Looking at the more credible indicators of secured employment, incomes, percentage of the population receiving adequate social services, poverty incidence, the number of hungry population etc. shows that the global crisis is not yet over. | By Jenny Guste
IBON Features – Amid news that capitalist countries are in the road to recovery, real indicators for growth show that developed economies are still struggling to rise above the ravages of the near-collapse of the global financial system.
After governments released millions of dollars in handouts, loans and guarantees to save the world’s largest financial institutions and major corporations from collapsing, markets appear bullish in recent weeks as a number of major banks bailed out a year ago showed signs of recovery.
Likewise, gross domestic product (GDP) in many developed countries is looking towards strengthened growth, especially in the United States (US) and China. Trade appears to be recovering as well.
Not yet over
These macro-economic indicators however are not fundamental indicators of economic recovery. The more credible indicators of economies recovering is in the level of secured employment, incomes, percentage of the population receiving adequate social services, as well as poverty incidence and the number of hungry population.
A year after the onset of the global financial crisis, the army of unemployed workers is still rising by the millions. The International Labor Organization (ILO) forecasts an increase in global unemployment of between 39 and 61 million workers in 2009 amid continued labor market deterioration around the world. The World Bank also estimated an increase of over 90 million people in the world’s hungry population by 2010.
Private rescue, public burden
Last year, the world witnessed how First World governments stepped up their interventions through bailouts, rescues and takeovers to stem the worst financial crisis in decades. The US$12.6-trillion worth of stimulus funds are financed by soaring government debt, and of course will be shouldered by the people through higher taxes and declining social security. The US federal government alone already has US$11.8 trillion in debt even as it faces a deficit of US$1.8 trillion just for 2009 and trillion-dollar-plus deficits every year for at least the next decade.
In other G8 countries, fiscal stimulus programs translate into huge public deficits and eat up a large chunk of their revenues at record levels since World War II. In the US for instance, fiscal stimulus programs comprised 13.5% of GDP; in the UK, 11.6%; in France, .4%; and 10.3% in Japan.
Indebtedness in the US is projected to increase further in 2010 as 40% of US government revenues will come from debts. This will result in the US national debt nearly doubling over the next 10 years to about US$20 trillion. By 2019, the US national debt will increase to nearly 70% of GDP, up from 48% this year. Meanwhile, some 40 poor countries are projected to plunge into a new debt crisis.
The phenomenal bailouts and consequent rising budget deficits and debt have made one thing clear: private financial institutions are rescued by governments while taxpayers are footing the bill. While capital is being concentrated further in the hands of few finance oligarchs, losses are passed on to the working people. Belt-tightening measures in the form of reduced government spending for social services are also borne by the public.
Record-level unemployment rates
Following the bailouts are massive lay-offs in developed countries, while the remaining employed are forced to work longer hours without due compensation. According to the Organization for Economic Cooperation and Development (OECD), unemployment rate in advanced economies reached 8.6% in August 2009, 2.3 points higher than last year.
In the US, the latest unemployment rate 9.8% is the highest yet in 26 years with the number of unemployed persons increasing by 7.6 million to 15.1 million since the onset of the recession. Meanwhile, the seasonally-adjusted official unemployment level for the 27-member European Union (EU) rose to 8.9%, reflecting a 246,000 increase in the number of jobless people as of June 2009 or more than 21.5 million people without work last June 2009. Japan’s unemployment is at its highest in 53 years reaching 5.7% level or 3.59 million unemployed as of July 2009, a million more than in July 2008.
More than 1.6 million people worldwide have been pushed into reduced hours, casual or part-time employment. Almost half a million people are stand-ins or temporary workers because they cannot find permanent jobs, while nearly one million work part-time because they cannot find full-time employment.
Global forecasts on unemployment levels show that the impact of the global financial crisis is yet to become worse. According to the ILO, global unemployment could reach 219 million to 241 million in 2009 as the labor market deteriorates. It is projected that the jobs crisis will linger up to seven to eight years after the market has recovered.
Poverty and Hunger in the Third World
The ranks of unemployed will eventually add up to the growing number of the world’s poor. It is projected that there would be 98 million more poor people by end 2009. Likewise, sharp increases in food prices from 2005 to 2008 saw an additional 130 million pushed into hunger, as the price of commodities such as wheat and rice soared. This means that 950 million people still face a daily battle against hunger across the world. According to the UN, despite decreasing world food prices in the last half of 2008, domestic food prices generally have remained very high and are projected to continue to rise in the coming period. In the first half of 2009, commodity prices rose again, reflecting the return of financial speculators to commodity markets.
However, the impact of the global financial crisis is harsher in the developing countries whose backward economies have been made further vulnerable to the volatile financial flows and reduced trade. In fact, the UN estimates that between 105 and 145 million more people would remain poor or fall into poverty because of the current global economic crisis. Most of this setback would be felt in East and South Asia with between 95 and 132 million likely to be affected, of whom about half are in India. The crisis could keep 5 to 7 million more people in poverty in Africa and another 4 million Latin America and the Caribbean.
The crisis also has graver impact on employment in the Third World. Job losses have continued, especially in export-producing factories, such as mining, textile and textile garments, metals and metal products, automobiles, gems and jewelry, construction, transport and information technology, as well as tourism.
In the Philippines, the number of job insecure population as of April 2009 is 10.8 million (4.2 million unemployed and 6.6 million underemployed) on top of the 9.2 million overseas Filipino workers (OFWs) forced to find jobs abroad. Crisis-related retrenchments from October 2008 to April 2009 reached 50,000 workers. Most of these are in the export processing zones in the sectors of electronics (29,000), garments (6,179), automotive (3,436), etc. An additional 17,600 workers are threatened to lose their jobs-8,000 from the Philippine Airlines, 5,000 from the North Harbor, 3,000 from Wyeth-Pfizer merger, and 1,600 with Triumph International’s closure. Meanwhile about 6,500 OFWs have already returned to the Philippines since October last year because of the global crisis.
These are just among the many statistics depicting the wide range of human suffering worldwide made more insufferable with the global financial crisis. All these serve to belie the claim that economies, including those of the most developed countries, are already moving towards recovery.
How the capitalist countries deal with the crisis is severely limited because the crisis is rooted in the system’s basic contradiction between private profit and social production, and in the resulting crisis of overproduction. The solutions of bailouts, rescues, stimulus packages etc. are all limited efforts because they pretend that the problem is merely about financial excesses and resulting instability.
Considering the US financial crisis continues to affect poor countries through their main links with foreign economies-trade, investment, debt and overseas remittances-should make Third World governments realize that much greater integration in global financial and trading system makes them far more vulnerable to external shocks.
The global crisis, which is certain to linger for a longer time, should also prove to developing countries the importance of prioritizing genuine agrarian reform, agricultural development for food security and national industrialization in order to build a strong domestic economy. IBON Features