Whatever happened to the 'Great Recession'?

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"Global Economic Recovery Is Growing, Says IMF." This Daily Mail headline was typical of the media's response to signs of economic recovery in August.

Marxists face two dangers when trying to assess the state of the economy. The first is to attempt to shoehorn the facts to fit with a preconceived account of crisis. The second is to simply accept at face value the analysis put forward by economists.

The figures for the second quarter of 2009 do show a low level of growth in Germany and France. Their GDPs (a measure of the total goods and services produced) rose by 0.3 percent. Japan's grew even faster and there are some indications that the US recession is bottoming out. However, the signs of recovery remain weak.

During the early months of the recession companies cut back production and ran down their stocks. Now they are starting to restock, which has boosted the economy from its very low levels.

But, as the IMF argues in its recent statement on recovery, "growth will not be quite strong enough to reduce unemployment". The squeeze on wages and attacks on jobs will continue to hold back workers' consumption and limit the demand required to drive the economy forward.

This means that growth will continue to depend to a large extent on state intervention. The unprecedented stimulus packages and bank bailouts managed to avert economic Armageddon, but they have taken their toll. In Britain, where the economy is still shrinking fast, there are calls for public sector spending to be slashed to try to fix the enormous budget deficit. Other states will face similar pressures.

As the IMF writes, "Positive growth forecasts are largely predicated on a combination of a fiscal stimulus and inventory rebuilding by firms, rather than on strong private consumption and fixed investment spending. Sooner or later, the fiscal stimulus will have to be phased out. And inventory adjustment will also naturally come to an end."

It remains to be seen whether economies can keep moving forward once these stimuli are removed. Many economists are predicting a W-shaped or U-shaped recovery - either a short-lived recovery and then further recession or a protracted period of near-stagnation before growth picks up. A Marxist perspective adds another dimension to the analysis. For Marx, one crucial indicator of the potential dynamism of an economy was the "rate of profit" - the return capitalists receive on their investment. This would tend to fall over time because total investment by capitalists would rise faster than the amount of labour employed, which, for him, governed the total profits available to the system.

This long-term problem could be solved if crisis ripped through the system, knocking down the price of investment for surviving firms as competitors went bankrupt or goods were dumped on the market and sold below their real value. This kind of "creative destruction" during the 1930s and the Second World War helped pave the way for the long post-war boom. But as capitalism has aged, companies have increased in size and become more tightly integrated with the state and the financial system.

The failure of a giant multinational poses much greater risks for the system, which is why, when the post-war boom ended in the 1970s, states intervened to prevent such collapses and avoid a repeat of the Great Depression.

The current crisis is deeper than any we have seen since the Second World War but it is unlikely to have destroyed capital on a sufficient scale to pave the way for a sustained boom.

Arguments about the nature of the crisis have political implications. Those on the left who argued a year ago that what was happening was merely a financial blip failed to grasp the impact of the crisis. But an apocalyptic vision, with the economy continuing downhill all the way, could equally lead to pessimistic conclusions in which all that could be done would be to organise the growing pools of destitute and unemployed.

In fact, the crisis has opened up a prolonged period of political and ideological turmoil, along with serious attacks on workers. This is also a period in which struggles by those fighting to defend their jobs and their pay are a real possibility. And it is a period in which workers are torn between anger and fear for the future. The priority for socialists is to engage with whatever struggles take place and attempt to tip the balance from fear to resistance.