On catching Newsnight’s Evan Davis interviewing the American Economist Jeffrey Sachs it was easy to conclude that the BBC Newsnight presenter is either a nincompoop, or just another example of a daily drivel hack living in denial . “When you’ve got too much stuff, we should try to stoke up demand”, he stated almost inquisitively, while looking across at the Columbia University professor for a response.
The answer he received was not wholly stupid with it being pointed out that by investing in developing countries’ infrastructure demand could ultimately be created, even if that answer conveniently ignored the fact that the IMF and World Bank are in fact plundering the planet under the umbrella of structural adjustment. Still, Professor Sachs’ criticisms of the IMF and World Bank do go back a long way, so he is perhaps due some leeway. However, there is an implied hint on his part that those institutions, which Simon Dixon says represents central banking on a global scale and creates loans out of thin air for corporate interests, can be overhauled then his culpability and complicity is as great as, if not greater, than that of Mr Davis. These institutions support the banks, corporations, and ruling elites and nothing short of scrapping them and replacing them with institutions that truly support the poor will do.
Newsnight was still running and when it seemed it couldn’t get any worse, it did with the “intrepid” Mr Davis’s asking the question that has to be asked; “A lot of people are talking about global implosions. How worried are you?” The professor quoted some astronomical global debt figures, but didn’t seem too worried, and the Newsnight presenter appeared to breathe a sigh of relief with his big grin almost turning into a smirk that indicated he knew his hefty pay packet and very comfortable standard of living is secure for a while yet.
Of course, his self-professed Keynesian guest was not there to state that the only way of adverting a catastrophe is for us to stop this obsession with economic growth and, with this unlikely to happen, we should all be very worried about the global economy imploding and our planet ultimately exploding. No, for our corporate masters that would have been a bit too close to the truth at a time when that catastrophe is already there. Still, with the Professor quite rightly pointing out that China “was supposed to be the great sucking machine” for global capital we have all the elements of the real story.
Firstly, the continual growth that capitalism needs to survive is what made it necessary for China to be brought into its orbit and what has ultimately led to that form of rentier capitalism which will dispense with social value while carrying out its mass looting of the planet.
It is, therefore, worthwhile looking at what is happening in what “was supposed to be the great sucking machine” and when we do even the most myopic among us must come to the conclusion that any simplistic formula based on trying to “stoke up demand” is the product of an infantile mind.
In order to stimulate the economy in China after the financial crisis of 2008 debt was passed onto state-owned enterprises. That debt, now has to be paid back. However, with the debt failing to generate a commensurate economic growth one-third of any new debt now has to be used to pay off old debt. Therefore, as the International Marxist Tendency quite rightly points out:
“The Chinese economy has become clogged up with unproductive debts because the government-led debt stimulus could not be used sufficiently for productive investment. Why take on debt to invest in new factories if the rest of the world economy is stagnant and demand is declining? Thus these new debts were used in short-sighted speculation instead. It is this underlying overproduction that has caused investors to speculate first in property, now in the stock market. The bursting of the stock market bubble reflects the unsoundness of this speculation, and in turn the unsoundness of the economy as a whole.”
This is no different from elsewhere and along with plans for new urban areas to provide housing for 3.4 billion people, which is about two and a half times the country’s population, and with a massive flight of Chinese capital in search of those returns that investment in the real economy cannot provide, we are already presented with a scenario where the end days could be just around the corner. In China, as elsewhere, an increasingly shrinking elite turn their backs on any form of productive capitalism and the future looks increasingly as bleak for the majority of Chinese as it does for the majority of people on the planet.
Mr Davis should worry about “global implosions” and we might suspect that Jeffrey Sachs is only thinking about his next invite onto the mainstream media, when he allays the Newsnight presenter’s concerns. The fact is the real economy cannot create the demand for the 3% compound growth that capitalism needs and the required flight to rentier capitalism might very well see a development where rather than sixty-two people owning as much as the poorest half of the world’s population, even fewer people will own as much as some 90% of the planet’s population.
Of course, if people start to organise that might not happen, but with the mainstream media bombarding all and sundry day in and day out and with nincompoops such as Mr Davis asking really “awkward” questions the odds against a dystopia being around the corner for all of us is pretty high. We might hope that Daniel Morley is correct in his assertion that in China and elsewhere 2016 and beyond will see a deep economic crisis and social upheaval. That might at least offer us some prospect of avoiding just slipping unaware into an impending dystopia and it might even offer us some hope. Moreover, while we are hoping we could do a lot better than watching crap like Newsnight.