Dutta GFC Ppt

7/29/2019 Dutta GFC Ppt

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Shikha SwaroopAditya PandeyAnanta TikkuVikas Sonkar

Vikas Chauhan


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Introduction

The U.S. and the global economy have been andcontinue to be in serious crisis, and the 2007-09

global recession is the worst economic downturn sincethe Great Depression of the early twentieth century

The Dow Jones plunged more than 50 percent from itshighs of 14,000 in late 2007 to below 6,500 in early

2009, with more than a trillion dollars of value lostin the stock market in little over a year

Although the Dow rose to around 12,500 alittle over two years after its worst decline,

the recent turmoil on Wall Street over the pasttwo weeks, which pushed the Dow down to thethe 10,000 level could make things worse adouble-dip recession turning into a depression


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Clearly, the global capitalist economy isgoing through its deepest crisis since theGreat Depression of 1929, and this signals

serious challenges for global capital overthe next decade, especially for the UnitedStates

The best example of this impact, and whatis in store for us over the next few years, is

what has been happening with thesovereign debt crisis in Greece, Portugal,Spain, Ireland, and Italy, as well as theUnited States (and with what hashappened to the icons of U.S. big business

General Motors, AIG, Citigroup, andother big corporations and banks)

Lets take a brief look at these once-powerful icons of the U.S. economy toassess the magnitude of the damage


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Figure 1. Lehman Brothers stock, 2007-2011 (in dollars and volume traded)

$80

Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.

$18

4 cents
http://finance.yahoo.com/http://finance.yahoo.com/


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Origins of the Crisis

The periodic crises resulting from the capitalist businesscycle now unfolds at the global level

The current crisis of the world economy is anoutcome of the consolidation of economic power that

the globalization of capital has secured for thetransnational corporations

This has led to a string of problems associated with thefinancial, banking, real estate, and productive sectors ofthe economy that have triggered the current economiccrisis
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Nature of the crisisThe central problem of our present capitalist economic

system is the recurrent business cycle which is nowoperating at the global level. It manifests itself in anumber of ways, including:

The problem of overproduction/underconsumption

Increasing unemployment and underemployment Decline in real wages and rise in super-profits

The sub-prime mortgage and credit card debt

Speculative corporate financial activities

Increased polarization of wealth and income


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The large corporations made huge profits and hadmuch money at their disposal

They bought other corporations (mergers andacquisitions) and they put their money into banks

The banks loaned that money (with interest) toworkers who didnt have money to consume

This was done to raise their purchasing power because

their wages werent enough to buy things


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EffectsSince employers no longer raised workers wages, the

workers had to go into debt to survive

Debt went up and up and things got out of control

The banks continued to loan money through new loans(secondary mortgages) at high interest rates, and this was aprofit bonanza for the banks

As corporations increasingly began to invest abroad(outsourcing production and services), U.S.workers lost their jobs, and this led to greater

unemployment and underemployment


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Unemployed workers with a lot of debt were unable

to make their mortgage and credit card payments, and thisled to foreclosures and bankruptcies

This, in turn, led to the collapse of the banking system,necessitating a government bailout of the banks

It is only through the nearly trillion dollar stimulusfunds that the U.S. government poured into the economy tosave the banks from default that a financial collapsewas averted


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Extent of the Crisis The current economic crisis has been deep and widespread

on a global basis, especially in the U.S.

In the epicenter of the crisis, in the United States,unemployment increased from 7 million in December 2007

to 16 million in October 2010 Counting the discouraged and part-time workers, the

unemployment rate reached 18% in 2010

Foreclosures have been running over 1 million a year

Poverty is on the rise (now 44 million Americans 1 in 7 live at or below the poverty line)


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Long-term Unemployment and

Underemployment (as of January 2011)

The mean unemployment duration was 36.9 weeks, and themedian was 21.8 weeks.

The share of unemployed workers who have been without

work for over six months was 43.8%, one of the highest onrecord.

A total of 6.2 million workers have been unemployed forlonger than six months.

There were 25.1 million workers who were eitherunemployed or underemployed.


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Today, the labor market remains 8.1 million jobs belowwhere it was at the start of the recession over three years

ago in December 2007. This number vastly understates the size of the gap in the

labor market because keeping up with the growth in theworking-age population would require adding another 3.4

million jobs over this period.

Thus, with the above 9% unemployment rate today, thelabor market is now 11.5 million jobs below the level

needed to restore the pre-recession unemployment rate of5.0% in December 2007.


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So, to achieve the pre-recession unemployment ratein five years, the labor market would have to add

285,000 jobs every month for the next 60 months. But, more importantly than that, beyond the impact

of the great recession and the slow recovery in theyears ahead, the big issue is the impact ofglobalization on the labor force structure and jobcreation in the United States

And that will depend in large part how the problemof outsourcing is addressed in conjunction with therole of the state in providing stimulus funds to create

jobs in the public sector jobs that private industryis unable or unwilling to create in the era ofneoliberal globalization.


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Which Way Out of the Crisis? Economic remedies to save the system from collapse are

bound to fail so long as they remain within the frameworkof the existing capitalist system

Changes that are required to revitalize the economy and

turn things around point to a redistribution of wealth andincome to increase mass consumption

This would increase demand for consumer goods, henceincrease production, and create jobs for the unemployed, as

well as raising revenue for the state through corporate andindividual income taxes


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All these would require a restructuring of the economy awayfrom failed neoliberal corporate capitalist policies and towarda new set of priorities that promote the interests of workingpeople

Such restructuring requires the transformation of our currentcapitalist economic system and the existing social order in the

direction of providing greater rights and benefits to workingpeople

And this would, in turn, benefit society greatly and set us on aprosperous course that would vastly improve living standards

and pull us out of the economic crisis


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Dutta GFC Ppt