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The reopening amid the surge of the Delta variant deepens the contradictions in the world economy

There is growing contradiction at the center of the economic agenda being pursued in the major centers of the world economy, particularly in the United States and Europe.

On the one hand, the policy of reopening regardless of the health hazards of the Delta variant, and relentless opposition to any extermination policy, is being pursued on the basis that nothing can be done to negate the speculative rise of Wall Street and other stock markets over the past 18 months.

Worker carries drinks to a table at Puckett’s Grocery and Restaurant, Friday, September 10, 2021, in Nashville, Tennessee (AP Photo / Mark Humphrey)

On the other hand, the persistent wave of infections that this policy has generated worldwide affects all areas of the economy and leads to disruptions in global supply chains, the development of bottlenecks and increasing inflationary pressures due to bottlenecks. Computer chip supply issues have attracted the most attention, but the scarcity ranges from the simplest to the most complex components.

The tightness in the supply chain is reflected in the inflation data. In the year through August, the U.S. Producer Price Index, which measures the wholesale prices of goods as goods leave factories and enter market, rose 8.3 percent, the largest annual increase since 2010.

Comments from US executives and economic analysts in an article in the Financial Times titled “US Business Model Darkens As Delta Reverts Forecasts” pointed to the slowdown in economic growth.

The largest US airlines have reported a drop in demand and have scaled back their revenue growth forecasts for the second half of the year.

Home Depot boss Craig Menear said at an investor conference last week that the company had not given any guidance on its performance this year because there was “just so much uncertainty” and it was not known how the Delta variant would perform.

The number of S&P 500 companies that lowered their earnings growth forecasts rose from 37 percent to 47 percent between Q2 and Q3.

The situation of small businesses is also worsening. In a blog report published by the Innovation Group over the weekend, the percentage of small businesses reporting weekly revenue declines has remained constant over the past three weeks “at a high level that has not been reached since March”.

Coupled with the smaller proportion of companies reporting sales growth of just 8 percent, this was “evidence that the small business recovery may stall amid the resurgence of Delta.”

There has been something of an economic upswing in Europe in recent months. But how long it can take is another question.

At a press conference last week following a meeting of the Governing Council last Thursday, European Central Bank President Christine Lagarde gave a generally optimistic view, but warned that Delta “could slow the recovery in world trade and the full reopening of the economy “.

Erik Nielsen, UniCredit’s chief economist, told the FT that there will be good growth numbers for the third quarter, but “Winter is at risk of slowing down. Our leading indicator is getting deeper towards the end of the year, so there are warning signs that this recovery may not be as smooth as people think. “

The problems in the auto industry due to the lack of computer chips have not subsided. Large companies in Europe have closed production lines and total production is 30 percent below what it was before the pandemic broke out.

One of the key aspects of Lagarde’s report on the ECB meeting where she decided to cut her bond purchases from € 80 billion a month to € 60-70 billion a month as part of its pandemic emergency purchase program was the issue of inflation.

The inflation rate rose to 3 percent in August and was thus well above the ECB’s target range of 2 percent. Like her US counterpart, Fed chairman Jerome Powell, Lagarde claimed that this was due to “transitory” factors resulting from the scarcity.

However, as an indication of a central concern of both the ECB and the Fed, she raised the demand for higher wages by workers affected by rising prices.

“One component that we are addressing, monitoring and reviewing very carefully is the second-round effect, the impact of price increases on collective bargaining, and that could actually fuel more sustained and lasting price increases and inflation.” Forward, “Lagarde said on hers Press conference on a question about inflation.

As in the US, the ECB is relying on unions to continue their long-established role in suppressing wage demands. She commented, “We do not expect these wage increases and collective bargaining to be very large.” However, her comments underscore the financial establishment’s fears that workers are breaking out of the union’s straitjacket and starting to act independently.

In a recent interview conducted by the FT with St. Louis Fed President James Bullard, the need to force workers to take any job available, regardless of how low the wage or the danger to their health is, was raised.

Bullard, one of the “hawks” in the Fed’s leadership who advocates faster running of the Fed’s monetary stimulus package, said there is a high demand for workers and more jobs than unemployed.

The problem, he said, is that the workers may not want to take them away now. “They can afford to be careful about which jobs they take, or they can feel like they can get an even better job by waiting or searching harder.”

In a graphic representation of the malevolent class orientation of the entire ruling establishment, he said one problem that is holding back the supply of cheap labor is that “households are low on income” with stimulus payments of $ 1,400.

Wall Street billionaires have seen their fortunes soar to record highs as a direct result of the trillions of dollars poured into the financial system by the Fed.

But reputation demands more, and so, in the face of rising prices and myriad other problems, the meager payments to workers are seen as barriers to getting ever greater amounts of surplus value and profit from their labor.

Meanwhile, the Fed’s ultra-cheap money speculation is reaching staggering heights on Wall Street. A comment by Wall Street Journal columnist Andy Kessler published over the weekend mentioned some of the more egregious examples of this financial madness.

Joby Aviation, which plans to start electric air taxi services from 2024, is worth more than Lufthansa. At the beginning of the year, Tesla was worth more than the next nine car companies combined, since it “only” fell back to the next six.

And the list went on: Airbnb is worth more than the hotel chains Marriott and Hilton combined; the Coinbase crypto exchange is worth more than the NASDAQ exchange; Beyond Meat, made with pea protein, worth more than the entire world market for peas, and the used car sales platform Caravana, which is worth more than Volvo, Honda, Ford or Hyundai. And there were many other examples on his list.

This financial madness, Kessler said, is driven not least by “fear of missing out” but, as he noted when sales begin, it becomes “fear of losing everything if speculators jump off a sinking ship like rats . ”

The collapse of this speculative bubble, as it has never been before, will not be just a market correction and a return to something “normal”.

The US economy’s reliance on market madness has grown so great that it will have far-reaching economic and social repercussions well beyond the impact of the 2008 crash. It will immediately set revolutionary tasks for the working class – the necessity of the struggle for political power as a prerequisite for a complete reorganization of the economy on a socialist basis.

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