THE HEAD of the International Monetary Fund (IMF), Kristalina Georgieva, has delivered a stark New Year warning that a third of the world economy will plunge into recession in 2023.
Speaking on US television on Sunday, Georgieva warned that the world’s three largest economies – the US, the European Union and China – are ‘all slowing down simultaneously’.
She added that ‘even for countries that are not in recession, it would feel like recession for hundreds of millions of people.’
Georgieva placed the blame for the world recession on the policy adopted by the main capitalist central banks of driving up interest rates in an attempt to halt the inflationary spiral consuming the world.
She noted that the actions by the US Federal Reserve Bank (Fed) in pushing up interest rates to a 40-year high has increased the debt burdens and cost-of-living crisis throughout the world as countries and industries struggle with the surge in interest repayments on their debts.
Clearly anxious not to be portrayed as a prophetess of total doom, Georgieva tried to reassure the US that it may ‘escape the worst’ of the global crisis saying: ‘We see the labour market remaining quite strong’ in America.
But, she added, high employment rates in the US are ‘a mixed blessing because if the labour market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down.’
In this one sentence Georgieva has revealed the dominant thinking by the central bankers, namely that pushing up interest rates and increasing the cost of debt will increase recession and lead to a rapid growth in unemployment.
Mass unemployment in the US, UK and Europe will, the bankers calculate, weaken the struggle of workers across the world for pay increases to match the impact of inflation.
The bankers plot for a world where workers fight over jobs which pay poverty level wages, a world where inflation is tamed, prices are sent plummeting by hundreds of millions of workers, youth and impoverished masses who have nothing to spend on food, heating and shelter.
In other words, forcing people to spend less (or nothing) on food, heating and housing while driving up mass unemployment and imposing super-austerity is the solution to capitalism’s inflationary crisis.
Georgieva’s dire warnings of an inevitable global recession in 2023 underlines the IMF’s New Economic Outlook report published last October which pointed to the aggressive rise in interest rates along with the disastrous sanctions imposed by the imperialist nations on Russian oil and gas.
This report warned the central banks that ‘monetary policy could miscalculate the right stance to reduce inflation’ while the IMF director, Vitor Gaspar, stated bluntly that ‘the worst is yet to come.’
That time has most certainly come for capitalism, as every attempt to find an ‘economic’ solution to its crisis only deepens it to the point where the world is plummeting into a recession in 2023 that far exceeds the Great Depression of the 1930s.
Propping up the banks and the capitalist world financial system after the banking crash in 2008 by zero interest rates and free money through Quantitative Easing drove an inflationary spiral and a capitalist world that existed entirely through debt.
Trying to bring down inflation through aggressive rate increases by the central banks has, as the IMF warns, pushed the entire world over the cliff of recession.
With no economic solution, the only way out for capitalism, as the IMF makes clear, is to impose the full burden of this crisis on the backs of the working class and people of the world.
This historic crisis of capitalism will be resolved not through economic measures but in the class struggle. The working class and the great mass of people are rising up, refusing to passively accept being driven into the ground by a bankrupt capitalist system in its death agony.
The only answer to the world crisis of capitalism is the world socialist revolution to put an end to capitalism once and for all.
This requires the building of revolutionary parties of the International Committee of the Fourth International in every country to lead the fast developing world socialist revolution to victory.