
enables them to momentarily dominate world markets. But today's free traders
soon become tomorrow's protectionists as the world's major economic power
blocs gear up to meet the challenge of their opponents and introduce ever
more efficient technologies.
For the moment WTO and FTAA-type gatherings seek
a common objective, to agree that all the rich can advance at the expense
of the world's workers. The ruling rich seek to negotiate trade agreements
that at least temporarily prevent the inevitable, the collapse of world
trade in the face of ever-shrinking markets and a growing crisis of overproduction.
U.S. stock market plummets
Faced with declining profits in their home markets,
Japanese capitalists, like their European counterparts, have long sought
higher rates of return on their capital in the United States, particularly
in the U.S. stock market. But when these markets were themselves jolted
as major U.S. corporations announced the same bad news, the Japanese and
others withdrew large sums from the U.S. stock market, leading to the dramatic
declines of the past several months.
A March 23 Los Angeles Times article titled,
"The Economy: There's Almost No Hope of a Soft Landing," accurately
describes the U.S. dilemma: "Company after company announces rapidly
dropping sales. The stock market takes note by marking down prices. From
the peak of last year, the tech-laden Nasdaq has plummeted more than 60%,
the Standard and Poor 500 index has crashed by 25%, and the Dow Jones industrial
average has lost almost a fifth of its value. The dreaded "r"
word [recession] is everywhere."
Over the past 12 months, investors in the U.S.
stock market have lost an incredible $5 trillion in stock market values.
Unlike past decades when market investors were largely confined to the wealthy
few, today, in one form or another, more than half the U.S. adult population
has investments in the stock market.
At the end of April, Federal Reserve Chair Alan
Greenspan, like his Japanese counterparts, tried to stimulate the failing
U.S. economy by a surprise half percent drop in the prime lending rate and
a near promise to reduce rates yet again when the Federal Reserve meets
in May. These reductions follow several others over the past six months.
The combination of a rapidly declining U.S. stock
market, declining U.S. interest rates, and declining U.S. profits has slowed
foreign investments in the U.S. economy. With Japan incapable of recovery
and the U.S. seemingly heading toward its own recession, a world economic
slowdown is expected to spread and generalize.
The long period of capitalist decline has led to
an awakening consciousness on the part of workers and the oppressed and
exploited everywhere. Youth especially have been among the first to directly
challenge the world's capitalist profiteers, as with their mobilizations
from Seattle to Quebec City.
In time the broad working class in the United States
and worldwide will also begin to challenge their bosses and governments.
The resulting confrontations will open a new era in the world class struggle,
as Marx's maxim becomes a reality once again: "Workers of the world
unite! You have nothing to lose but your chains!"
Socialist Action /May 2001 |