BY FIDEL CASTRO
[The following is an abridged version of the first part of a nationally televised address given on November 2 by Cuban President Fidel Castro.]
To characterise the current situation, one could say, by way of a very brief summary, that in the mid-1990s, when globalisation was extending around the planet, the United States, as the absolute masters 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 three trillion dollars were involved in speculative operations including currencies and stocks. Stock prices on US 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 US$1000. 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 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 labour, 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 industrialised countries.
An elementary analysis was sufficient to comprehend that this situation was unsustainable.
Nobody seemed to realise that any apparently insignificant occurrence in the economy of one region of the world could shake the entire structure of the world economy.
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.
Spreading crisis
In July 1997, the first major crisis of the globalised neo-liberal world erupts. The [Asian] "tigers" fell to pieces. Japan has still not managed to recover, and the world continues to suffer the consequences.
In August 1998 came the so-called Russian crisis. Despite this country's insignificant contribution to the world-wide gross domestic product, barely 2%, the stock markets of the United States were badly shaken, dropping by hundreds of points in a matter of hours.
In January 1999, only five months later, the Brazilian crisis broke out.
An all-out joint effort by the G7, International Monetary Fund and World Bank was needed to prevent the crisis from spreading throughout South America and dealing a devastating blow to the US stock markets.
US economic crisis
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.
In March of that year, the so-called high-tech NASDAQ index had already begun to drop. At the same time, the trade deficit showed an enormous growth, from $US264.9 billion 1999 to $US368.4 billion in 2000.
In the second quarter of the year 2000, the gross domestic product registered growth of 5.7%; in the third quarter, it grew by only 1.3%. Industrial sector production began to fall in October of 2000.
Nevertheless, at the end of 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 Organisation 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% worldwide growth in 2001. For the United States in particular, projected growth was 1.5%, and 2.4% for the euro zone. Japan was facing its fourth recession in 10 years, leading to a prediction of 0.5% 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 south-east Asian countries, with the exception of China, and in Latin America, too. According to the World Bank, growth in south-east Asia, which had begun to recover after its dramatic fall in 1997, would decline from 7.6% in 2000 to 4.5% this year, while Latin America's growth would be around 2%, 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%, in contrast to the 4.6% growth registered in the year 2000, while world trade would grow by 3.5%, compared to the 13.4% growth in 2000.
With regard to the euro zone, the OECD, in its quarterly report issued in early May, estimated that the European Union would experience growth of 2.6%, a figure 0.5% lower than its initial projection.
On September 10, the IMF analysed the evolution of growth predictions for the world economy and for the economies of the United States, Europe and Japan. Its findings were as follows:
- World economy (percentage growth): autumn 2000 4.2; March 2001 3.4; spring 2001, 3.2; September 2001, 2.7. A progressive fall from 4.2% to 2.7% in less than a year;
- United States: autumn 2000, 3.2; March 2001, 1.7; spring 2001, 1.5; September 2001, 1.5. More of the same, from 3.2% to 1.5% over the same time period;
- Japan: autumn 2000, 1.8; March 2001, 1.0; spring 2001, 0.6; September 2001, 0.2. The numbers speak for themselves; and
- The euro zone: autumn 2000, 3.4; March 2001, 2.7; spring 2001, 2.4; September 2001, 1.9;
Without exception, the three major centres 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.
Rising unemployment
At the end of the year 2000, the unemployment rate in the United States was only 3.9%. What happened in the year 2001? The unemployment rate registered 4.2% in February, 4.3% in March, 4.5% in April, 4.4% in May, 4.5% in June and July, and 4.9% in August.
Today, November 2, the official figure was released for September: it is 5.4%. In just one month, 415,000 jobs were lost.
The increase of the unemployment rate is irrefutable evidence of the deterioration that the US 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%, this has coincided with the beginning of a recession.
The percentage of industrial capacity used in the United States has fallen from 79.2% in February to 76.4% in August.
In August, industrial production fell by 0.6% as compared to July. Over the previous 12 months, industrial production had shrunk by around 5%. 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 was a budget deficit of US$80 billion.
That same month, Democratic members of Congress were already pointing to predictions indicating that the government would have to use social security money to finance current expenditures.
During the second quarter of 2001, US imports shrank by US$13.9 billion, while the low level of trade activity in the rest of the world led to a US$9.1 billion reduction in exports.
Stock values on the main indexes have suffered the following decreases in 2001: Dow Jones 18.06%, NASDAQ 66.42%, Standard and Poor's (S&P) 28.48%. 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.
Europe and Japan
Industrial production in Europe experienced a sustained decline in the first quarter of 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% this year. Meanwhile, the six most prestigious economic research institutes in Germany have predicted that their country's economy will grow by 0.7% this year and 1.3% 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".
Japan's real gross domestic product in the first quarter of 2001 dropped more dramatically than expected, with a decrease of 0.2% as compared to predictions of 0.1%, followed by an additional 0.8% drop in the second quarter. The decrease in industrial production that began in March reached 11.7% 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, 1991, to May, 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% 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% in August of this year, something never before seen in Japan.
In August, the Economic Commission for Latin America and the Caribbean (ECLAC) reported that the region's economy would grow by only 2% in 2001, a mere half of the growth registered the previous year (4%). In so doing, it retracted its prior prediction, made in May, forecasting a GDP growth of between 2.7% and 3%.
According to ECLAC, this is the result of the world-wide 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% 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% is predicted for this year, and 1.74% for 2002. The government had originally forecast 4.5% 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 US. ECLAC estimates that unemployment in the region will reach at least 8.5%.
September 11
There are people who calmly speak today about the "world economic crisis caused by the terrorist attacks that took place in the United States on September 11 and by the war against Afghanistan initiated on October 7". Such statements are completely baseless. What I have just outlined irrefutably proves this. The crisis was already breaking out, uncontrollably.
The crisis is a consequence of the resounding and irreversible failure of an economic and political conception imposed on the world: neo-liberalism and neo-liberal globalisation.
The terrorist attacks and the war did not give rise to the crisis, but they have considerably aggravated it. What had already been rapidly advancing was abruptly and untimely boosted even further. Humanity must now confront three extremely serious problems, which feed off of one another: terrorism, the war and the economic crisis.
The economic crisis also means the aggravation of major problems that are far from being solved: poverty, hunger and disease, which kill tens of millions of people in the world every year; illiteracy, lack of education, unemployment, and the exploitation of millions of children through child labour and prostitution; the trafficking and consumption of drugs, which mobilises and absorbs hundreds of billions of dollars; money laundering; the lack of drinking water; the scarcity of housing, hospitals, communications, schools and educational facilities. The crucial rights of all human beings are affected.
The crisis will have an especially negative impact on the struggle for sustainable development, the preservation of the environment and the protection of nature from the merciless destruction to which it is being subjected, and which is causing the poisoning of the waters and the atmosphere, the destruction of the ozone layer, deforestation, desertification, and the extinction of animals and plants. How could this possibly not be taken into the slightest account?
There are nations and even entire regions on some continents that could be annihilated if terrifying plagues like AIDS are not urgently combatted and defeated by humankind; and if terrorism, war and the economic crisis are not resolutely confronted. Now is the time when cooperation among all countries is needed more than ever before.
From Green Left Weekly, November 14, 2001.
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