Capital Offers No Solution To It's Own Crisis

Capital's crisis is now fully public..
.Only twice in the past has the business confidence index been lower - in the third quarter of 2001 - during the bursting of the tech-bubble - and during the 1990-91 period, when a recession battered the real estate, financial and retail sectors.
"In both cases, the drops were followed by contracting business capital investment," the Conference Board said in a release.
Capital spending is a major engine of economic growth, combining with consumer and government spending and exports as the main pillars of the economy. Weak capital spending, at a time of falling consumer confidence and government cuts, will put a squeeze on growth.
The Conference Board said "the latest survey, conducted during the first three weeks of October, as mayhem gripped global financial markets, found businesses were "much more concerned" about the economy and their future financial situations than in the previous poll, taken during the summer.
Nearly 70 per cent of businesses responding to the survey believed that the economy would be in worse shape in six months - compared with 12 per cent who expected an improvement.
The net result of that negative view is that only 25.8 per cent of the business leaders surveyed believe now is a good time to make new investments in plants, technology and equipment, the board said.

And it is having a Flashback....

Hedge fund industry enters time-warp in January 1970, pops out virtually unchanged in 2008

Thought recent develops in the hedge fund industry such as poor performance, SEC registration, and taxation were unprecedented? Yeah, so did we - until Nicholas Motson of the Cass Business School (see related post), gave us a heads-up about a fascinating article from the January 1970 issue of FORTUNE magazine. The entire article can be downloaded here on the A.W. Jones & Co. website (yes, that A.W. Jones - the father of the hedge fund industry).
As you will see, the similarities between the hedge fund world of 1970 and that of 2008 and truly amazing - almost eerie in fact. Even the 39 year old Warren Buffett makes a cameo in this piece. As Motson pointed out to us, “…if you re-scale the numbers it could have been printed yesterday.”
The bizarre parallels begin with the article’s very title: “Hard Times Come to Hedge Funds“. It goes on to chronicle the travails of the $1 billion industry (as a point of reference, the US mutual fund sector managed about $50 billion at the time). FORTUNE estimated there were 3,000 investors in about 150 hedge funds by 1970. Most funds were launched between 1966 and 1970 and “the great bulk” were registered in Manhattan (that’s just south of Greenwich, for those who may not remember the old days).


Speaking of flashbacks the solution to this crisis is a New Regina Manifesto for the 21st Century.....

Public reading marks 75th anniversary of Regina Manifesto
'No CCF Government will rest content until it has eradicated capitalism.'
Ottawa (19 Aug. 2008) - Seventy-five years ago this summer, the Regina Manifesto was adopted at the first national convention of the Co-operative Commonwealth Federation (CCF) in Regina. The 4,300-word declaration laid out a socialist vision for the country and has influenced the Canadian left ever since. To this day the document remains an emotional symbol for the New Democratic Party (NDP) – which replaced the CCF in 1961 – even though it includes a utopian declaration that no socialist today expects ever to be realized


The former based upon Fabian Social Democratic tradiditons looked to the State and in particular its economists to deal with the crisis of capital during the Great Depression. As such capital was lost, in the collapse of the stock market. Today the same Great Crisis is occuring but what is obvious is that all socialization of capital can be accomplished without the State and centralized planning; rather through public ownership through workers control, a phenomenon denied by the CCF as implausable, impossible, and associated with the 'Imposibilists" of the Socialist Party of Canada.

Today we have the opportunity to mobilise the mass of social capital, the wealth created by workers through the production of surplus value, as well as through workers investments; their pension plans, RRSP's and investments. Share Capital, that the Wall Street pundits proclaim was the new capitalism, was in fact the expansion of the recognition that all capital is the result of creation of the proletariat.

That is when the casino market of investments and movement of fictional captial; finance captial, collapses all that is left to retrieve capital is real prudction; factories and workers. In other words all capital is actually based on two contradictory sources; inheritence, the dead capital of previous generations of workers, and productive capital; living workers and the means of production.

The hedge funds and private capital investors who dominate the financial markets are based upon the former as George Soros ,himself a benfificary of the fictive capita of hedge funds,l takes pains to point out, the obvious, that without real capital; living workers and factories, all other capital is whiffenpoof.

And credit is the ultimate in dead capital, its only real is when it is spent by living workers through consumption and investment. Otherwise it is merely caluculations made by computers being used by international speculators. The use of 'creative' accounting practices by capitalists allows them to discount their losses over a period, to make them disappear, which has led us to this crisis. The real effect of these practices is to create actual unemployment of workers the very source of all capital.

While it may appear counterintuitive the practice worked for a decade as investors shored up companies that cutback workers, however in this crisis it is the reverse that is now required. Investment to be successful must create jobs such as in infrastructure. And the greatest source of capital remains living workers, both their labour to produce value and the capital they have created in pension funds, mortgages, RRSPs, savings accounts and government bonds. Its as clears as the nose on your face. The credit/capital crisis is the fact that Americans and Canadians have no savings, rather they are overextended on credit, they are in debt, so their nations are in debt. Laying off workers only worsens the crisis, since they now become permanent debtors.

Public ownership, the socialization of all capital under worker and community control, the creation of workers cooperatives as an alternative to corporations, and by extension the creation of peoples banks; credit unions under workers control, is the elephant in the room, that so terrifies the captialist class who keep telling us this meltdown is not the end of capitalism as we know it. Though it should be.

SEE:

There Is An Alternative To Capitalism

Business Unionism Offers No Solution To Capitalist Crisis

Auto Solution II

Super Bubble Burst

Your Pension Plan At Work

Gambling On Your Future

The End Of The Leisure Society

It's the Labour Theory of Value, stupid

Workers Control vs Corporate Welfare

NDP And Workers Control

A Peoples Program for Alberta

Left, Right and Liberty

State-less Socialism

Cooperative Commonwealth=Free Market

Not Your Usual Left Wing Rant

Populism and Producerism

THE BRITISH DISTRIBUTIONISTS

Historical Memory on the Eve of the Election

Calgary Herald Remembers R.B. Bennett

Social Credit And Western Canadian Radicalism




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Command Capitalism

China remains a one party state, not unlike Alberta, and the command economy has transformed into command capitalism. China's model of capitalism is an alternative to American style capitalism, and to prove its model to the world it is expanding its own form of Free Trade agreements with newly emerging capitalist economies. Welcome to 21st Century Imperialism.

This is why Bush and Harper have spent the last few weeks in international meetings defending American Capitalsim, China and Europe offer other models of capitalism, with China coming to the aid of countries abandoned by the Americans or in some cases like Costa Rica directly competing for market share with the Americans. China has embraced Free Trade in direct competition with the U.S. including in its own backyard. And depsite Bush's claims that free markets creat free people, China proves that democracy and freedom are not inherent to capitalism.

Capitalism in the west developed out of the collapse of autarchic fuedalism, not much differnt than the autarchy of command economies in the East. In fact all of Asia's capitalist development has been by autarchic state capitalsm, some under right wing military dictatorships, such as Korea and Taiwan, or through the Japanese model of an integrated Military Banking Industrial State complex or through the Chinese model.

And all ot the real growth in Asia has come about with fordist manufaturing and the creation of a proletariat.And with the development of a Chinese proletariat based on fordist manufacturing model comes the inevitable, workers organizing to improve their standards of living. And being tied into the international capitalist market place means that China too suffers when capitalism melts down. Forcing it to expend its mass of capital in promoting trade for its products and to speed up production for its own consumption.

Governments need to move fast, because this crisis, which has taken several forms already, is about to change form again. In the past few months, we've moved from a seizing up of credit markets to the collapse of economic demand in the mainstream economy. Soon we could see a string of sovereign defaults of poor and emerging economies that can't meet their debt obligations.
Even worse, hundreds of millions of previously poor people from Hungary and Turkey to India and China - recent arrivals in the global middle class who've benefited from an economic boom fuelled by endless quantities of cheap credit - are about to see their standard of living fall of a cliff. Around the world, Western-style capitalism will be discredited, as it's perceived to have wiped out people's jobs and life savings.

The United States' superpower status will wane over the next two decades as power spreads among several countries and moves from the West to the East, a report by the country's intelligence agency says.
The National Intelligence Council's Global Trends report, issued every four years to document looming problems, predicts a new global system will emerge where no single state dominates.
"By 2025, the U.S. will find itself as one of a number of important actors on the world stage, albeit still the most powerful one," the report by U.S. intelligence agencies says.
China is poised to have more impact than any other country, but the report also foresees a rise by India and Russia.
If trends continue, the report predicts China will have the world's second-largest economy by 2025, be a leading military power, while becoming the world's largest importer of natural resources and also the biggest polluter.
What is striking, the report notes, is that none of the three rising stars adhere to a Western liberal model but rather a system of state capitalism, under which the government takes a key role in economic management.
The transition will leave a world system "almost unrecognizable" in comparison to today, the report says.

Hu visit marks China's growing interest in Latin America
Chinese President Hu Jintao begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.
The Asian giant has increased diplomacy and investment in Latin America in recent years, with an eye on its natural resources and developing markets for manufactured goods and even arms.
Many in Latin America hope for an investment boost to help ride out the economic crisis.
Exports from the continent to China include soya and iron ore from Brazil, soya from Argentina, copper from Chile, tin from Bolivia, and oil from Venezuela.
The trade is still only a small percent of the continent's total, but it is growing.
China's state-run Xinhua news agency reported this month that exports to Latin America grew 52 percent in the first nine months of 2008 to 111.5 billion dollars.
Hu will visit San Jose and Havana between a G-20 meeting on the global crisis in Washington on November 15 and an Asian Pacific Economic Cooperation forum summit in Peru on November 22.
"It's more than just symbolic that Hu Jintao has decided to come, because it is clearly making the point that it is no longer a Taiwanese stronghold," said Costa Rican analyst Luis Guillermo Solis.
Both Taiwan and China have been accused of using so-called "dollar diplomacy" to get nations to ally with them.
But China's economic might is hard to compete with, especially in tough economic times.
Part of China's incentives to Costa Rica came from China's enormous foreign exchange reserves with an offer to buy 300 million dollars in bonds.
Costa Rica, a major exporter of computer components, is now prepared to negotiate a free trade deal with China, the foreign trade minister said here this week, dismissing fears of an invasion of Chinese products into the tiny Costa Rican market.
China has expanded its high level missions to the whole continent in recent years, making investments and agreements with such oil producers as Venezuela, Ecuador, Colombia, Argentina, Brazil and Mexico.
"The fact is that China has been locked out of a lot of countries for energy deals" in the past, Brown said. "It's going to be going into these areas more and more."
China has also advanced to economic assistance and direct investment, sometimes taking over from the region's main commercial partner and neighbor, the United States.
The teaching of Chinese in schools and universities and scholarships to China, as in Costa Rica's deal, add to a charm offensive.
And although Latin American economies are in a stronger position to withstand financial setbacks than in the past, a strong economic partner such as China is more attractive than ever.

China is Costa Rica's second-largest trading partner -- although the amount of trade between the two countries is subject to interpretation. China claims it imported $2.3 billion in goods from Costa Rica in 2007, and exported $570 million. Costa Rican officials have said exports to China were valued at $848 million and imports at $763 million. Either set of numbers seems like small potatoes compared to Costa Rica's trade with the U.S.: $3.9 billion in exports last year, and $4.6 billion in imports, according to the U.S. Commerce Department.

A free trade agreement to be signed by China and Peru in March will go into effect in the second half of 2009, if everything goes as planned, the Chinese Ministry of Commerce announced. The agreement will benefit China’s light machinery industry as well as those of its electronics, domestic appliances, heavy machinery, automobile engines, chemical items, vegetables and fruit. Peru's fishmeal and aquatic products industry, as well as its mining sector, among others, will be reaping benefits from the accord, Reuters reports.

Tacos, Ugly Betty gain Mexico a foothold in China
MEXICO CITY — Armed with tortillas and telenovelas, Mexican companies that have relied on trade ties to the United States are heading to China, challenging old images of a country that many Mexicans consider a rival for foreign investment and jobs.
Mexican exports to China have jumped nine-fold since 2000, soaring from $ 204 million to $ 1. 9 billion in 2007. It’s the fastest growing market for and seventh-largest buyer of Mexican goods, according to Mexico’s government.
Some of Mexico’s most prominent companies have opened operations in China since 2006, expanding beyond their traditional trading turf in the Americas and Europe to vie for a foothold in what is expected to become the world’s biggest market. Even amid the current economic slowdown, China’s 2009 growth rate is projected to hover around 8 percent.
“This is a great signal that commercial relations between Mexico and China are on a good path,” said Juan Jose Ling, director of GDEM, a business development group that promotes Chinese-Mexican ties.
But Mexico relies more than its neighbors on manufactured exports, and many Mexicans saw the Asian giant as an economic enemy that diverted jobs and foreign capital. Since 2000, hundreds of thousands of Mexican jobs have been lost as foreign-owned assembly plants moved to China — which displaced Mexico as the secondlargest supplier of goods to the United States after Canada in 2003, U. S. Census Bureau data show.
China also was accused of flooding markets with low-cost toys and textiles. Even ubiquitous statuettes of Mexico’s iconic Lady of Guadalupe now bear the stamp “Made in China.” Yet more than a dozen big Mexican companies no longer see China as a financial foe, and have joined the global race to capture a slice of its $ 1. 3 trillion retail market.

In Beijing, well-planned modern infrastructure sits comfortably alongside historic monuments. Massive ring roads and modern high-rise apartments seem to be perfectly synchronised to ensure perfect movement of traffic and human beings.
This city of more than 11 million people lacks the chaos that is the hallmark of so many Asian megacities such as Mumbai. It also lacks the stern rigidity of cities of state-controlled countries.
China was not always like this. Free markets and capitalism were allowed to flourish in this communist country 30 years ago when the Chinese leader, Deng Xiaoping, introduced economic reforms that sought to modernise agriculture, industry, science and technology.
Known as the architect of China’s emergence as an economic powerhouse, Deng managed to unleash what the Lonely Planet guide refers to as “the long-repressed capitalist instincts of the Chinese” by reforming the agricultural sector, creating special economic zones and “growth poles” in urban areas that served as boomtowns and factories for China’s exports.
In the 1990s, China began intensifying its pro-urban development strategy by investing heavily in cities to boost economic growth.
The results have been remarkable. China’s economic growth has soared to 9 per cent a year and the country has been able to lift nearly 500 million people out of extreme poverty within one generation.
THE QUALITY OF LIFE FOR URBAN residents has improved with cities such as Beijing having the lowest levels of income inequality in the world. Shanghai now stands alongside Singapore and New York as a city with the tallest buildings.
More than 300 million rural migrants have moved to cities since 1980 and 60 per cent of the country’s population is projected to be urban by 2030.
Urbanisation has been one of the key pillars upon which China’s economic success rests.
But unlike other countries, particularly in Africa, rapid urbanisation has not led to the proliferation of slums. This is because China is still a command-and-control economy that can mobilise resources quickly to respond to changing demands.
According to James Adams, the vice-president of the World Bank’s East Asia and Pacific region, “China recognised early on that urban development is not possible on the cheap and that building ahead of demand makes lots of sense.”
He notes that Beijing and Tianjin spend more than 10 per cent of their GDP on roads, water and sewerage services, housing construction and transport, and that “China’s phenomenal ability to mobilise financial resources for urban development through domestic credit and foreign direct investment is what keeps the funds for cities coming.”
National policies that give Chinese municipalities the authority to implement regulations governing land use and transport and decentralised urban planning have also played a part in helping China’s cities to cope with rapid urbanisation more effectively than other middle-income countries such as Brazil and South Africa.
The cracks, however, are beginning to show. Sit-ins and protests by workers in China’s booming industrial cities are on the rise.
Rural-urban disparities are widening, and a growing urban middle class is beginning to ask difficult questions about democracy, freedom of expression and human rights.
The global financial crisis is also having an impact on the economic growth rate, which is projected to slow down.
Nonetheless, as I sipped a glass of Chinese Cabernet Sauvignon wine in a bookshop-cum-café in Beijing, I found it hard to make a case against China’s development model.
I mean, does it really matter if the CEO of your bank is an official of the Communist Party? And what use is democracy when it can’t help put dinner on the table?

Warning from China's premier
"We must be aware that this year would be the worst in recent times for our economic development," Chinese Premier Wen Jiabao warned in the Communist Party magazine Qiushi on November 1."It is very difficult to maintain high growth and a low inflation rate in the long run. These unfavourable factors have already affected our country, and will continue to. There are also many pronounced problems in domestic economic activity," he wrote.As Minqi Li explained in an article in the April 2008 Monthly Review, China's economic growth in the late 1990s and 2000s depended heavily on it being a net exporter. The US alone accounts for 20 per cent of China's total export market, so a US recession alone would have a major impact. In 2007, Europe replaced the US as China's largest export market but Europe too has gone into recession.China's rapid economic growth also relied on Chinese capitalists (state and private) and foreign capitalists operating in China exploiting labour at a rate of about "one-twentieth of that in the US, one-sixteenth that of South Korea, one-quarter of that in Eastern Europe and one-half of that in Mexico or Brazil".While, a large, productive, and cheap labour force allows Chinese capitalists and foreign capitalists in China to profit from intense and massive exploitation, this places a brake on domestic demand making up for collapsing Western export markets.

The initial phases of the Free Trade Agreement between China and the Association of Southeast Asian Nations have brought significant benefits for both parties, helping to absorb external pressures at a time of slowing global growth.
On Oct. 22, Chinese Vice Premier Wang Qishan told the fifth China-ASEAN Business and Investment Summit that it is paramount for the two partners to accelerate their economic cooperation in the face of weakening global demand. Association of Southeast Asian Nations (ASEAN) officials also stated their wish for deeper economic ties with China, stressing the need to reduce the bloc's exposure to slowing demand from the U.S., Europe and Japan.
Structural shift. China's economy is moving away from traditional processing and assembly operations, sourcing more components domestically as its industries move up the value chain. Southeast Asia lacks the technology and skills to provide many of the required high-end imports and raw materials. It thus risks the prospect of a shrinking trade surplus with China and greater vulnerability to currency fluctuations.

Reform of financial system
(China Daily)Updated: 2008-11-15 17:07
As leaders of the 20 largest economies gather in Washington DC to discuss a coordinated plan to deal with the global financial crisis, it is necessary to reassess the existing US dollar-dominated international financial system. It is a speculation-rife, supervision-lacking system.
After the collapse of the Bretton Woods System in the early 1970s, the US rushed to introduce the Jamaica System, which is still in effect, in an attempt to carry forward its financial dominance. The Jamaica System, strictly speaking, is not new, and it has elements of Bretton Woods.
Under this financial structure, the US has excessively indulged itself in the benefits, but has tried to shrink from its responsibility as the world's largest economy. The superpower's unrestrained issuance of dollars to bolster its unrestrained domestic credit consumption and its efforts to maximize its national interests by adopting policies, such as transferring financial risk and crisis to other countries, has added vulnerability to the international financial system.
An absolute authority always leads to corruption. The unchallenged hegemony of the US has contributed to its abuse of power and conduct.
Long ago the European Union proposed that the international community strengthen supervision over hedge funds, which mainly stem from the US, and serves as an important source of its financial capital.
The EU's recommendation has repeatedly been ignored by Washington. As an important prop of the Bretton Woods System, the International Monetary Fund (IMF), has long been utilized by the US as a tool to push for neo-liberalism worldwide.
While offering aid to some crisis-plagued emerging economies, the lame-duck organization has never given up its interference in the economic jurisdiction of recipients in contravention of the UN. This has plunged some of these countries into a worse economic situation, sometimes resulting in political and social upheaval.
Since the exposure of the US financial crisis, the IMF has remained idle and other international financial bodies, such as the World Bank and the Bank of International Settlement, due to serious defects, have also been unable to play their roles as creditors and effective monitors.
The current defective international financial system has been widely criticized, but no country can ignore the dominant role of the US in it.
However, the unprecedented international financial tsunami in a century we are experiencing, and the summit on the crisis, have offered a rare opportunity for some competing players to change the existing international financial establishment to their advantage.
The hegemonic status of the US is now under challenge from its friend on the other side of the Atlantic Ocean, the EU. For many years, the expanded EU has pushed for market integration among its members and accordingly consolidated its strength to rival the US. That can be seen by the rising status of the euro in international markets.
It has been elevated to a major international currency, but admittedly it still has a long way to go before dethroning the US dollar as the world's leading reserve currency.
Behind the euro there is no unified capital market, military or fiscal policy. European countries have different economic development levels and political preferences.
At the same time, the regional community is plagued by problems of immigration, and an aging population. All this present hurdles to snatching the world's No 1 financial status from the US.
The EU has also been a beneficiary of the US-manipulated international financial order. So it is not difficult to understand why up to now it has not proposed major reforms.
We look forward to some positive measures from the Washington summit but should not pin our hopes too high.
The author Jiang Yong is a researcher with the China Institute of Contemporary International Relations

Crisis puts brake on sales of cars

By Patti Waldmeir Financial Times

It had to happen sometime: after several years of stratospheric growth, the Chinese vehicle industry has come back to earth with a bump - and found itself facing a grim reality of weak demand and cut-throat competition that could persist well into the future.Even before the western financial world imploded - stoking fears of a global recession that has chilled the hearts of car buyers, even in faraway China - industry analysts were expecting a slowdown in Chinese car sales this year. But by that, they meant 15 or 20 per cent growth (down from 34 per cent in 2006 and 24 per cent last year) - not low single-digits this year, and flat sales next year, as predicted recently by JD Power, the auto consultancy.Chinese car industry growth had defied gravity for so long - rising from only 5,000 cars in 1980 to 5.8m forecast for 2008, making it the world's second largest auto market - that it was hard to imagine anything could cause such a hard landing. But that was before the credit crisis.In many ways, Chinese car buyers ought to have been well insulated from the crisis: according to Mike Dunne of JD Power in Shanghai, 93 per cent of car purchases are still made with cash. But Li Shufu, chairman of Geely, one of China's largest automakers, says the effect is predominantly psychological. "If consumers think the global economic situation is bad, they also think maybe prices will fall," and they stop buying cars, he told the Financial Times recently in an interview. In China, no one wants to buy a car until the price is as low as possible.But China's car industry was already highly competitive, even before the threat of further price declines. According to Dieter Seemann, commercial executive director of Shanghai Volkswagen, one of VW's two carmaking joint ventures, China has 81 automotive brands compared with 47 in the US - the world's largest car market - and 47 carmakers compared to 16 in the US. VW says prices fell by a staggering 37 per cent from 2001 to 2007, and forecasts further price erosion of 8 per cent from 2008 to 2010. In the short term, says Joseph Liu, General Motors' Asia-Pacific head of sales and marketing, "everyone will suffer".But the medium- to long-term forecast is more cheerful. Nick Reilly, head of Asia-Pacific operations for GM, says market fundamentals remain strong. GM is still forecasting 10 per cent growth for this year and as much or more for next. "I don't see this as the start of a significant decline," he says.Jeffrey Shen, president of Changan Ford Mazda, one of Ford's Chinese joint ventures, says: "We see this as a shortterm adjustment. Long term the [growth] trend in the Chinese automotive industry will continue." Ford believes that when per capita GDP reaches $6,000, the industry will boom and carbuying "will get into every family", Mr Shen says.Ford acknowledges that car sales in China's richer, more export-focused east and south have slowed, but says sales in the interior are beginning to take up the slack - as China has shifted manufacturing production to cheaper regions.In the longer term, one basic fact remains paramount: only 20 out of 1,000 people in China own a car (compared wi th roughly 500 per 1,000 in the US and EU). That fundamental fact will drive the industry for many years to come.Most industry forces expect the Chinese government to stimulate demand in the short term, as a way of propping up the economy in difficult times. "The car industry can serve as a cushion for the overall economy," a senior official of Changan Motors, a large state-owned automaker, said recently. But in the longer term, Beijing's ambitions are much grander.China knows it missed out on decades of automotive technology, because of its Communist past. Now Beijing plans to leapfrog that gap to a new greener future: One plug-in hybrid electric car is expected on the Chinese market within weeks, from BYD, the upstart Shenzhen battery manufacturer that recently rose from nothing to become the biggest-selling Chinese auto maker. And nearly all of China's other leading auto companies say they are working on alternative fuel vehicles. They are counting on backing from Beijing - which has said that 10 per cent of China's cars must run on alternative fuels by 2012 - for everything from tax breaks to the massive infrastructure of charging stations needed for electric cars.China's peculiar brand of authoritarian semi-capitalism could even give Beijing an advantage in the battle, says Paul Gao, author of a recent McKinsey report on electric cars: democracies need to consult on such things as electric vehicles; but Beijing could just decide to support the technology, and it would happen."In China things can happen very fast, or very slowly," says Mr Liu of GM. If the past is any guide, change in the Chinese car industry will be fast-forward

China’s economy losing steam, workers losing jobs and wages
Guangdong province faces millions of job losses in coming months
Vincent Kolo, chinaworker.info
The global capitalist crisis has struck southern China’s export powerhouse Guangdong with the force of a super-typhoon. It is “the worst economic environment of our lives” exclaimed the chief economist of Hong Kong’s Chamber of Commerce. A domino effect of factory closures is rippling through industries such as toys, footwear, textiles and light engineering in Dongguan, Shenzhen, and other heavily industrialised cities in the Pearl River Delta. The Federation of Hong Kong Industries (whose members run their production from the delta) warns of 2.5 million job losses in the coming three months – 27,000 every single day! The same source said 20,000 Hong Kong-owned small and medium-sized enterprises could close down by the Lunar New Year (January 2009).“Depression”For years the world has marvelled at China’s spectacular growth figures, now it should prepare for spectacular figures of another sort! City leaders in Dongguan speak of a “depression” in the city of seven million people, mostly migrant sweatshop workers. Wang Zhiguang, vice chairman of the Dongguan Toy Industry Association, told Guangzhou Daily: “Of some 3,800 toy factories in Dongguan, no more than 2,000 are likely to survive the next couple of years.”Skyrocketing costs for fuel and raw materials, the Chinese currency’s rise, and shrinking export markets, have squeezed already narrow profit margins. “After the EU and the US changed the market thresholds for China-made toys, and because of recalls in 2007, our testing fees have gone up by about 25%,” a toy industry spokesman said.Several Hong Kong-owned factories have gone bust in the last week, including three run by the world’s largest toymaker Smart Union Group, which makes toys for Mattel and Hasbro. “It’s scary,” engineer Zeng Yangwen, 26, who worked for Smart Union for three years, told Reuters. “The companies that folded before were small. This is the first big one to go under.”Daily protestsThousands of workers have lost their jobs and many have taken to the streets to demand unpaid wages. Their former bosses in many cases have spirited away valuable assets and disappeared. Street protests and demonstrations at local government offices have been a daily occurrence in many townships in the region. In at least one case in Shenzhen, at the Xixian factory linked to luxury watch retailer Peace Mark, also Hong Kong-owned, more than 600 workers staged a sit-in for two days to demand their wages. More such protests are on the cards in coming weeks and months.Exporting regions like the Pearl River Delta are the first to be hit by the crisis, as their export markets wither under the impact of the global recession, while input costs have risen, and bank credit has become tighter. This is just the first phase of what is clearly a significant industrial slowdown in China, exacerbated by the simultaneous bursting of gigantic financial bubbles in the Chinese stock market and property sector. Added to this there is of course the global capitalist crisis, which is hammering export markets and threatens new financial upheavals. Asian stock markets sank to four-year lows this week on fears that growing difficulties in China and other ‘emerging markets’ will prolong the global recession. From being a possible ray of hope, China’s faltering economy is becoming another source of despair for the global capitalists.All the above factors mean the current industrial downturn can be far more serious than China’s leaders and most commentators publicly recognise. The Beijing regime continues to reassure the public how ‘basically strong’ the economy is. But in part these statements are tailored to avoid further frightening capitalist ‘investors’ (speculators) – who are more inclined towards panic from the global meltdown than they are to be calmed by recent market-supporting measures from the Chinese regime and central bank.“The slowdown in the Chinese economy so far is unexpectedly serious,” Li Wei of Standard Chartered Bank told China Daily. All the main economic data now point downward. China’s gross domestic product (GDP) growth slowed to 9% in the third quarter, the slowest rate since during the SARS crisis of 2003, and the fifth consecutive quarter of reduced growth. All the forecasts for 2008 and 2009 are being scaled down, and several economists now warn of growth dipping below the crucial 8% level in 2009. Morgan Stanley’s latest forecast is 8.2%, while CICC predicts just 7.3%. Li Wei of Standard Chartered forecasts 7.9% in 2009 and only 7% in 2010. Anything below 8% is a recession in the Chinese context, meaning rocketing unemployment and falling living standards for broad layers of the population.Investment slowsInvestment too, a key motor of GDP growth since the start of the century, has seen a sharp slowdown. The Chinese Academy of Social Sciences warns that real fixed asset investment (after compensating for higher producer prices) could grow by 15% overall this year, compared to 20% growth in 2007. This poses big problems for the central government: even its monetary easing (interest rates have been cut twice in the last month) and lifting of earlier credit restrictions on banks, may not have the desired effect if companies are reluctant to invest due to a sluggish market and huge levels of existing surplus capacity. Industries such as steel, coal, and power generation, have grown far beyond the limits of the Chinese economy in the course of a frenetic seven to eight year investment bubble, and are dependent on the country’s XXXL-sized export machine to sustain demand. If this machine fails, so do they. Steel and coal firms have announced production cuts for the first time in years in order to put the brakes on sharply falling prices brought about by lower demand and excess capacity. Coal prices are down 14% and steel by 30% since the summer. 23 of the nations 71 largest steel firms reported losses last month, and Beijing may reintroduce tax incentives for steel exports, despite opposition from the US and EU. Clearly, the slowdown is not confined to export industries or regions, although these are being hit first and hardest.While China’s overall GDP growth still seems impressive by global comparisons, its complex and fragmented economy can experience widely divergent processes at the same time. Guangdong and other coastal provinces are, because of globalisation (they trade more with the US and Europe than with the rest of China), showing clearer signs of recession at this stage than most Western economies. There has been a spate of suicides by capitalists in these provinces. All told perhaps 20 million workers have lost their jobs in 2008 as a result of business collapses. But as the overall economy is still growing, many of these worker (most are migrants) can be absorbed elsewhere. At a certain point in the downward cycle, however, this ability to soak up the new unemployed will likely break down and open unemployment will soar and, with it, the threat of serious unrest.Government measuresProperty markets – pumped up to fantasy levels in the speculative wave of recent years – have deflated sharply, by 40% in some cities such as Shenzhen. The coastal exporting regions that are suffering most from the crisis and the property meltdown are also the main launch-pad for the much discussed but yet to be seen “rebalancing” of the economy towards domestic consumption. Per capita GDP in the wealthiest coastal provinces is roughly twice the level in the north-eastern provinces, three times the level in the central provinces and five or six times the level in the poorest western provinces. Much greater consumption – close to double today’s level – would be needed to break the economy’s huge dependence on exports and avert a serious downturn. If increased consumption does not come from the wealthier provinces, then where? But the combined blows of falling property prices, factory closures and recession, migrants moving elsewhere, will serve to weaken rather than strengthen consumption in these regions. For the first time in modern Chinese history, since the pro-capitalist reform and opening process began 30 years ago, the coastal provinces may be headed for slower growth and greater dislocation than their poor relations in the interior. Already, coastal companies are gearing up for an assault on the markets of other provinces. The stage is being set for a dramatic increase in inter-provincial rivalries and economic disputes. Beijing may find itself in the role of referee at a dogfight!The central government has responded to the current slowdown with a series of measures that include even more investment in infrastructure, restoration of tax rebates to labour intensive export industries (these were cut two years ago as Beijing moved to soften US protectionism) and special rules to ease loan terms for small and medium-sized companies. The pace of currency appreciation will surely slow, if not reverse, and US protests over this fact may be bought off for a time with a Chinese commitment to keep up its lending to the US government’s huge state bailouts. Other steps have been taken to shore up the sinking stock market, to prevent the main CSI 300 index slipping below the psychologically important 2,000 mark. The market has plummeted 70% this year, but the latest measures – using state companies and the sovereign wealth fund, CIC, to buy up shares – have not prevented further falls (the CSI 300 is down on 1,833 points at the time of writing). The government will soon in all probability announce a stimulus package containing tax cuts and extra funds for public investment. It is rumoured that this package will be worth 400bn yuan ($58bn). That the plan has been delayed may reflect deep divisions inside the regime’s economic management team over what ‘mix’ of policies to adopt. Many CCP bigwigs now favour tax cuts, accepting the liberal economists’ argument that this is the fastest way to stimulate consumption. Less than one-third of China’s wage earners would benefit from a tax cut as the remainder do not earn enough to pay any tax. Fear of protestsWhat is the role of local-level governments in the Pearl River Delta and other export hubs in the rising wave of factory closures? There is of course a big risk of instability and even riots and the authorities are keen to diffuse this. At the same time the CCP local administrations have created an environment that allows corrupt capitalists to run their businesses into the ground and then abscond, leaving workers, creditors, and suppliers, in the lurch. Many of today’s fugitive bosses were well integrated with local officials and paid well for their services. Today the factories are being sealed for “immediate auction”, with workers allowed to remain temporarily only in the dormitories and canteens.At the same time the local governments are using public budgets to pay out unpaid wages to redundant workers, a fact that is drawing increasing criticism on similar lines to anger at bank bail-outs in the West. In order to clear the streets and prevent the anger of workers crystallising into a wider struggle across factory or township borders, governments are using the ‘carrot’ of compensation rather than the ‘stick’ of police repression – at least for the time being. The local government in Zhangmutou township, Dongguan, paid out more than 24 million yuan ($3.5 million) to compensate the 7,000 former workers of Smart Union Group, China Daily reported (23 October). This was the township’s entire budget for the coming year! Yet workers are owed four times this amount and may never receive the full amount. Once paid off and dispersed, the authorities hope migrant workers will move onto other jobs or other areas. Rival factories have been sending recruitment agents into the demonstrations in Dongguan and Shenzhen to fill their quota of vacancies.The main focus of workers’ protests has been to get part if not all of the wages they are owed. This is the still basic level at which the struggle stands today, not seeking to challenge the bosses’ right to turn thousands out onto the streets. The perspective of many migrant workers is that 1) they hope and believe that by moving again if necessary they can get new work, and 2) It is not really possible to challenge the bosses and officialdom: “They will do as they want, what can we do?”

The Challenge Of The New Statism
The liberal democracies have experienced financial shocks and reacted, but not as free market advocates expected. Adam Smith’s name is not being loudly heard in the world’s central banks. Instead we have western governments recommending federal interference in their poorly regulated economies and incorporating methods similar to those that guide New Statist nations, such as China and Russia. This phenomenon reveals that Francis Fukayama, who received commendation for his 1989 philosophical tract: The End of History, might have spoken too fast."What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."Fukayama repeated a thesis of often maligned Karl Marx that liberal democracy is an integral part of the capitalist system but refuted Marx's assertion that “capitalism would inevitably lead to increasing class polarization and class conflict,” and “through its own inherent processes of development it is destined to give rise ultimately to its own dissolution." It now seems that both of these scholars have erred and the more prescient is Azar Gat, Professor of National Security at Tel Aviv University. In a Foreign Affairs article: The Return of Authoritarian Great Powers, July/Aug 2007, Professor Gat argues that Fukuyama has not considered the emergence of imposing authoritarian nations, "which could 'end the end of history'." Gat proposes a challenge: “These authoritarian capitalist regimes could inspire other states to follow their model.”The New StatismIn a previous article, The New Statism, The Rise of Corporate States, Alternative Insight, Oct. 2007, the writer independently outlined a similar concept: "A new statism, in various prescriptions, exercises control over the political, moral, economic and social fabric of several nations and has the potential to control the destiny of the world."An earlier article, The Socialization of America, Alternative Insight, April 2005, stated: “The global economy has been pioneered by the United States but has not been a perfect fit for new pioneering nations. In order to provide prosperity for its people, the United States must implement policies that offset the deleterious effects of globalization. American history shows that private industry has never been the sole source of solutions to recurrent economic problems.”The former article described several nations that can be described as "authoritarian capitalist” regimes. China and Russia are the most prominent, but India, Israel, Venezuela, Bolivia and Vietnam, and several autocratic Arab nations can also be considered New Statist. Their institutions include significant New Statist characteristics:The government allows free enterprise but might invest in some industries (mixed economy) and control industries related to national defense, natural resources, communications and media. In some cases it also has extensive land ownership.The government, by direct or indirect mechanisms, partially regulates international money transfers, international trade, wages, prices, internal investment and segments of the labor market.The government promotes nationalism, reinforces chauvinism and allies the education system with these efforts.The government exercises powers that lessen opposition and prevent excessive dissent.With the liberal political and economic world suffering from an economic downfall, emerging nations might be less likely to adopt the free market model and more likely to consideration the autocratic Statist paradigm as an attractive alternative to liberal democracy. Even the free marketers are shelving their concepts and applying Statist solutions for private problems. Rather than an end to history, the liberal democracy movement has become only a stage in history. As predicted by rejected and non-conventional economists, a new stage of history is unfolding.

SEE:

His Masters Voice

Stiglitz On Market Fundamentalism

The New Imperial Age

China Fuels US Inflation

China Burps Greenspan Farts Dow Hiccups

Neo-Liberal State Capitalism In Asia
China: The Triumph of State Capitalism
US vs China for Global Hegemony
China No Longer Red Nor In The Red

China Needs Free Unions

Japanese State Capitalism

China's Trickle Down Economy

New Asian Dragon

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Business Unionism Offers No Solution To Capitalist Crisis

You know that the labour movement is no threat to Canadian Capitalism when it can agree with the bosses on a band aid to the current economic crisis.;

'Job killing' EI premiums hurt workers, employers as manufacturing sector lags

Critics say the current EI program fails jobless workers, many of who don't qualify for EI benefits because they have not worked the required number of hours, as well as employers, who worry about having to pay what Liberal MP John McCallum, an economist, calls 'job killing' EI premiums.
On the employee side of the debate, the push is for more generous benefits.

Not surprisingly, one of the few things employer and employee representatives agree is the need to refrain from increasing the 2009 EI premiums for employees or employers. The chief actuary of the EI commission has already recommended a freeze for 2009, and the commission is expected to take the advice when it announces the 2009 rates this week.
Corinne Pohlmann, vice-president of national affairs for the Canadian Federation of Independent Business, said the commission should go further and cut employer premiums. Continuing surpluses in the EI fund, estimated at $600 million for the last year, should be used to reduce the rate from the current of $2.42 per $100 of insurable earnings, she said in an interview.
The federation also wants the formula rewritten so employers and employees share the cost of the EI plan 50/50, or so that the government picks up a share of the cost. Employer premiums are currently 1.4 times higher than the $1.73 paid by employees.
The business federation and the CLC have both advocated - unsuccessfully so far - to give employers a 'premium holiday' for a period of time if they use the money to train employees.
The Conservative government's plan to move to a new system for setting EI premiums, starting in 2010, is causing jitters in some circles too. A newly-created EI financing board will set the premium rate each year "to generate just enough premium revenue during that year to cover expected payments" and to ensure a $2-billion reserve is maintained, according to government documents. Legislation establishing the new system became law last June.
Diane Finley, named last week to her former post as human resources minister, declined requests to discuss the EI system on grounds she is still getting briefed on the portfolio.
But Georgetti and McCallum said the system means that if the country's jobless rate worsens, as is expected, the board will either have to raise premiums the following year or cut benefits to meet its mandate.
"It has to be one or the other," said Georgetti. "That's the only way I have ever learned to balance the books. And neither one, in this environment, is the way to go."



Once upon a time the labour movement opposed child labour now they decry unemployment of the youth sector of the economy. These are kids working at Wal-Mart, MacDonalds etc., all of course in the non unionized sector.

Canadian Labour Congress: Public Works!
Now That the Election is Over, it's Time to Invest in Jobs That Last

Young workers, many of whom work in accommodation and food services, took a big hit in October. In total, 34,400 workers aged 15 to 24 lost their jobs. At the same time 27,000 people who earned their livelihoods in the accommodation and food services sector were out of a job last month.



And in their recently released paper on the global meltdown they sound more like economic apologists for capitalism than the voice of the working class. There is no discussion of using public and workers pension funds to finance the creation of worker controlled take overs of manufacturing in Canada. Showing that Canada's labour movement has lost the vision of building a new world within the shell of the old. Instead true to its nature as business unions the CLC calls for the state to bail out its bosses.



The Meltdown, Seen from Below
What union leaders, labour experts and anti-poverty activists say needs to be done.

The CLC has just issued a paper on its response to the current crisis titled "Global Capitalism: On the edge of the abyss." The paper says the global economy is now "almost certainly headed for a deep and prolonged recession," and notes that global markets have already fallen as far as they did in the Great Crash of 1929.
The labour group blames deregulated global finance for the crisis, pointing to what it calls "the unregulated shadow banking system of investment banks, hedge funds and private equity funds," and decrying the creation of "fiendishly complex and sometimes outright fraudulent products." The face value of these highly abstract and uncertain financial instruments, the paper notes, was recently estimated at over $50 trillion.
The CLC paper quotes Nouriel Roubini, professor of economics and international business at the Stern School of Business at New York University: "The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity.... a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in he biggest real sector and financial sector deleveraging since the Great Depression."
The CLC paper calls on Canada to play a role in creating a co-ordinated international response to the crisis that features re-regulation of both local and cross-border transactions and the imposition of a small transaction tax on all securities trading, including commodity futures. This Tobin Tax, named for the Nobel Prize winner who first suggested it, is designed to discourage short term speculation and to raise the government revenues that will be necessary to fund appropriate investments in social services and infrastructure repair.
Bail out tied to regulation
While many critics of the official response so far are asking why so much money is going into the banks and finance houses that created the crisis, the CLC endorses some bail-out activity as necessary to avert a systemic collapse. The bail out money must come, it cautions, tied to effective regulatory rules.
The CLC wants Canada Mortgage and Housing to re-finance distressed Canadian home mortgages at lower rates, dismissing the view that Canada is not experiencing a housing bubble as a myth. The $10 billion a year in new infrastructure investment the CLC calls for, says the paper, would create 200,000 new Canadian jobs rebuilding roads and bridges, mass transit projects, water works and the like as well as replenishing the country's diminished stock of social housing. A public letter recently signed by 80 prominent Canadian economists has echoed this call for an active and interventionist response by government to the economic crisis.
Further corporate tax cuts should be cancelled, the paper argues, in favor of direct government support for new investments in machinery and equipment, research, development and training.
Even if all these reforms are put into place, says the CLC paper, Canada may well experience serious increases in unemployment, which will expose weaknesses of the Employment Insurance program. Far fewer workers are eligible for EI as it now exists than was true in years past, and maximum rates and time allowed for coverage are both inadequate, according to the paper, which calls for broadened eligibility, higher maximum payouts and longer terms of coverage for the unemployed. The EI system currently has a surplus of over $50 billion.
Call for new pension protection
The CLC paper predicts the current financial crisis will create a severe pensions crisis, and a follow-up paper issued on Oct. 29 calls for the creation of a new pension benefit insurance scheme (financed by the proposed tax on financial transactions) to insure annual pension and RRSP benefits for individual Canadians up to $60,000 a year.
Pensions are a concern for Bill Saunders, too. Saunders, the president of the Vancouver and District Labour Council, says that Canadian workers and their pensions are more exposed to risk during market trouble because of the successful campaign over the past decades to move from defined benefit pensions, which guarantee a certain monthly amount when you retire, to defined contribution plans, promoted by market enthusiasts.
Contribution plans shovel a defined amount every month into mutual funds and other stocks, creating pension payouts that can vary widely depending upon the health of the market, as many Canadians are discovering this year as their RRSP holdings have shrunk dramatically.
"Twenty years ago," said Saunders, "60 per cent of Canadian private pension plans were defined benefit. Now that share has been cut in half. Defined contribution plans just don't deliver the goods for workers the way defined benefit plans do, and the current crisis illustrates that."

The final irony is that despite calls by the CLC to meet with Harper government it appears that labours agenda was accepted by the Premiers and the PM at their first ministers te'te' today.

Harper, premiers agree on infrastructure, pensions

Once again proving Herr Doctor Professor Marx correct:



Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say the ultimate abolition of the wages system.Karl Marx, Value, Price and Profit, Addressed to Working Men, The First International Working Men's Association, 1865.



SEE:

Concessions Don't Work

And Then There Was One

October Surprise Was The Market Crash

No Austrians In Foxholes

Pension Rip Off



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