THE International Monetary Fund (IMF) warned yesterday that the Covid-19 crisis could cost the global economy a staggering £9.5 trillion in the biggest hit to growth since the Great Depression of the 1930s.
Back in April, the IMF was despairing that global growth would fall by 3% now it is warning that the economic crisis is much worse than it thought and has revised its figures now predicting growth will fall by 4.9%.
The IMF’s chief economist Gita Gopinath said: ‘These projections imply a cumulative loss to the global economy over two years (2020–21) of over $12 trillion (£9.5 trillion) from this crisis.’
With the world economy in freefall, the IMF are predicting the total amount of world debt will surpass global economic output.
On top of the debt mountain run up by countries to prop up the world banking system after the banking crisis in 2008, the IMF estimates that over $10 trillion has so far been spent by governments trying to deal with the Covid-19 pandemic.
$10 trillion has been run off the printing presses of the central banks to pump into the banks, industries and businesses just to keep them afloat. Now the IMF is warning that in the near future even if the pandemic ends, this debt will have to be repaid and that this can only be done by countries ‘tightening the purse strings’ to get their finances in order.
Tightening the purse strings of course is another way of saying these colossal debts must be repaid through the most brutal austerity cuts inflicted on the working class throughout the world.
The IMF is particularly concerned with the perilous state of the UK economy where debt is now officially over 100% of the economic output.
After the Tories in the 1980s set out to deliberately destroy large industry in their unsuccessful drive to defeat the highly organised trade unions, Britain has become reliant on financial services and the service sector for over 80% of the nation’s wealth.
These sectors have been battered into the ground by Covid-19 and even Boris Johnson’s mad rush to reopen is not going to save them.
The massive hospitality, travel and tourism industries have gone and as Gopinath said: ‘Countries heavily reliant on such sectors will likely be deeply impacted for a prolonged period.’
The IMF went out of its way to stress that it is the working class that has borne the brunt of the crisis so far, with low-paid workers and the unemployed being hit hardest.
Despite its fears that pumping yet more trillions to keep capitalism afloat is only piling up more debt, the IMF has absolutely no alternative except to call for ‘targeted support’ that should be gradually unwound when ‘recovery gets underway’.
In fact there is absolutely no prospect of a recovery from this crisis. Those companies and industries kept on life-support through government bailouts will close down as soon as it ends.
Pumping money into the banks through Quantitative Easing was also sold as a temporary measure back in 2009 and yet it has never ended and all the trillions handed out have never been repaid by the bankers. Instead, it was paid for by the savage austerity war against the working class and its public services.
When the debt mountain comes crashing down and the debts have to be repaid it is the working class that will be expected again to foot the bill.
That is the threat behind the IMF’s talk of tightening the purse strings – austerity on a scale not seen since the 1930s, with government spending on services slashed to the bone and millions of workers thrown out of work.
The powerful working class will not accept being driven into the gutter to keep bankrupt capitalism going.
The only way forward for workers today is to take the power by bringing down the Tories and going forward to a workers’ government that will expropriate the banks and main industries placing them under the control of the working class.
Only socialist revolution can resolve the crisis for workers today.
