capital confusion

A quick peruse of this mornings paper and i find capitalism confuses even itself .

The figures confirm that the UK had plunged into recession at the end of last year and with interest rates nearing zero, the Bank of England is moving towards buying assets with newly-created money to try and boost demand.
Both professional services, such as accountants and legal firms, and consumer businesses, such as hotels and restaurants, reported sharp falls in profitability and warned of plans to scale back investments and jobs. The numbers employed also declined at a record rate,
Companies selling to other businesses likewise saw record rates of decline in job numbers and profitability, with worries about the ability to raise funds for expansion.

The CBI's chief economic adviser, Ian McCafferty, said: "Consumers are clearly reining back their discretionary spending - postponing holidays, and spending less on leisure activities and personal care.Similarly, an already deteriorating demand for business services such as advertising, legal advice and temporary office staff has slumped in recent months .Jobs are already being lost at the fastest rate in over 10 years from the whole of the service sector, and firms' expectations suggest conditions will remain depressed for some time to come."

Bruce Stout, manager of Aberdeen Asset Management's £568m Murray International investment trust, said
"Political rhetoric claimed the nation had never been in better shape heading into a downturn - in reality it was the complete opposite Policymakers outwardly delivered assurances whilst internally they panicked. Interest rates were slashed to historic lows whilst simultaneously fiscal pledges and spending rocketed. The effects of such drastic measures have yet to be felt, but given the chronic state of the banking system and the sheer scale of debt outstanding, the UK economy is likely to suffer the worst recession of all G7 countries."

Professor Tim Besley states
"The idea that we can and should use short-term interest rates to quell asset booms or to curb lending practices is intellectually and practically suspect," he adds. "Put another way, all those charged with getting us out of this mess are now having to make it up as they go. And one obvious risk of throwing too many weapons at the credit crunch is that inflation turns negative for too long and we find ourselves in that very uncomfortable downwards spiral experienced by the Japanese throughout their lost decade. "

Chinese Bubble Pricked

China's manufacturing contracted by the most on record last month as the global financial crisis cut demand for exports, a second survey showed. A government-backed survey released on Nov. 1 also showed a record contraction, adding to concern that the world's fastest- growing economy may slump.

With export orders falling because of the global slowdown and rising raw material and labor costs, more than 68,000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million jobs in the Pearl River Delta region may be lost by the end of the year, according to government and industry estimates.

As the economy has soured, dissatisfaction has grown: Since mid-October, there have been dozens of labor protests involving thousands of workers at major exporters, including several publicly listed companies. China needs to grow in order to keep generating enough factory jobs to maintain stability in the labor market, as millions of peasants continue to pour into Chinese cities in search of work.In Jiangsu province, the government extended unemployment benefits to migrant workers laid off from ailing factories; these workers had previously been shut out of public services because they don't have residency cards.
The Guangdong provincial government in the south is scrambling to set up a special fund to compensate laid-off workers in order to "protect against some of the financial and social problems caused by such closures."
In the eastern city of Wujiang, nearly 1,000 workers from bankrupt Chunyu Textile Co. received four months' salary on Oct. 27 after they swarmed the area's four main roads to draw attention to their cause. After more than 1,000 workers for home appliance maker BEP International Holdings gathered outside the factory to protest, district officials gave them $44 each late last month. The employees were also allowed to continue living in the defunct factory's dormitories for free. The same week, the government offered three months' back pay to the 900 workers at Gangsheng, an electronics supplier, after they staged a protest at a shop near their factory.
In the neighboring city of Dongguan, the local government handed out about $3.5 million on Oct. 21 to the employees of Smart Union -- which sold its toys to Mattel , Disney and Hasbro -- after the 7,000 workers staged a strike.Employees became nervous when the owners slipped three months behind on salary payments. The workers occupied the factory and the surrounding streets until government officials promised them they would be paid.


China's most revered companies, whose growth once seemed limitless, have reported surprising losses in the past few days. Air China , the nation's biggest international carrier, posted its first loss in seven quarters because of declining passenger numbers and wrong-way bets on fuel prices.Bank of China , the nation's largest foreign-exchange lender, said that as credit-market losses went up, its profit growth went down to its slowest in two years.

China's leaders have made a variety of moves to try to stabilize the economy -- three interest rate cuts in six weeks, new export tax rebates, reduced costs for home buyers, and billions spent on infrastructure.

"...What the government fears most is workers making trouble..." Hu said.
"....no one wants to hire you because they know about the blockade and now we have a bad reputation..." Jia said.

Doom and Gloom

"What We’re In For: Projected Economic Impacts of the Next Recession," by John Schmitt and Dean Baker paints a grim economic picture in the event that the United States falls into a recession this year. The report projects the likely effects of a recession in 2008 based on the experience of the last three recessions --the severe recession of the early 1980s, and the mild-to-moderate recessions of the early 1990s and the early 2000s.

Even a mild recession in 2008 would add 3.2 million workers to national unemployment by 2010, according to a new report from the Center for Economic and Policy Research. A severe recession, the group estimates, could make 5.8 million more workers unemployed by 2011. Along with a sharp rise in unemployment, a recession in 2008 would eventually result in 4.7 to 10.4 million more men, women, and children living in poverty, at least 4.2 million people losing health-insurance coverage, and a drop in the inflation-adjusted median family income of between $2,000 and $3,700 per year. The estimated effects would extend as far as 2010 or 2011, depending on the severity of the downturn.

“For financial markets and employers recessions are fairly short-term events,” noted Schmitt. “For labor markets and workers, though, recessions have historically been long and painful.”

Even once financial markets begin to recover, workers will suffer the ill effects of a recession for at least the next 3 to 4 years.

American Nightmares

Touched on the American Dream and the lack of thereof for many of the black population but of course the real American nightmare is not simply restricted to race .

Michigan, by some calculations, has lost 400,000 jobs in the past seven years. That's in a state whose population is only 10 million. Detroit is seeing unemployment running at nearly 8%, twice the national average. The number of homes in the city "foreclosed" - or repossessed by mortgage lenders - is among the highest in the country. An economic storm is hitting this state - falling property prices, a credit crunch, a shrinking tax base and rising oil prices.

"This is ground zero when it comes to poverty..." an organiser at Gleaners Community Food Bank, a charity which provides food to needy people, reported .

A marked increase in the number of professional workers who are seeking food assistance.

Daniel Wolfe worked in civil engineering for 22 years. He lost his job eight months ago. Daniel had been earning $90,000 a year . Daniel and Cynthia thought of themselves as middle class. He was laid off when the state government cut back on contracts to private companies. His unemployment benefits expired. Much of that money had been spent on trying keep up the family health insurance. And his savings disappeared . In the course of eight months, Daniel and his family have gone from prosperity to poverty. Daniel and his wife Cynthia collect free groceries from a charity food bank .

"To find myself in a position where I couldn't afford a gallon of milk, I couldn't afford a loaf of bread - it was very humbling," he says. "For want of a better term it made me feel like a loser...I think we're on the poverty line right now..."

So will Michigan's pain spread to the rest of the country?

"Keep an eye on Michigan . I believe what's happening here could happen to the rest of America ..." - Augie Fernandez at Gleaners food bank

Hat-tip to PB at World Socialist Movement Forum for link