Recession

Appropriate mood music for London’s stock exchange last month, according to the Financial Times’s James Mackintosh, might have been Anthrax’s “I’m Alive”. For those readers unfamiliar with thrash metal, the relevant lyrics are: “An empty smile / And you’re hypnotised / Selling lies, my enterprise / The sheep just get in line / Capitulate so easily / The power of fear.”

Bankers were crowing at the end of October when it was revealed that “only” 25 Eurozone banks failed stress tests conducted by the European Central Bank (ECB).

The tests, which looked at how banks would cope with adverse economic conditions, highlighted particular problems for the troubled Italian economy, where nine banks failed, but gave the all clear to much of the sector across Europe.

There are, however, questions about the stringency of the tests, especially as earlier tests, in 2011, cleared banks in Belgium and Ireland months before they had to be bailed out.

Conflicting figures and competing forecasts for Britain make confusing reading for anyone trying to make sense of what is going on in the economy.

In early autumn 2013 chancellor George Osborne was trumpeting economic recovery, but between October and November 2013 there was a sudden slump of output in construction, and manufacturing flatlined.

By January the International Monetary Fund (IMF) was making optimistic predictions about the British economy, and the coalition is crowing over the rise in employment.

Indeed, luxury and niche producers, like Jaguar/Land Rover - which is now the sector's biggest employer, mainly because of sales of the all-terrain vehicles derided as "Chelsea tractors" - and BMW/Mini are doing extremely well. However, continued recession and the impact of austerity means a drop in demand for cheaper "mid-market" models, especially in Europe.

If we look behind the headline figures, we'll see that a number of factors are involved. Together they point to the conclusion that the labour market is nowhere near as healthy as it seems.

Across the core of the capitalist system, economies are either slowing, stagnating or contracting. In the United States, the rebound from the crisis was already the weakest on record, hovering at around two percent annual growth. But this has weakened further, slipping to 1.7 percent in the latest set of GDP figures. This is despite four years of $1 trillion plus government deficits and huge injections of cash into the economy by the Federal Reserve, the central bank, on top of that. And it could get worse.

Now the mood of bitterness and revolt against austerity has received a powerful electoral expression which will have major ideological, political and economic reverberations across the continent.

It could be argued that it's been a long time coming. For 30 years, US capitalism's answer to falling rates of profitability has been to restructure - cutting manufacturing jobs, relocating operations from former industrial heartlands to the much more weakly unionised South and West, intensifying work processes, deregulating industry, privatising services and extending working hours while chipping away at wages and holiday and sickness benefits.

At the centre of all the press talk of a capitalist crisis (and this is the phrase increasingly used by papers such as the Financial Times) lies a crisis of the eurozone - the EU economy is bigger than that of the US.

The British economy shrank by 6.5 percent between the spring of 2008 and autumn of 2009. The recovery since then has been anaemic, with growth in the three months to June just 0.2 percent. Output remains significantly below its pre-crisis peak in early 2008. It's clear that most working class people are feeling the pinch, as unemployment rises and living standards are being sharply squeezed even for those in work. Unemployment at the end of June stood at 2.49 million, up nearly 40,000 on three months earlier.