Published on WSWS, by Barry Grey, August 17, 2011.
Economic growth in Germany, which had been largely powering limited economic growth in the European Union, ground to a virtual halt in the second quarter of this year, according to figures released Tuesday by Germany’s statistical office … //
… Comparisons to the Depression of the 1930s are proliferating, along with grim warnings from governments, policymakers and commentators. “We are entering a new danger zone,” World Bank President Robert Zoellick said Sunday during a visit to Australia. He added that world leaders need to take strong action “both short- and long-term to restore confidence.” But he remained vague as to what these measures should be.
“The second quarter marks a turning point in the German business cycle,” said Unicredit analyst Andreas Rees, adding: “The period of exuberant growth is now behind us.” Christoph Schmidt, a member of Germany’s panel of economic advisers, told Reuters, “We are far from nearing the end of the crisis. Germany cannot decouple from the rest of the world.”
Joseph Stiglitz, a Columbia University professor, former chief economist at the World Bank and Nobel prize winner, published a column in August 10 Financial Times in which he concluded, “A long malaise now seems like the optimistic scenario.”
Bill Gross, the founder and co-chief investment officer of the investment management firm Pimco, published a column in the Washington Post on August 12 in which he warned that “policymakers from a fiscal perspective are pointing us toward recession and the destructive 1930s instead of a low-growth but still breathing US economy of the 21st century.”
Nouriel Roubini, the economist and professor at New York University’s Stern School of Business, has published recent columns arguing that there is a 50 percent chance of a “double-dip recession” and last week acknowledged in an interview with wsj.com that Marx’s analysis of capitalism’s contradictions was correct.
“Karl Marx had it right,” Roubini said. “At some point capitalism can self-destroy itself. That’s because you cannot keep on shifting income from labor to capital without having excess capacity and a lack of aggregate demand. We thought that markets work. They are not working.”
As one improvised measure after another fails to stem the slide toward full-scale depression and a new wave of bank failures and sovereign defaults, the sense of perplexity, helplessness and fear mounts within the ruling class. To cite some recent headlines in major newspapers: “Global Crisis of Confidence” (Wall Street Journal, August 13); “Financial Markets at Their Wits’ End” (Financial Times, August 13); “Geithner, Bernanke Have Little in Arsenal to Fight New Crisis” (Washington Post, August 14).
They all agree, however, on seeking to extricate themselves from the crisis by carrying out the most ferocious attacks on the working class. Liberals and conservatives, followers of John Maynard Keynes and Milton Friedman alike are unanimous on the need to attack the basic social reforms of the previous century and drive back the living standards of the vast majority of the world’s people.
In addition to ever more brutal cuts in social programs, what is being prepared is a new assault on jobs and wages. E.On, Germany’s largest utility, said last week it might need to cut as many as 11,000 jobs after suffering the first loss since it was created a decade ago from the privatization of state-owned utilities.
In an article published Monday by the Financial Times headlined “US industrials prepare for risk of double dip,” the newspaper cited Michael Larsen, chief financial officer of Gardner Denver, a maker of pumps for the oil and gas industry, who said, “We got the team together and we prepared a list of the plants that we are going to go after, and we have a number in terms of headcount reduction that we are ready to putt the trigger on if we do see a slowdown in orders.” (full long text).