Report at General Meeting 26-28 January

The decline in inflation

The increase in interest rates has led to a slowdown in the world economy, to the point of a global recession. This led to a significant drop in inflation which, after reaching a peak in June 2022 of 9.1% in the United States and in October 2022 of 10.6% in Europe, fell to 5.5% in June 2023. % in Europe and 3% in the United States. However, inflation has started to increase slightly again in the United States, reaching 3.7% in August, a phenomenon that is ascribed to the summer season and government incentives to relocalize industrial production and support the development of new technologies.

In Europe, the inflation gap between different countries is tending to narrow: in June, the highest value, in the United Kingdom, was 6.3% and in France 4.9%. A determining factor is certainly the increase in the price of fuel, linked to the increase in the price of oil

To boost oil prices, OPEC+ repeatedly cut daily production, so much so that the supply-demand imbalance in the third quarter reached 1.6 million barrels per day, the highest level since 2021. To offset this decline Oil-consuming countries are drawing on supplies: in August alone they withdrew 76.3 million barrels, bringing stocks to the lowest level in the last 13 months. The result was an increase in prices. North Sea Brent crude was selling (September 2023) at $94 per barrel.

The monopoly of some countries on the production of hydrocarbons is not the only cause of the increase in prices. Added to this is the underinvestment of the last ten years in the raw materials and energy sectors, and speculation, which sees the opportunity to obtain fabulous returns.

But, in the chronic crisis of the capitalist mode of production, the recession will be followed by a new wave of deflation. Central banks will then once again have to rush to the rescue of capital to keep it on its feet.

Industrial production

The general trend is not only towards a sharp slowdown, but even towards recession.

In the United States, despite the hundreds of billions of dollars paid by the government to support industrial production and to modernize it by developing new technological branches, since December 2022 we have witnessed a clear slowdown, with growth close to zero. For industrial production, which includes the production of shale gas and oil, only the small growth of 0.2% was recorded in the first eight months of 2023, compared to the whole of 2022. However, if we consider manufacturing production alone, we notice a decline of 1.7%, which comes on top of 15 years of decline, which brings the sector to -7.6% compared to the 2007 peak.

Even if a few hundred billion dollars in State aid will allow American industrial production to modernize and face the "energy transition", this will not prevent the spread of the historic crisis of the capitalist mode of production.

The Japanese economy continues to struggle. After a recovery of 5.1% in 2021, compared to -10.1% in 2020, and the very modest growth of 0.2% in 2022, Japan will record -1.6% in 2023, bringing the level of production at -19% compared to the maximum reached in 2007.

South Korea, after years of relatively strong growth, averaging 2.8%, is now in the midst of a recession with industrial production dropping 6.1% in the first seven months of the year! This is not a negligible figure. A strong downward trend that heralds a formidable crisis of overproduction.

Germany has been in recession since September 2021. Together with Belgium, it was one of the few Western European countries to have surpassed the peak reached in 2008, but has now lost its gains. From 2014 to 2018, growth in Germany was weak (1.5% annual average) but constant, while in the other Western European countries growth only resumed during the two-year period 2017-18, marked by a favorable international situation, and then fell from 2019 onwards in all the main imperialist countries, including China.

In the first seven months of 2023, the German industry recorded a very slight gain compared to 2022, of 0.21%. However, the level of production fell by 7.7% compared to the peak in 2018, while compared to that of 2008 we have a minus of 0.7%, in other words, German capitalism has returned to its starting point.

The energy tariff choice made by the German bourgeoisie was imposed on the whole of Europe by aligning the price of electricity with that of gas, so that German industry is not at a disadvantage compared to French industry, which benefits from cheaper energy thanks to nuclear power. The French bourgeoisie agreed to sacrifice its own industry, seeing the gains from the increased energy rent and aimed to enrich itself, at the expense of the proletariat and the petty bourgeoisie, by privatizing electricity production. A growing mass of parasites bought electricity from EDF at low prices and sold it at a higher price on the “free market”.

The German bourgeoisie had bet on low-cost Russian gas for energy supply. But after the invasion of Ukraine by Russian imperialism, Germany found itself forced to buy oil and gas from other suppliers at high prices, thus reducing the competitiveness of its industry vis-à-vis China and the United States. While the latter produce shale gas and oil, China buys most of its hydrocarbons from Russia at a 30% discount. The Kremlin thus becomes increasingly dependent on Chinese imperialism.

Like many old imperialist countries, Germany invests little in infrastructure and digital technology, and some of the industrial apparatus is obsolete. This weakens the competitiveness of German capitalism.

For years, Germany has invested heavily in China to take advantage of that gigantic, booming market. The prodigious development of Chinese capitalism in the first twenty years of the century contributed greatly to increasing the average rate of profit and offered a gigantic market, saving the capitalist mode of production for further decades. This was possible because, starting from the 1950s, Chinese State capitalism developed a formidable industrial base with the necessary infrastructure that allowed the flow of investments. The German monopolies in the automotive, mechanical and chemical industries, investing massively in China, have made fabulous profits for years. But Chinese capitalism, which in the meantime has seen its growth slow down, having acquired know-how from the West, is now able to compete in those sectors, such as machine tools, chemical products, motor vehicles, which are the strength of German capitalism.

China is Germany’s main trading partner, trade between the two countries has reached 300 billion dollars. But Germany’s trade deficit is continually growing. A trend that could be strengthened with the growing competition from Chinese electric cars, whose prices are competitive. Europe, and Germany in particular, is lagging behind in this sector and cannot compete with Chinese production. After years of refusing to invest in the production of batteries, magnets and electric motors, the European industry, and the German one in particular, is fighting for its survival. The succulent car market could completely escape the European bourgeoisie, incapable of producing competitive vehicles in terms of price and quality.

German capitalism in senile crisis thus risks having to bow to much stronger imperialist powers.

French capitalism, like German capitalism, with industrial production growth of 0.51%, fared slightly better in 2023 compared to 2022 which was a slight recession. But the general picture is even less rosy than the German one. Compared to 2019, production is 4.9% lower, while it remains 12% below the peak of 2007. In other words, the production level is very close to that of 2009, at the worst moment of the overproduction crisis. As we can see, despite all the tricks they have implemented, the older imperialist States are not able to get out of the 2000-2009 crisis.

Europe’s other big sufferer is the United Kingdom. After the strong recovery in 2021 from the fall of 2020, Great Britain has been in recession again since October 2021. If we compare the index for the first seven months of 2023 with those of 2022, we have -1.4%, a decline which follows that of -3.7% in 2022. If we compare the 2019 index with the maximum reached in 2000, we discover that in 2022 industrial production is still 6.6% lower than that of 22 years earlier. So British capitalism has been in recession since the 2000s. But, as if by magic, the statisticians of the British bourgeoisie have manipulated all the indices. If we take the average of the first seven months of 2023, a recession year compared to 2022, also in recession, we obtain a surplus of 1.5% compared to the 2000 index! So the British bourgeoisie would have us believe that British capitalism is doing better than German capitalism.

This ignorance is also a confirmation for us of their decadence: soon the bourgeoisies of all countries will no longer be capable of producing reliable statistics. Instead of industrial production they will rely on the much more dubious GDP statistics.

The situation in Italy is not any rosier. After a strong recovery in 2021, +11.7%, which followed an 11% decline in 2020, growth fell to +0.4% in 2022, before turning negative in 2023 at -2.7%, based on the indices of the first nine months of the year. After the two positive years of 2017 and 2018, Italian capitalism had reduced the gap with the peak of 2007 by a no less staggering -17.6%. Despite the post-pandemic recovery, industrial production is still 20% lower than in 2007.

In  Poland, the accumulation of industrial capital for some years stood at an average annual rate of 5.4%, a notable growth when compared to the decrepit capitalisms of the Old Continent. But with the recession that began at the beginning of the year, production recorded a decline of 1.7% in the first six months.

World trade sees a slowdown in exports as of October 2022, but they have fallen sharply for most major imperialist countries. Exports from China, Korea, the United States and Belgium fell by about 10%. Those of Japan by 5%. Chinese imports fell 15% in July year-on-year. As always, the decline in imports is synonymous with internal recession.

We can conclude that, as expected, after two years of growth in 2017 and 2018, global capitalism is once again in recession. It should be noted that the old imperialist countries, with the exception of Belgium and Germany, have never regained the level reached in 2007: all the recovery of these two years has been lost, and the scale of production in most of the major imperialist countries is now close to that of 2009!

China is also hit by recession and in the real estate sector there are spectacular failures, such as that of Evergrande. The general picture is that of high unemployment, with at least 20% of young people out of work, a decline in consumption and a return to deflation. With this crisis, an entire sector of the Chinese lower middle class and middle class risks being ruined.

On a global scale, this adds up to the colossal debt of companies, families and States, not to mention the devaluation of trillions of bonds. As a result, the situation is much worse than in 2009.

In the current situation, with every capitalism fighting for survival, we can expect an increasingly fierce trade war.

But the time will come when the failure of a few large companies, which in turn leads to the failure of a large bank, will cause all the dominoes to fall. The "every man for himself!" sooner or later it will break out for the large imperialist States and some of them could be forced to declare bankruptcy.