According to its latest report, between April and July 2012 the IMF sharply revised downwards its growth projections for all categories of countries. For example, it cut the growth prospect for UK to 0.2 percent (down from 0.8 percent) this year and to 1.4 percent (down from2.0 percent) in 2013. It shaved the growth forecast for the crisis-hit euro zone to 0.7 percent in 2013, while maintaining its projection of a 0.3 percent contraction this year.

The IMF chopped its forecast for growth in emerging economies this year and the next: e.g., China 8.0 percent, (down from 8.2 percent forecast in April) and 8.5 percent next year (down from 8.8 percent). It also sharply revised down its growth projections for India to 6.1 percent this year from 6.9 percent, and chopped its 2013 forecast to 6.5 percent from 7.3 percent. Currencies like the Brazilian real and Indian rupee have depreciated by between 15 and 25 percent in less than a quarter, the IMF noted. “In emerging economies, policymakers should be ready to cope with trade declines and the high volatility of capital flows,” it said.

The IMF trimmed its US forecasts slightly but warned of the “fiscal cliff’’ (the scheduled expiration of Bush-era tax cuts and the $1.2 trillion in automatic spending reductions – which can knock the still-weak U.S. economy back into recession) facing the country. And as José Viñals, the head of the fund’s monetary and capital markets department, pointed out, “Uncertainties about the fiscal outlook in the United States present a particular latent risk to global financial stability”. Overall, the IMF cut the 2013 forecast for global economic growth to 3.9 percent from the 4.1 percent it projected in April (to view this in perspective, in 2010 the world economy expanded by 5.3 percent).

 

“Dystopia, the opposite of a utopia, describes a place where life is full of hardship and devoid of hope. Analysis of linkages across various global risks reveals a constellation of fiscal, demographic and societal risks signalling a dystopian future for much of humanity. The interplay among these risks could result in a world where a large youth population contends with chronic, high levels of unemployment, while concurrently, the largest population of retirees in history becomes dependent upon already heavily indebted governments. Both young and old could face an income gap, as well as a skills gap so wide as to threaten social and political stability. …

“Two dominant issues of concern emerged from the Arab Spring, the “Occupy” movements worldwide and recent similar incidents of civil discontent: the growing frustration among citizens with the political and economic establishment, and the rapid public mobilization enabled by greater technological connectivity. These trends are evolving differently across developed, emerging and least developed economies.

“In developed economies... the social contract that has in recent decades been taken for granted is in danger of being destroyed. Workers nearing retirement fear cutbacks in social entitlements they have grown up to expect, such as state pensions, pre-established retirement age and guaranteed access to quality healthcare. Meanwhile, young adults in this same group of economies realize that they are part of a compressed labour force that is expected to support a growing population of elderly citizens, while bearing the brunt of austerity measures required to offset growing national debts.

“In emerging economies, the context – and the challenge – is different. ... These nations’ ability to seize the opportunity is far from guaranteed, given sluggish global growth and reduced demand from developed economies. Rapid economic growth in emerging economies has fuelled an impatient expectation that a rising tide will lift all boats, but social contracts may not be forged quickly enough to rectify increasingly visible economic inequalities and social inequities.

“Failure to meet demands for civil and political rights could also have harmful consequences. ...”

From Global Risks 2012, “Insight Report” of World Economic Forum

 

More than 150 years ago, Karl Marx developed a perfectly dialectical approach to economic crises. On one hand, they constitute capitalism’s inbuilt mechanism for spontaneously and ruthlessly eliminating excess or over-accumulated capital, ‘so that the cycle would run its course anew’(Capital). On the other hand, they achieve this in a manner that ‘paves the way for more extensive and more destructive crises, and diminishes the means whereby crises are prevented’ (Communist Manifesto) and leads finally to the ‘violent overthrow’ of the rule of capital (Grundrisse).

Marx showed that capital’s frantic endeavour to overcome inherent constraints like mass poverty and inadequate demand leads to artificial credit-induced “forced expansion” or bubbles, which get deflated sooner rather than later. But this false prosperity built on debt always bounces back in the shape of sudden crisis – much like a rubber band getting stretched and snapping back – resulting in a recession/depression. Essentially, that is what has been happening with remorseless regularity, especially since the onset of the neoliberal policy regime. This booklet seeks to comprehend the current crisis of neoliberalism from this approach.

But who will bear the burden of the stubborn recession into which the financial catastrophe of 2008 metamorphosed? The common people? Or the big banks and corporate honchos – responsible for the breakdown yet bailed out by governments? An intense struggle to decide this all-important question is now going on across the world in multiple forms – intellectual debates, street battles and parliamentary struggles. While analysing the historical context and causes of the worldwide economic woes, the pamphlet in your hand also shades light on this live political dimension of the crisis scenario.