[Following are excerpts from a Nov. 2nd, 2001 television address on the present international situation, the economic and world crisis, by President Fidel Castro of Cuba.] ANATOMY OF a WORLD ECONOMIC CRISIS
Or FIDEL CASTRO PREDICTED in 2001 WHAT WOULD HAPPEN TO the WEST
Basically, they have the most and manage it the worst!
"To characterize the current situation, one could say, by way of a very brief summary, that in the mid-1990s, when globalization was extending around the planet, the United States, as the absolute master of the international financial institutions and through its immense political, military and technological strength, achieved the most spectacular accumulation of wealth and power ever seen in history.
But the world and capitalist society were entering into an entirely new phase. Only an insignificant part of economic operations were related to world production and trade. Every day, $3 trillion dollars were involved in speculative operations including currencies and stocks. Stock prices on U.S. exchanges were rising like foam, often with no relation whatsoever to the actual profits and revenues of companies.
A number of myths were created: there would never be another crisis; the system could regulate itself, because it had created the mechanisms needed to advance and grow unimpeded. The creation of purely imaginary wealth reached such an extent that there were cases of stocks whose value increased 800 times in a period of only eight years, with an initial investment of $1,000. It was like an enormous balloon that could inflate to infinity.
As this virtual wealth was created it was invested, spent and wasted. Historical experience was completely ignored. The world’s population had quadrupled in only 100 years. There were billions of human beings who neither participated in nor enjoyed this wealth in any way whatsoever. They supplied raw materials and cheap labor, but did not consume and could not be consumers. They did not constitute a market, nor the almost infinite sea fed by the immense river of products that flowed, in the midst of fierce competition, from factories that were ever more productive and created ever fewer jobs, based in a privileged and highly limited group of industrialized countries.
An elementary analysis was sufficient to comprehend that this situation was unsustainable.
Nobody seemed to realize that any apparently insignificant occurrence in the economy of one region of the world could shake the entire structure of the world economy.
THE FANTASY FALLS TO PIECES
The architects, specialists and administrators of the new international economic order, economists and politicians, look on as their fantasy falls to pieces, yet they barely understand that they have lost control of events. Other forces are in control now. On the one hand, those of the large and increasingly powerful and independent transnationals and, on the other, the stubborn realities are waiting for the world to truly change.
In July of 1997, the first major crisis of the globalized neoliberal world erupts. The tigers fall to pieces. Japan has still not managed to recover, and the world continues to suffer the consequences.
In August of 1998 comes the so-called Russian crisis. Despite this country’s insignificant contribution to the worldwide gross domestic product, barely 2 percent, the stock markets of the United States were badly shaken, dropping by hundreds of points in a matter of hours.
In January of 1999, only five months later, the Brazilian crisis breaks out.
An all-out joint effort by the G-7, IMF and World Bank was needed to prevent the crisis from spreading throughout South America and dealing a devastating blow to the U.S. stock markets.
This time, the inevitable has happened: the crisis began in the United States, almost imperceptibly at first. Beginning in mid-2000, the first symptoms began to be observed, with a sustained decrease in the rate of industrial production.
U.S. CRISIS BEGAN IN MID-2000
In March of that year, the so-called high-tech NASDAQ index had already begun to drop. By MAY we had the NASDAQ CRASH. TECH SECTOR PLUMMETED.
At the same time, the trade deficit showed an enormous growth, from $264.9 billion in 1999 to $368.4 billion in 2000.
In the second quarter of the year 2000, the gross domestic product registered growth of 5.7 percent; in the third quarter, it grew by only 1.3 percent.
Industrial sector production began to fall in October of 2000.
Nevertheless, at the end of the year 2000, opinions on the prospects and forecasts for the world economy were still rather optimistic. But reality soon reared its ugly head.
Since the beginning of 2001, the IMF, the World Bank, the Organization for Economic Cooperation and Development (OECD) and the European Commission, along with private institutions, have been obliged to downwardly adjust their growth predictions in the various regions of the world for 2001.
In May, the IMF forecast 3.2 percent worldwide growth in 2001. For the United States in particular, projected growth was 1.5 percent, and 2.4 percent for the Eurozone. Japan was facing its fourth recession in 10 years, leading to a prediction of 0.5 percent negative growth for the same year.
IMF Managing Director Horst Kohler, during a speech to the United Nations Economic and Social Council (ECOSOC) in Geneva, on July 16, 2001, stated, "Growth is slowing throughout the world. This may be uncomfortable for the advanced economies [the developed and wealthy countries], but it will be a further source of hardship for many emerging markets and developing countries [the poor and underdeveloped countries], and a real setback in the fight against world poverty."
Production has dropped in the majority of the Southeast Asian countries, with the exception of China, and in Latin America, too. According to the World Bank, growth in Southeast Asia, which had begun to recover after its dramatic fall in 1997, would decline from 7.6 percent in 2000 to 4.5 percent this year, while Latin America’s growth would be around 2 percent, one half of the growth registered in 2000.
Other institutions also made predictions. The Economist magazine estimated in April that world growth in 2001 would be only 2.7 percent, in contrast to the 4.6 percent growth registered in the year 2000, while world trade would grow by 3.5 percent, compared to the 13.4 percent growth in 2000.
With regard to the Eurozone, the OECD, in its quarterly report issued in early May of 2001, estimated that the European Union would experience growth of 2.6 percent, a figure 0.5 percent lower than its initial projection.
On Sept. 10, just one day before the events in New York and Washington, the IMF analyzed the evolution of growth predictions for the world economy and for the economies of the United States, Europe and Japan.
[Here Castro cites figures showing falling growth rates from autumn 2000 to September 2001: the growth rate of the world economy declined from 4.2 to 2.7 percent; the U.S. economy from 3.2 to 1.5; Japan, from 1.8 to 0.2 percent; the Eurozone, from 3.4 to 1.9.]
Without exception, the three major centers of the world economy saw their growth rates fall simultaneously, dropping to less than half of initial figures over the course of less than a year. In the case of Japan in particular, growth dropped to almost zero.
THE EMPLOYMENT SITUATION
At the end of the year 2000, the unemployment rate in the United States was only 3.9 percent. By August 2001, it had risen to 4.9 percent.
Today, Nov. 2, the official figure was released: it is 5.4 percent. In just one month, 415,000 jobs were lost.
The increase of the unemployment rate is irrefutable evidence of the deterioration that the U.S. economy had been suffering prior to the terrorist attacks.
It should be kept in mind, as an important precedent, that over the last 50 years, when the unemployment rate has reached 5.1 percent, this has coincided with the beginning of a recession.
In August, industrial production fell by 0.6 percent as compared to July. Over the previous 12 months, industrial production had shrunk by around 5 percent. August was the 11th consecutive month of economic contraction.
The figure registered in August is very close to the lowest level reached since 1983.
Also registered in the month of August of 2001 was a budget deficit of $80 billion.
That same month, Democratic members of Congress were already pointing out that predictions indicated that the government would have to use Social Security money to finance current expenditures.
During the second quarter of 2001, U.S. imports shrank by $13.9 billion, while the low level of trade activity in the rest of the world led to a $9.1-billion reduction in exports.
Stock values on the main indexes have suffered the following decreases in 2001: Dow Jones, 18.06 percent; NASDAQ, 66.42 percent; Standard and Poor’s, 28.48 percent. This means the loss of trillions of dollars in less than a year.
The Federal Reserve has lowered interest rates nine times in 2001. The goal in doing so is to lower the cost of money, boost consumer confidence and thus promote economic activity. This frantic frequency clearly reflects desperation.
DECLINE IN EUROPE AND JAPAN
Industrial production in the European region experienced a sustained decline in the first quarter of the year 2001 that obliged companies to reduce staff, and this, in turn, reduced consumption, thus creating a vicious downward circle.
Investment and consumption are depressed, aggravating the trend towards recession.
The European Commissioner for Monetary Affairs has stated that the European economy will grow by only 1.5 percent this year. Meanwhile, the six most prestigious economic research institutes in Germany have predicted that their country’s economy will grow by 0.7 percent this year and 1.3 percent next year, and announced that the German economy is on the verge of a recession. This will have a strong negative impact on the rest of Europe, given that Germany is considered the region’s "economic motor."
The decrease in industrial production that began in March reached 11.7 percent by August. This phenomenon of six consecutive months of decline in industrial production has not been witnessed in the Japanese economy since the period from December of 1991 to May of 1992, and it places industrial production at the lowest level of the last seven years. This means an even worse crisis than the financial crisis of 1997-1998, according to Japanese analysts.
Japan’s trade surplus decreased 48 percent in July of this year.
As a defensive measure, companies are cutting staff, leading to a rise in the unemployment rate, which reached an all-time high of 5 percent in August of this year, something never before seen in Japan.
CRISIS IN LATIN AMERICA
In August, the Economic Commission for Latin America and the Caribbean (ECLAC) reported that the region’s economy would grow by only 2 percent in 2001, a mere half of the growth registered the previous year. According to ECLAC, this is the result of the worldwide economic weakening and instability in a number of the region’s key countries: Peru and Uruguay will experience no growth; Brazil has been affected by a scarcity of fuel supplies, which has hit its productive activity, and by an almost 40-percent devaluation of its currency this year; and Chile’s economic reactivation has come to a halt. In the case of Mexico, a feeble economic growth of 0.13 percent is predicted for this year, and 1.74 percent for 2002. The government had originally forecast 4.5 percent growth in the gross domestic product for 2001, but it has downscaled that figure a number of times due to the slowdown in the world economy, and particularly that of the United States. ECLAC estimates that unemployment in the region will reach at least 8.5 percent.
As can be seen, the economic crisis is not a consequence of the Sept. 11 attacks and the war against Afghanistan. Such claims could only be made out of total ignorance or an attempt to hide the real cause. The crisis is a consequence of the resounding and irreversible failure of an economic and political conception imposed on the world: neoliberalism and neoliberal globalization. The terrorist attacks and the war did not give rise to the crisis, but they have considerably aggravated it.