Economy, Globe

Global Crisis: industrialized nations at the centre

The United States, Europe and Japan, the principle powers in the world, are also at the centre of negative results in the midst of the global market crisis.

Rafael Contreras

The depression comes out of the neoliberal system which makes their economies interdependent, especially the U.S. economy, where the financial bubble blew up in mid-2007, and remains. Experts say that the United States has one of the most worrisome situations, with a combination of financial crisis and recession, which it then spreads to the other main powers.

The current results is a process of continuous, generalized bankruptcies with mass layoffs, according to an article published on the website Rebelion. According to the article, “Industrial and financial bankruptcy sharpens in United States and Europe,” the main consequences include a drop in consumption, the first signs of deflation, and low wages negotiated to avoid further layoffs.  The Wall Street Journal warned in the last week of January that if the credit markets continue to be paralyzed, the impact on businesses and consumers would grow, reducing access to loans, spending and investment, and therefore leading to more layoffs.

As one example, General Motors, one of the Detroit “Big Three,” reported that as a strategy to turn around its impoverished situation, 47,000 workers would be laid off to cut costs, although many more would lose their jobs if it went bankrupt. A string of announcements of business closing has brought the total number of unemployed workers to 19.4.

The European Commission says that 5.5 million jobs will be lost in the euro zone in 2011, and unemployment would rise to over 10 percent in 2011. Japan, which is leading the bad news in Asia, reported in the last quarter of 2010 its largest contraction since 1974, 3.3 percent, putting the country in its worst crisis in seven years.

The Japanese trade deficit reached record levels, 9.9 billion, when exports, vital to this economy, plunged in December to -13.9 percent. Moreover, the key indicator of the current state of Japanese markets lost 2.6 points compared to the previous month, to 89.6 points.

According to U.S. analyst Mike White, the world economy is decelerating at the fastest pace ever recorded. The World Bank recently reported that the monetary shortfall in developing countries totaled 270 to 700 billion dollars annually, due to decreasing capital flow. Professor Edmund Phelps, winner of the 2006 Nobel Economy Prize, says it will be at least 10 years before a more or less clear solution will be seen. (PL)

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