“The profit-driven system isn’t working – real, systemic change is needed.”
Trump’s tariffs further bleaken the outlook in the ‘advanced’ capitalist economies, writes Matt Willgress in the Red Weekly Column.
However some ‘liberal’ commentators may choose to frame it, even before this week’s tariffs announcements from Trump the ongoing economic crisis was deep across the biggest capitalist economies.
2024 ended with six out of the top seven capitalist economies either in stagnation or in recession, as measured on the basis of gross domestic product (GDP). Furthermore, when measured on GDP per person, even the US – the best performing of the G7 economies – performed relatively badly, while the rest were all stagnant at best. As the socialist economist Michael Roberts has put it, “The long depression that started after the Great Recession of 2008-9, resumed after the pandemic slump of 2020 and continued in 2024.”
This was already clear evidence that the profit-driven system simply isn’t working, and that real, systemic change is needed.
People are increasingly seeing the need for such change in Britain where this decades-long crisis has been reflected particularly deeply. It can be seen in continually low growth rates, and the ongoing chronic lack of investment from the private sector in large and numerous sectors of the economy.
Into this bleak picture, has now entered the returning Trump and his tariffs-led ‘economic war,’ which (as we have discussed in this column before) represents a desperate bid to reverse the US’ relative global economic decline.
Before last week’s announcement, earlier analysis reckoned that if Trump followed through with his tariff measures, the impact would be massive globally. The tariffs would affect $1.3trn worth of US trade, with 43% of all US imports affected.
Moves on the global markets this week have confirmed this, with trillions wiped off global markets within days of Trump’s announcement of widespread tariffs and their levels.
When people all over the globe see that all the stock markets are falling, they understand that something is deeply wrong with the system, yet at such vital moments they also see that when the economy – and all-powerful ‘markets’ – are discussed in the media, and indeed in Parliament, the human effect of what is being discussed is not centre-stage, or sometimes even discussed at all.
Yet, in the aforementioned bleak economic context – even before the developments around Trump’s tariffs and the deep austerity waves being unleashed here and elsewhere – economic inequality has mushroomed in the last two decades.
The poorest 50% of the population consistently lags behind the top 10% of the population in every region of the world.
Here in Britain we have seen spiralling inequality and poverty, with still no serious Government plan to tackle it, since at least 2010.
Prior to this week, Starmer and Reeves has already announced yet more cuts, with there being little doubt now that more are on the way (with the exception of in the area of military spending of course, as Diane Abbott has brilliantly critiqued here.)
This all means that we urgently need a serious discussion on alternative economic approaches and policies which can tackle poverty and inequality.
This is especially the case here in Britain, where the Establishment has responded to each global economic shock by arguing for more and more of the same failed neo-liberal ‘solutions’ of cuts.
For those still needing evidence this won’t work, one current international example clear, namely over a year of extreme austerity from Trump’s Friend President Milei in Argentina.
When he took office, annual inflation was running at 160%, over four of every 10 people were below the poverty line and the trade deficit stood at $43 billion. In addition, there was $45 billion debt owed to the International Monetary Fund, with $10.6 billion due to multilateral lenders and private creditors.
Using a language we are increasingly seeing in the House of Commons – including from Kemi Badenoch who is an open Milei fan – he said he would smash state sectors, ‘free up’ markets from regulation and so forth.
This then is a living experiment in extreme free market policies – involving hardcore austerity measures, such as slashing energy and transportation subsidies, laying off tens of thousands of government workers, freezing public infrastructure projects and imposing wage and pension freezes below inflation.
Public spending has been reduced by 30% year-over-year in real terms. The budgetary cuts have been especially hard on infrastructure (-74%), education (-52%), social development (-60%), healthcare (-28%) and federal assistance to the provinces (-68%).
For those who claim hardline austerity works, the evidence is not pretty reading. The IMF forecasted a contraction of 3.5% for 2024, the biggest contraction in any of the G20 economies.
There has been a deep, deep slump with horrendous human consequences. Argentina’s poverty rate has jumped from almost 42% to 53%, an extra 3.4m Argentines. Two-thirds of Argentine children under the age of 14 are living in poverty.
Whilst in countries such as Britain the level of austerity being proposed is not at this level, the flawed logic of “we can’t afford it” and that cuts are a way out of stagnation and recession are the same. We most oppose every cut to our public services and welfare state as part of opposing the whole, rotten economic system. And if capitalism “can’t afford” basic dignity and services for people here and around the world, then the reality is clear and simple. We can’t afford capitalism anymore.
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