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What is this economic crisis?

Written by: John G. on 11 May 2024


Free Food Pantries have sprung up across cities and towns

The capitalist economic system and US imperialist domination of Australia is very destructive for this country and the working class. 

For capitalist economists, commentators and planners, economic activity is measured by stock exchange prices and corporate monopoly profits. Just look at ‘financial’ pages in the press, on TV and in digital media news.  
For workers economic activity is measured in wages and what we can get for them. We are looking for wages, government benefits, production and sale of goods and services for people to live. 
They are completely contradictory outlooks, the contrast sharpened in times of crisis. 
Capitalist economics can only conceive of people’s well-being - having good homes, food on the table, education and healthcare - as an outcome of the capitalist economic system ticking over making profits, propped up by workers’ hard yakka. 
Crisis rescue operations for bankers, mining monopolies and corporate giants generally rely on carving holes in reasonable living standards and driving heaps of people into hardship. They can only consider a system with corporate well-being as the foundation on which people can eke out some life. 
But what is happening now? We all know our families and friends are in a recession. Our incomes don’t satisfy our wants, just create worries over making ends meet. When you think about it, it’s really dumb relying on the system created by, developed by and dependent on capitalist investments as the starting point to sustain people. 
All it’s set up to sustain is the accumulation of profits, not the well-being of people. 
In this interest rates/ price inflation crisis, we all know, our lives are poorer. 
Small and medium business sales are slow. That pressures them to cut margins and cuts costs to keep sales up. They face high rents and high interest rates on loans for mortgages, stocks and machinery. Dropping turnover, lowered margins, and debt mean small and medium businesses are not able to drop prices.
They are forced to hold and increase prices in many categories. 
They are in recession. Bankruptcies and closures are rapidly increasing. According to debt monitoring firm CreditorWatch, more Australian businesses are now in the hands of external administrators than ever before, rising more than 22 per cent since this time last year.

Bonza airlines one of the latest to hit the wall

At the heart of the crisis, workers are in recession. 
Current economic news outlines numerous features of the crisis the country’s in, and details how we and others are suffering.  They can help when we are looking at ways to fight our way out of it. 
Customers are in trouble, sales down, consumption in recession
An MYOB survey of 1000 firms with less than 200 employees across the country found pressure on customers had disrupted their customer purchases. 
28% are buying fewer products;
20% have moved to cheaper goods and services;
20% put off purchasing altogether.
That’s 68% of firms seeing customers spending less. 
Just 6-7% of firms reported an increase in sales. 
It is a national recession in working peoples’ consumption.
There were few differences between small, medium and large businesses, and was common to both cities and regional areas. 
Retail Sales data from the Australian Bureau of Statistics recorded a 0.4% fall in the value of sales economy wide in March alone. In the year to the end of March retail sales grew by just 0.8%. Only the DotCom crash, the GST introduction and the pandemic saw such slow growth in the last 35 years. The fall in sales occurred on both real value and in volume of goods and services. 
People are being driven to consume less in volume and in quality, reflected in cheaper goods and services.  In the Pandemic the low growth happened when the population went down. The effect was that ‘per capita growth’ didn’t fall anywhere near as much as now. Current population growth is reported at 3.6%.
Sales of clothing, footwear and personal accessories were 4.3% down, and department store sales down 1.6% in the year. Household spending on household goods, cafes, restaurants, hotels, vehicles, and tobacco products, takeaway was also down. Food retailing was up 0.9%. In the December quarter, household discretionary spending was down 0.9%. Eating is not discretionary. With spending on cafés, takeaway and restaurants down, eating at home and taking lunch to school and work makes sense where you’ve got the income. 
Prices and wages
Prices for education, health, rent, food, fuel and power, and insurance drove inflation rises. Rent rose 7.8% in the year even with the Commonwealth rent assistance rise providing some relief. A nationwide housing shortage guarantees rent inflation will continue.  Insurance prices rose 16.4% in the year, driven by higher costs of reinsurance and ‘natural’ disasters.
Education prices were up 5.9% in the March quarter alone, with prices across primary, secondary and tertiary sectors. 
The increases in household incomes was 4.2% last year according to the Bureau of Statistics. Employee households recorded a rise in living costs of 6.5% over 2023, down from a peak annual rate of 9.6% in April-June 2023. Household incomes were 2.3% lower than the rise in employee household living costs. 
Australian Bureau of Statistics Labour Force reports for March 2024, found  
   unemployment rate increased to 3.8%.
    participation rate decreased to 66.6%.
    employment decreased to 14,259,900.
    employment to population ratio decreased to 64.0%.
    underemployment rate decreased to 6.5%.
    monthly hours worked increased to 1,956 million.
    full-time employment increased by 27,900 to 9,853,800 people.
    part-time employment decreased by 34,500 to 4,406,100 people.
House prices nationwide were up 11.1% in the year to January according to Corelogic. They have kept rising since, though there are minor falls in some localities, notably a 0.1% drop in Melbourne in April. 
Population Growth masks the extent of Recession
The drop in consumption of day-to-day goods and services has been happening despite a rapid growth in population of 3.6% in the year to March. 
That means the 0.8% retail sales growth in the economy to the end of March translates to a 2.8% drop in sales per capita, a recession in homes across the country. Food sales per capita also dropped 2.7%. Little wonder there is a scramble to bad-mouth and direct the initial distress at supermarket monopolies.
Now population increase is being slowed by tightened visa requirements, particularly on international students. That will add to pressures on sales and consumption, giving businesses more headaches.
Some International features
The International Labour Organization (ILO) reports that the global unemployment rate in 2023 was 5.1 per cent, with number of unemployed and underemployed close to 435 million, remaining high. Average hours worked remain below their 2019 pre-pandemic levels. The number of workers living in “moderate poverty” – earning less than US$3.65 per day per person – increased by about 8.4 million in 2023. The number of informal workers reached 2 billion.
Over $15 trillion was added to the global debt mountain in 2023, bringing the total to a new record high of $313 trillion. The global debt-to-GDP ratio is 330 per cent.
Real interest rate increases in 2023 made the debt burden on many poorer countries unbearable. Since March 2020, Argentina, Zambia, Ethiopia, Ghana, Lebanon, Sri Lanka and Ukraine defaulted on their government debt, and Kenya, Egypt, Pakistan and Tunisia are in danger of defaulting.
Working people and small and medium businesses are carrying the burden of the slowdown of the capitalist cycles of production and sale for profit. 
Contradictions within countries worldwide have intensified. Internal civil conflicts are rife. Imperialism is meddling and interfering everywhere. Proxy wars by client states raised tensions. Preparations for war between rival nuclear-armed imperialist camps haunt the globe. Divisions grow within imperialist homelands. 
National Liberation struggles are reaching new high points. People’s struggles for freedom from imperialism and its local agents grow.
This crisis drags on and capitalism’s hold is weakening. Imperialism is strong but faces billions of people whose lives the imperialist system is devastating.
While capitalist crisis keeps hitting people, the call for workers’ power has plenty of fertile soil in which to flourish.   


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