Demoralised Davos surveys the debacle of the world capitalist crisis!


THE World Economic Forum meeting in Davos to celebrate capitalism finds the assembled chief executives, politicians and would-be prophets much more pessimistic and frightened about the prospects for capitalism this year than they were last year, according to a survey.

PricewaterhouseCooper’s survey, released ahead of the annual World Economic Forum in the Swiss Alps, interviewed more than 1,400 chief executives across 83 countries. Dennis Nally, global chairman of PwC said of the crisis: ‘No matter what the business size, the threats it faces are becoming more complex, crossing the borders of geopolitical, regulation, cyber security, societal developments, people and reputation.’

Last week, energy consultancy Wood Mackenzie estimated that energy companies have shelved almost $400bn of spending on new oil and gas projects since the price of oil began tumbling about 18 months ago.

At home, the Governor of the Bank of England, Mark Carney, on Tuesday ruled out an immediate rise in interest rates pointing to an ‘unforgiving’ global environment. Six months ago, Carney had predicted that a rise in interest rates would come at the beginning of 2016, after the US had increased its rates. The US has increased rates but the UK is too weak to follow suit.

On Tuesday he said: ‘Now is not the time to raise interest rates … The world is weaker and UK growth has slowed.’ Last year’s false prophet repented, saying: ‘It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for bank rate rises cannot be pre-ordained.’

His refusal to raise rates has sent the pound into a nose-dive, with currency traders reacting by selling the pound to $1.42, its weakest since March 2009, and almost 5% weaker than where it was trading just a month ago. The diplomatic Carney has however been trumped by the plain speaking William White, the Swiss-based chairman of the OECD’s review committee and former chairman of the Bank for International Settlements.

At Davos he has been warning that the global financial system is so dangerously unstable that capitalism faces an avalanche of bankruptcies, worse than 2007, since ‘Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years … It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something.’

He hinted at the danger of revolutionary collapses: ‘The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly.’

He also hinted at revolution, saying that, ‘The big task for the global authorities is how to manage debt write-offs – and therefore a massive reordering of winners and losers in society – without setting off a political storm.’

In fact, European banks have already admitted $1 trillion of non-performing loans. The European banking system will have to be recapitalised on a scale yet unimagined, and new ‘bail-in’ rules mean that any deposit holder above the guarantee of 100,000 euros (£77,000) will have to help pay for it, while the rest will have to leave their money in the bankers’ dodgy banks.

Combined public and private debt has risen by 35 percentage points since the top of the last credit cycle in 2007 to all all-time highs of 185% of GDP in emerging markets and to 265% of GDP in the OECD states. The period ahead is not only one in which capitalism is gripped by its greatest-ever crisis.

It will be the period in which humanity will have hammered into its consciousness that its future depends on putting an end to the anarchy of capitalist production, through a socialist revolution, and replacing it with a planned socialist economy where production will be to satisfy people’s needs. This will allow society to advance to a situation where people contribute to it according to their ability and take from it what they need.