A comprehensive report published in September by the United Nations Conference on Trade and Development (UNCTAD) provides a devastating evaluation of the current state of world capitalism. The 174 pages are infused with pessimism about whether the UN’s 2030 Agenda for Sustainable Goals, agreed in 2015 by the 193 member states represented in the General Assembly, can be reached. At the same time, the authors appeal to governments and private investors in ever more desperate passages to take the urgent and necessary steps to coordinate their actions around delivering a global green new deal.
The analysis is accompanied by mountains of statistics that strip bare the illusion that capitalism has learned fundamental lessons from the causes that triggered the great recession of 2007-08. Nevertheless, it abstains from any overt disapproval of the reckless geopolitical and economic policies currently pursued by capitalist governments.
Though the report is framed as a call for international cooperation to restore an economic equilibrium for capitalism and avert a global climate meltdown, there is no critique of Donald Trump’s right-wing populism in the US and its damaging impact on world trade and international political stability.
US-imposed protectionism is criticised only very obliquely, as an unfortunate policy choice. The deteriorating economic performance of Brazil is scrutinised, yet the UN stays tight-lipped about president Jair Bolsonaro’s tacit encouragement of those setting fire to huge swathes of the Amazon rainforest.
Internationally, an estimated $50 trillion was wiped off asset values in 2007-08 and the report concludes gloomily that few lessons have been learned. The international world order remains extremely fragile, it warns, with a “falling income share of labour; the erosion of public spending; the weakening of productive investment; and the unsustainable increases in carbon dioxide in the atmosphere”. Indebtedness has grown, high levels of inequality remain and widening political divisions are developing. This is creating a “breakdown in trust which has occurred at the very moment the collective actions needed to build a better future for all depend on a greater sense of shared responsibility and solidarity”.
To tackle global warming, the report argues that there is only one option left: a coordinated investment programme on an unprecedented scale across the entire planet. According to the World Bank in 2015, this would require trillions of dollars, with UNCTAD adding that $3 trillion annually is needed just to address the challenge in developing countries.
In the context of the Washington-sponsored trade war with China, a heightening political crisis in the Middle East, geopolitical uncertainties everywhere and an impending recession, which will have serious repercussions across the world economy, such a plan remains little more than a fantasy.
The US economic recovery may be the longest on record but it is also one of the shallowest. The latest world trade figures published in May show a drop in the first half of the year and the weakest position since 2010. There is little sign in the US or anywhere else of the promised investment boom, while the shadow banking system which wreaked such havoc in world markets in the last recession now accounts for around one third of the global financial system.
UNCTAD adds despairingly: “Long-standing institutional and market firewalls have been broken down in the name of competition, efficiency and innovation. But the main aim of the financial innovation that took place from the 1970s onward has been to put credit creation further out of the reach of regulators”.
In 2018, the Intergovernmental Panel on Climate Change (IPCC) announced that the world faced climate disaster in ten years without fundamental coordinated action by UN member states. Between 2010 and 2016 there were around 5,000 extreme weather events internationally, costing an average of $127 billion each year. Exposure to air and water pollution already causes nine million deaths annually, while thousands of species are becoming extinct, soil quality is degrading, oceans becoming acidified and entire regions suffering desertification.
The reality, however, is that, despite an acknowledgement of the climate peril that faces humankind by growing sections of the capitalist class and establishment politicians, they continue to fail to effectively address global warming. Any future attempts to secure internationally binding mechanisms to halt this process will break down in the face of economic and political rivalries between competing nation states. The authors of the document implicitly recognise these geopolitical realities, while impotently urging a “multilateral response to this immediate policy challenge”.
The report confirms many of the conclusions that the CWI has drawn about the present precarious economic conjuncture. While global corporations are sitting on an estimated $2 trillion cash pile, there is little evidence of that being used for productive investment. Even infrastructural development carried out by private capital has been heavily concentrated in very narrow sectors, with energy and communications receiving 37% and 30% respectively between 2008 and 2017. Water and sanitation obtained only 7% of total private-sector financing in the last decade.
With non-financial corporations able to secure very cheap credit to fund financial operations, they have a strong incentive to turn away from productive investment because of its long maturity, low liquidity and often lower yields. The pattern of acquiring financial assets, instead of physical investment, has become more pronounced since before 2008. In summary, according to UNCTAD: “The nexus between profits and investment has broken down in many countries as profits have been used to augment dividends, to buy back stocks and to acquire other businesses, often using opaque financial structures to hide how profits are being used”.
The report sounds the alarm about the dangers that a forthcoming international recession will pose to an already weakened and fragmenting world economy. Argentina is already mired in recession, and GDP fell in the first quarter of 2019 in both Brazil and Mexico. China’s growth rate has fallen in the first two quarters of this year and, as demand slackens and the tariff war with the US continues to bite, there is already a discernible impact being felt across the world economy. This is because Beijing has been and remains a major source of import demand and a crucial final-stage export platform for global production chains.
World trade is stalling and developing countries face financial volatility, with local currencies coming under pressure as US investors retreat to the safe haven of the dollar as a means of attempting to secure themselves against the oncoming slowdown. These factors and the likely failure of another round of quantitative easing to provide the necessary boost to overall demand, all make more possible what the report warns can be the “triggering of a self-reinforcing deflationary spiral”.
World debt levels are unprecedented. Since 1980 they have risen more than 13 times, from $16 trillion to more than $213 trillion, with private debt dominating this figure. As a share of global GDP, debt now stands at 262%, compared to 240% in 2007. This has been fuelled in no small part by the historically low interest rates and quantitative easing made available by governments to avoid a 1930s-style depression. This is now embedded into the bowels of the system and acts as a massive additional economic destabiliser.
As is evident to all readers of Socialism Today, there has been no recovery in workers’ living standards. The polarisation of income continues to widen, with the rate of growth of average monthly earnings across 136 countries falling to its lowest level since 2008. The best that UNCTAD can offer is that, in industrially developed countries, labour may regain by 2030 at least half the income share lost since globalisation was unleashed! They do not explain how this wage ‘recovery’ will happen.
Taken in total, this report forms a shocking indictment of capitalism. To the authors’ aspiration “to reverse the polarisation of incomes within and across countries, create a stable financial system that serves the productive economy, mitigate the threats and seize the opportunities associated with new technologies and undertake massive investments in clean energy, transportation and food systems…” we would simply add: “Then we need socialism”.