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Toward a new global recession?


In the Brooklyn Rail, Jose A. Tapia, a professor of politics at Drexel University in Philadelphia, provides a somewhat wonky but nonetheless lucid assessment of the present state of the global economy. He suggests that if past trends are any indication, the capitalist system may be heading for a recession later this year or next. An excerpt:

It is indeed possible that we are, right now, in a new recession of the world economy, though if that were the case the recession would have begun in an insidious and creeping way, not with financial turmoil like the one that marked the outburst of the Great Recession of 2008 or the recession of the turn of the century, which was very mild in the U.S. but was accompanied by financial debacles in many countries of Latin America and Asia. Another possibility is that we are now in a “rare” period of the global economy in which there is neither a clear expansion nor a clear recession. To decide among these possibilities more perspective is needed. What is certain now is that the reduction of profits in the U.S. in 2014 is likely a manifestation of the decline in capital returns in the world economy. That is the reason why everywhere in the world huge masses of money are idle in safes and bank deposits, waiting for “investment opportunities.” Though economists tend to ignore this fact, corporate profits, returns on investment, are the engine of the capitalist system. Unless some very unexpected factor—like workers deciding to work much more for much less—increases the profitability of capital in the near future, everything suggests that the world economy will go soon into recession, if not in 2016, then not much later. But as the joke goes, predictions are always risky, especially when they concern the future.