The Course of Global Capitalism

After the international overproduction crisis of 2008-2009—the first post-war deflationary crisis—there was a vigorous recovery in the United States thanks to decisive intervention by the State and the Federal Reserve with its quantitative easing. In China, the state relaunched the production system thanks to large infrastructure projects. This recovery was followed in the United States and China by a recession in 2015-2016, which for China resulted in a large capital flight and a currency haemorrhage.

There was an economic recovery on an international scale for two years, from 2017 to 2018, but this was again followed by a recession in 2019-2020, aggravated by the COVID epidemic.

The vigorous recovery that followed in 2021, after the sharp increase in demand on the world’s manufacturing systems due to just-in-time economic practices that reduced stocks to the bare minimum, led to high inflation in most countries, except for Japan.

This inflation has been exacerbated by years of under investment in the energy and raw materials sectors. The large energy and industrial monopolies have taken advantage of this to increase their profits by raising prices and compensating for the drop in consumption by shifting production to high-end products.

And, of course, there is speculation on raw materials, producers of which took advantage of this gain by pushing up prices.

The initial response of the central banks to the 2019-2020 recession was to flood the banks with liquidity in order to enable them to support businesses and avoid a general collapse. Then, with the return of inflation, they discontinued their policy of quantitative easing and gradually increased interest rates to make money expensive and put pressure on demand to reduce inflation. This led to a real decline in inflation towards the 2% target.

Despite the general chaos, this dying system of production can resist titanic shocks; in particular the devaluation of 20-30% of trillions of dollars in bonds in the accounts of banks and various financial institutions.

This devaluation will certainly lead to sensational bank failures in the United States and Switzerland. And the sharp rise in interest rates, following the reckless economic policy of the short-lived British Prime Minister Liz Truss, very nearly bankrupted British pension funds.

Despite various economic recoveries—particularly that of 2017-2018—the manufacturing systems of the major imperialist countries will not return to the peak reached in 2007 and there is little chance that a new cycle of capital accumulation will exceed that level. Instead, we are heading towards a trade war, which will then lead to a third world war.

Keeping this dying monster on its feet comes at the cost of considerable debt, not only for businesses and families, but also for governments and public services. Global capitalism has entered a spiral of indebtedness, economic stagnation, and endless chaos. This is reflected on a global scale in political and military crises: the inter-imperialist war in Ukraine, the massacres in the Middle East at the hands of the Israeli state with the support of the United States and the complicity of various imperialist powers, the looting and massacre in Sudan by two armed factions supported by imperialist states, and so on.

Now let’s turn to the current situation, based on the usual statistical data.

This may not always be possible, because the bourgeoisie, sensing that everything is slipping through their fingers, is less and less interested in statistical work. They are particularly less interested in the calculation of industrial production indices and prefer GDP, which is much vaguer and more questionable.

Similarly, the statistical study of the indebtedness of governments, non-financial corporations, and households is not always rigorously conducted.

We have therefore made use of the work of researchers who have conducted an exhaustive investigation of indebtedness to establish a complete time series of debt. This work is made available by the Bank for International Settlements, whereas the admirable statistical work of the United Nations has been reduced to a mere trifle.

For most of the data we now must turn to the OECD.

Inflation

The sharp slowdown in inflation is very evident: in the United States, after reaching a peak of 9.1% in June 2022, it is now between 2.4% and 2.7%. In Europe it is around 2%. In France it has dropped to 1.3%, as it has in Italy, although in Italy it is on the rise again, given that since October 2023 it has been around 0.8%.In Germany, inflation is around 2%.

In the United Kingdom, on the other hand, inflation is still high, at 3.5% in November 2024, much to the discomfort of the British proletariat.

Surprisingly, China, which was experiencing a period of deflation, sees inflation hovering around 4%.

In view of the decline in inflation and the economic difficulties of the Eurozone, since June 2024 the ECB has eased its monetary policy by lowering the deposit rate four times by a quarter of a point, bringing it to 3% and the refinancing rate to 3.15%.

The Federal Reserve has cut rates only once in the same period, and with Trump’s more lax economic policy, there is little chance of another rate cut in the short term.

The international recession and the trade war that is likely to break out will only exert deflationary pressure, which will lead to a drop in prices and the ruin of many industrial and commercial companies. Then, it will affect the banks with an increase in non-payments.

International Trade

International trade is a good indicator of the economic situation of world capitalism. This is because in order to accumulate capital, it must first realize its value in the form of commodities on the world market. To get a more accurate picture of the situation, we have expressed world trade in 2019 dollars, taking into account wholesale price inflation.

If we look at the export curves of the main imperialist countries, we see a strong recovery in 2021 after the drop in exports in 2020, followed by an equally spectacular drop in 2022 and weak growth in 2023.

Looking at our two tables, if we compare the volume of exports in 2023 with that of 2018, the year in which exports peaked, we see negative growth for all countries except China: -23.1% for Japan, -20.8% for the United Kingdom, -17.4% for Korea, -13.7% for Germany, -11.6% for France, etc.

The best performance is that of Italy, with a small -2.6%, while the rest of the world is in crisis. The big winner, however, is China, with a surplus of 8.1% compared to 2018.

But all these years, despite the appearance of economic recovery in 2021 and 2022, are years of recession, as they remain below the 2018 level.

This conclusion is confirmed by the imports table, where all countries—except Italy with a small +0.5%—are clearly in negative territory, including China with -5.1%, which clearly confirms a recession. If imports are falling, it means that domestic demand has decreased and therefore there is a recession.

Ultimately, the two years of economic recovery—2021 and 2022—have not managed to erase the recession of 2019-2020.

In terms of exports, China is in the lead, followed by the United States and Germany.

On the other hand, in terms of imports, the United States is at the highest level, so if Trump imposes tariffs, as he promises to do, we will see a global recession and a trade war. And this situation is completed by the fact that the US trade deficit is huge: $830 billion, which is more than the total exports of Japan, the fourth largest exporter in the world.

The debt of the main imperialist countries

We report two types of debt, that of the non-financial private sector and that of the public sector.

For the non-financial private sector debt, we used the very comprehensive data provided by researchers in the field, available on the BIS website.

It appears that, with two exceptions—Japan and Spain—the overall private sector debt has increased sharply. Comparing 2024 levels of debt with those of 2019, it was +39.4% for China, +26% for the United States, +18% for Germany, +14% for France, +11.7% for Korea, and so on. The average increase in the Eurozone’s debt over the last four years was 11.3%. For Italy, the overall increase was only 1.5%.

As for Russia, its debt has increased by 23%, which can be explained by the war effort that has and is challenging its economy.

One country that stands out is Japan, which, after increasing its debt by 13.5% in 2020, then steadily reduced it, achieving an overall reduction of 20.2% in four years, compared to 2019, which represents a repayment of $1,725 billion in four years!

It’s hard to believe, except when you consider that Japanese monopolies produce part of their output in South-East Asia, where wages are very low and social security contributions almost non-existent, thus making huge excess profits.

The other country that has reduced its private debt compared to 2019 is Spain, which saw a reduction of 4.5%. This is equal to a repayment of $125 billion in four years.

In conclusion, after the great international crisis of 2008-2009, virtually all countries have become heavily indebted, and this indebtedness is only increasing.

It is at this price that the world bourgeoisie has so far managed to maintain its mode of production and avoid the great crisis of overproduction that will ruin it and bring the return of the class struggle, from which it will not emerge.

Industrial Production

For the sake of simplicity, we have summarized the industrial production increases of the main imperialist countries in the table below.

China and Russia have not been included due to the lack of data on their industrial production. However, we know that the situation in Russia is particularly serious, with an official inflation rate of 9%, but in reality, double that, and a discount rate of 21%. This prevents any investment and makes it difficult to borrow or renew debt, which means that many Russian companies are on the verge of bankruptcy.

As for China, we will examine physical data, such as electricity production.

In this table we have added three younger capitalisms: Poland, Brazil and Turkey.

What emerges from this table is that after the strong recovery in 2021, which followed the recession of 2019-2020, production is decreasing in all the old imperialist countries.

The United States is something of an exception, with an increase of +3.4% in 2022, followed by a negligible 0.2% in 2023 and then -0.1% in 2024. This means that if we compare the production achieved in 2024 with that of 2018, the peak year, we get -0.4%. However, compared to 2007 the increase remains positive, equal to 1.3%, thanks to oil and gas production, which has replaced much of the Russian gas in Europe.

But if we look at the index of manufacturing production, the result is quite different: for 2023, compared to 2007, the figure is -7.5%, and 2024, which marks a recession compared to 2023, will be even worse.

Thus, the United States, despite the huge investments made to relocate production and develop new technologies, is not doing any better than the old European countries, which are all in recession: growth in 2024 range from -0.5% in France to -4.4% in Germany, with the sole exceptions of Spain and Portugal, with +1.3% and +1.5% respectively.

But if we compare 2018 and 2024, they are all in the red with negative increases, if we look at the last column, ranging from -21.3% in Japan to -8.8% in the United Kingdom.

The only exceptions to this gloomy picture are Turkey and Poland, which are younger capitalist countries, and the imperialist country of Belgium (Flanders).

What emerges for the old imperialist countries is a situation of crisis and recession. This has been confirmed by the record level of business failures affecting the United States, Great Britain, Germany and France, with a loss of 65,000 companies for 2024, a record!

Italy remains relatively unscathed.

The United States, like all the old imperialist countries, is on the road to decline. This is reflected in a relative decrease in its industrial weight and its exports in world trade. In 2000, US exports still accounted for 15% of world exports; today they have fallen to less than 11%.

Furthermore, American imperialism is afflicted by two major problems: a monstrous federal budget deficit, which in 2024 will exceed $1.8 trillion, and a record trade deficit.

Since 1976, the US trade balance has been in persistent deficit, reaching $1,202 billion in 2024. This trade deficit is offset by capital inflows, but this has fuelled concerns about economic dependence on foreign investment. The trade deficit translates into a monstrous balance of payments deficit. Hence Trump’s determination to tax imports at all costs and cut federal government spending.

So far, the United States has not been able to reduce its trade deficit despite the increase in taxes on imported Chinese goods, because the deficit, as in France, is structural: the fall in the rate of profit has led monopolies to relocate part of their production to China, where labour is cheap, and the infrastructure offered by China is perfectly adequate.

This situation led to a law that reduced inflation in order to relocate industry and the heavy investment in infrastructures that had been neglected for years. But all these investments and tax incentives made under the Biden administration are expensive and are worsening the deficit and public debt.

It is in this context that Trump wants to deregulate everything and impose significant tariffs on the entire import market, while cutting public spending that does not generate future profits.

This is good news for us. The unbridled use of import duties can only trigger a trade war and deregulation will accelerate the chaos.

We are on the road to another 1929 and the return of class warfare!