Busted! The 'New Economic Paradigm' Goes South For the past few years we have been carefully following the development of the US and world economies. Yet almost overnight, instead of "the boom will last forever", the press now has stories about "how to survive the recession", and openly discusses the economic slowdown. They don't even blush at the fact that mere months ago they were encouraging everyone to get into the stock market or miss out on fabulous wealth and early retirement! We explained long ago that the so-called "New Economic Paradigm" was nothing new at all - that it was an investment boom propelled by the super-exploitation of the working class and ex-colonial world.
World deflation - led by Japan The complacent optimism of capitalist consensus is fast disappearing. At the beginning of this year, the general view about the world economy was that US growth would slow gradually to about 3% from 5%, Japan would pick up a little to about 2% and Europe would trundle along at about 2.5%. The US central bank, the Federal Reserve, would cut interest rates to ensure that any slowdown would not mean a loss of investor confidence or consumer demand. Well, January seems like eons ago in global economics. After a non-stop spate of warnings about lower profits from the main US corporations and the release of economic data each day that showed a weakening economy, US stock prices have plummeted. Michale Roberts analyses how all this is affected by the growing problem of deflation in Japan.
The pain after the gain The world’s stock markets took a big hit in the first quarter of 2001. The US markets were down at least 10%, as was the UK’s FTSE index. The world index of all stock markets measured in dollars was down 14%. The technology sectors were hit even more. The US hi-tech index, the NASDAQ, fell 26% in the first three months of this year and the UK’s Techmark index did nearly as badly. Michael Roberts looks at the relationship between the stock exchange and the business cycle and the likely effects of this collapse on the real economy.
