Editorial: Will America be next? (1998)

Editorial from the October 1998 issue of the Socialist Standard

“Capitalism is falling apart at the seams”—this apocalyptic statement from no other than George Soros, the international financier who broke the pound in 1992. This is a relative piece of honesty from our ruling elite who have so far done their damnedest to play down the severity of the global economic crisis. From the “quality” broadsheets to the television news-you have to look long and hard to find any serious coverage of the most newsworthy story of the day.

South East Asia, Russia and now Latin America are all in trouble and the only thing keeping the world economy going has been the bull market in the US—or so the “experts” tell us. What is interesting is the way each country or region is treated separately from each other as if what we are really facing is an aggregate of “local” problems the sum total of which adds up to a “global” problem. It is precisely this, which makes Soros’s honesty so refreshing yet frightening at the same time.

America, which has been growing for most of this decade is set to slow down. The “new paradigm” theory which argued that the US could grow forever will soon be proved demonstrably false-the only question is to what extent will the US crash?

The US has been attempting to get Japan to reslate its economy because Japan is considered to be the “motor” economy of South East Asia. But as we know Japan’s banking system is very nearly insolvent and its room for manoeuvre is extremely restricted. If the crisis in this region pulls Hong Kong and China down—the US fears that the cheaper exports from a lower exchange rate will put intolerable pressure on the dollar and the already glutted markets of the world will have to deal with even more cheap produce seriously undermining the US balance of payments. Couple this with a financial meltdown, you will have not just the rise of protectionism but a potential global trade war.

Finally, the US dominated IMF has nearly run out of money so its capacity to act as “lender of the last resort” and bail out any more countries is almost at an end. Even if more funds are found to re-capitalise Russia, what about the next time or the time after that? What about if America’s stock market bubble bursts and this leads to what one US economist called “the biggest depression since 1945”! The British and US stock markets have both now fallen about 15 percent in recent weeks. Who could now take a bet on capitalism?