Right-wingers are trumpeting the claimed prosperity of the US economy since Trump’s election, and of the British economy after Brexit. A closer look shows the prosperity as very partial.
Stock market prices in the USA have risen strongly since November 2016, though no more than their general rising trend since they hit bottom in March 2009. The slice of corporate profits in total US income is as high as it was at its pre-2008 peak, which in turn was the highest since 1965.
Unemployment in the USA continues to fall towards 4% from its 10% peak in 2009.Its workforce participation has also been falling, since 2008, indicating that more and more people don’t even bother to register as unemployed.
The FTSE 100 index of share prices in the UK is also rising, and has been rising since early 2009 with something of a dip in 2015-16. Profitability of UK corporations, outside North Sea oil and banking, is now way above pre-2008 peaks.Unemployment in the UK is also on a falling trend, at 4.6% now compared to its peak of 8.5%. That peak came not in 2009 but in the second dip, generated by Tory government cuts and eurozone turmoil, in 2012.
In the UK the workforce participation rate is going up, and at an all-time-record level.There is some capitalist recovery. It is way short of a boom. And it is not special to Britain and the USA. It means no more than that the usual cyclical revival from slump has continued, and that a crisis which looked like crashing it has not ensued.In 2015 and 2016 it looked likely that the 2008 global credit crash, and the 2010-2012 eurozone government-debt mess, would be followed by crashes in the “emerging economies” arising from private corporations in these economies having racked up huge debts in the previous phases when they seemed the most prosperous capitalist sector.That has not happened.
The Chinese economy is still showing 6-7% growth, though the statistics are unreliable. The Chinese stock market crash of 2015-16 did not result in a general crash. The Chinese economy still has a mountain of bad debt, but it is not toppling.The IMF estimates that Russia’s economy is “bottoming out”. Brazil’s economy is still in prolonged depression, but flat rather than crashing. The Indian economy is growing quite fast.Commodity prices — oil, metals and so on — which had slumped heavily, have started increasing again a little, which in capitalist terms is good news, because it means that exporters aren’t ruined and deflation does not spread.
For the first time since 2009, world trade is now increasing faster than production. The failure of trade to outpace production since 2009 was a break with the whole history since World War 2.Central banks are beginning to nudge back towards normal interest rates, though they are still very low.The twist in this tepid recovery is low investment, low growth of productivity, and low growth in wages. Labour productivity in the USA grew only 1.1% per year between the 2007-8 crash and late 2016, a lower rate than in any recovery phase since 1948.Gross fixed capital formation in both the USA and the UK, inflation-adjusted, is still below its less-than-gaudy 2006-7 peak. In the eurozone it is well below that peak.In the UK, output per hour worked is still only 0.1% higher than it was ten years ago, in 2007. If it had been rising at the trend rate for 1971 to 2007, it would be 23% higher.In the eurozone, labour productivity has risen faster, but still slower than in previous periods.
Real wages in the UK were lower in spring 2017 than in spring 2016, and much lower than in 2007. According to the Resolution Foundation think-tank, “this decade [2011-2020] is set to be the worst in over 200 years for pay packets”. Cuts in services and benefits intensify the increase in social inequality.Life expectancy in the USA has declined among poorer white males, with more deaths from drug overdoses, liver disease and suicide. Death rates in the UK have also risen: researchers link that to NHS cuts.
Thus, we have an economic recovery, the only economic recovery world capitalism shows signs of delivering before, sooner or later, the mismatches built into the system, and not at all mended since 2008, bring us a new crash.But, where some capitalist recoveries bring technical advances of great potential value, and increases in working-class living standards, this one has been meagre.
Bureaucratic weakness and timidity by trade union leaders is part of the reason for wage slowness. Another part is that the recovery, in capitalist terms, is so flat and fragile that corporations prefer to draw large profits, dividends, and top pay from slightly-expanding markets with low wages and low equipment-replacement costs rather than venture big investments.The flatness and fragility determine the political erosion of mainstream neoliberalism after its decades of triumph and after its rapid reassertion of its grip after it was bewildered in 2008.
They also mean that the economic padding to soften the adverse economic impact of Brexit, or of Trump’s possible trade disruptions, is thin.At the same time, publications like Computer Weekly say: “software robots will soon automate 80% of repetitive tasks currently being done by people... triple productivity” (30/1/17).Technologies may have the potential to do that. Capitalism is not doing it now, nor likely to do it in the next few years.