At the end of 1978, the international economic picture was dominated by the first signs pointing to a downturn in the United States, the only imperialist country where the 1976-78 upturn had attained some scope. The warning signals were the following: A characteristic overloading of the credit system. A rise in the inflation rate. And a jump in interest rates, which will result in choking off the "minibooms" in the automotive industry and construc tion, which were really "minibooms" in credit (consumer loans and mortgages)?
Orders for capital goods are beginning to show signs of running out of steam. The rising profits of the big industrial trusts, which were the outstanding feature throughout the upturn, are now running up against all the factors I have just mentioned. In this area as well, a downturn seerns near.
In fact, in its October 30 issue, the American magazine Business Week pointed out that while in the third quarter of 1978 profits were 12% to 13% ahead of what they were in the third quarter of 1977, 60% of the companies are already showing profits below the level of the second quarter of 1978. Moreover, 45% of these companies have seen their profit margins narrowed from those of 1977, when profits were already quite meager for a year in which there was a rather strong economic upturn.
Carter's Delense of the Dollar'
The steps taken by President Carter on November 1, 1978, to halt the precipitous decline of the dollar against the "strong currencies" (primarily the German mark and its satellite currencies, the yen, and the Swiss franc) and to stem the rising rate of inflation in the U.S. have reinforced all the factors bringing about a downturn in the United States.
These steps have not caused and will not be the cause of the downturn. Such a slump is inherent in the cyclical movement of the capitalist economy. The economic policy of bourgeois governments, espe cially those such as the U.S. government which have vast resources, can dampen or accelerate these tendencies. For three years, the Carter administration's policy
"played" its cards for an expansion. Now it is playing them for a moderate recession. That is the meaning of the steps to "defend the dollar."
I have said that the Carter administra tion is playing its cards for a "moderate recession." Actually, it is under a number of constraints from which it cannot easily escape. There is first of all a social and political constraint. Contrary to the myth widespread in Europe, there is no conservative "groundswell" among the working masses in the United States, and espe cially no weakening of the organized
Carter wants to provoke a moderate recession in 1979 . . .
power of the unions that would justify the supposition that the American workers will accept unemployment rates of 8% or 10%.
To the contrary, the evolution of the unions over the last two years indicates that a new worsening of unemployment, coupled with the other aspects of the Carter administration's offensive against labor, would accelerate the first tendencies toward radicalization that have appeared in the unions as well as a new rise in militancy on the part of a number of sections of the working class.
MacNelly/International Herald Tribune
Moreover, 1980 is a presidential election year in the United States. Acoelerating the course toward a deep economic recession, which would bring a sharp increase in unemployment on the eve of election, would amount to political suicide.
A deep recession in the United States would have no less grave repercussions on the international capitalist economy. It would inevitably spread to all the imperialist countries and a great many semicolonial and dependent countries during 1980, or even as early as the end of 1979. In view of the fact that the capitalists situation has deteriorated by comparison with that in 1974, om both the economic and the social and political levels, the risk of "destabilizing" important countries in volved in such a recession would be a grave one for the international bourgeoisie and would rebound against the American imperialists themselves.
In these conditions, it is quite clear what the Carter administration's calculation is. It wants to provoke a moderate recession in 1979, which could be limited both in its depth and in its duration. One of the essential factors in moderating the American recession would be its coinciding with a continuation or even an acceleration of the upturn in several important imperialist countries, especially West Germany and Japan.
Just as the strong upturn in the USA "fed" the upturn in Germany and in Japan, despite the "stabilization" policy ap plied by both governments in 1978, stronger upturn in West Germany and Japan during 1979 could "feed" an upturn in the USA in 19S0, despite the American policy of "stabilization to defiend the dollar."
In this way, the Carter administration would score successes in several areas at once. It would be able to approach the election campaign without having a massive increase in unemployment on its hands. The inflation rates in the USA and in West Germany and Japan could move back toward similar levels. The US. balance of payments deficit would be cut drastically. The dollar would make a lasting recovery.
Moreover, the Carter administration may hope that a "moderate" increase in unemployment, as opposed to a sharp one. wold also be sufficient to dampen for some years the slow radicalization taking pilace in the unions and in certain sections of the working class in the United States.
This is the scenario as it is expected to unfold. What are the Carter administration's chances for bringing it off?
First of all, this projection is based on one underlying assumption that there will be a desynchronization of the economic cycle in the main imperialist coun tries lasting throughout 1979 and 1980.
Let us recall that such a time lag limited the extent of the recessions in the 1950s and the 1960s. It was eliminated during the "speculative boom" of 1972 and 1973, which was universal throughout the imperialist countries. This was followed by a recession common to all these countries in 1974 and 1975. The capitalists" hope for avoiding a new general recession in 1979 and 1980 is based essentially on the observation that there has been a desynchronization in the upturn over 1976, 1977, and 1978
However, looking more closely at this claim, we note that it only very partially reflects the economic reality. It is true that major imperialist countries such as Great Britain, Italy, and even France expe rienced phases of stagnation or even de dine in industrial production during the
1975-77 upturn. But this was no longer true toward the end of 1977. Only some small imperialist countries such as Sweden or New Zealand were still in a downturn. Rather than a desynchronization of the cycle, it would be more correct to speak of an unevenness in the upturn in 1978. In these conditions, it is by no means prede termined that, with a lag of a quarter or two such as occurred in the 1974-75 necession, the American recession now on the horizon will not extend to the majority of the imperialist countries. This is all the more probable since toward the end of 1978 there were increasing signs that the now much weaker and hesitant upturn was running out of steam in a series of impe rialist countries-Great Britain, Italy. France, and Switzerland. And in Japan itself the rate of growth, which was 75% for the period from September 1977 to September 1978, fell to 2% in the quarter running from July 1978 to September 1978.
Actually, the assumption on which Carter's scenario is based depends on a single country-West Germany. There, the signs appearing at the end of 1978 did point toward a modest spurt in growth in 1979, rather than a downturn, if everything else remains equal. The whole question is whether an increase in the growth rate from 3.5% to 4% in a single country will be sufficient to stave off a recession in most of West Germany's Common Market trading partners, or in Japan, especially when these countries are feeling the impact of a recession in the United States. As can be seen, this hope is rather slim.
However, in order to be able to outline mure precise economic perspectives, we have first of all to examine the structural changes that are taking place in the world capitalist economy, rather than speculate about conjunctural fluctuations in the short, and sometimes very short, term.
Why the Dollar Fell The persistent weakness of the dollar is not the result essentially of the spectacular jump in petroleum imports. It is the result fundamentally of the declining competitiveness of American imperialism on the world market. The two "technical" aspects of the decline of the dollar-more boogant inflation in the United States, nsulting from a more "expansionist polics than that pursued in West Germany. Japan France, and elsewhen and the American government's attempts to make US exports more competitive through deprecsatom of the dollar—are linked structuralls Do this underiving cause.
The manufacturing industry in the Uni ted States has lost its lead in prodactivate in mast felds. The industrial plant in the USA is relatively outmoded by comparisom with that in West Germany and Japan. A the same time, potential escess productive capacity is much greater in the U.S. Then fore, the US. povemment has to follow a more inflationary policy in under to avert a catastrophic rise in unemployment and excess capacity- Where many commentators. both bour peris and some using a Marxist frame of nference, have seen either a "conspiracy" or an timesponsible laxity in monetars police that comes from relving on political supremacs." I see an economic constraint. And this constraint is reinferoed by a social and political priority. The US. poemment is determined to prevent the de velopment in the working class of a climate of bastility do the social sestem comparable to that existing in most of the other capitalist countries around the world.
It should also he noted that the policy of promoting American exports through a onstant devaluation of the dollar has been a failure. Or. to be more exact, it has been unable to prevent a continuous derriaration of the position of the Umited States on the world market. At most, it has prevented further acoleration of this detr moration.
I pointed out above that the US. has definitively lost its position as the leading exporter of manufactuned goods on the wurld market. That position is now being held by West Germany. Even in second place, the US. is followed very closely by Japan. (Ser Table 1)
What is now is that after the thind quarter of 1977, West German exports have come ahead of U.S. exports overall, includ
Table 1
Share of Main Imperialist Countries (%) in Total World Exports of Manufactured Products
1968 1970 1972 1974 1976 1977 Third Quarter 1977 Fourth Quarter 1977 First Quarter 1978 Second Quarter 1978 Third Quarter 1978
West Germany USA
Notes
1. Arrording to the November 1K, 197k, issue of the Fronomist, the most favored bornowers at that time had to pay 10.755 interest in the US. II'- in France. 1155 in Great Britain, 15.55 in Italy. On the money market, day-to-day bornowing hack and forth between financial institutions net mure than 9.3% in interest in the US, 9% in Great Britain, and 10.75% in Italy.