The Shadow Recession

Alors, bueno, so……In Capital, Volume 1, Chapter 3 Marx writes:

“The process of circulation, therefore, does not, [under conditions of capitalist exchange] like direct barter, become extinguished upon the use values changing places and hands… When one commodity replaces another, the money-commodity always sticks to the hands of some third person. Circulation sweats money from every pore.”

Indeed, capitalist circulation sweats money from every pore.  While in barter, exchange mediates need, in capitalist circulation that need is mediated not just by value, but as value.  Consumption as a moment in circulation is the reproduction of value. It cannot occur without the pumping of more commodities into the market.  The precipitation of money is a generalized, social, global process however petty, particular, specific, and grubby the distribution is (and must be).

Circulation, turnover, trade are the bourgeoisie’s tickets to ride.  The markets may not be everything, but without them, without their expansion, capitalism is nothing.

Alors, bueno, so until that fateful year 2008, the annual growth in world trade was generally 1.5 times the rate of growth of global GDP.  In the 90s, and then again following the recovery from the 2001 recession, trade grew twice as fast as global output.

After 2008, no such luck.  Following the decline of 2009 and the “snapback” of 2010, the ratio of the growth of trade to output hovered at 1:1, declining to  0.6 in 2016.

In value terms, world trade had peaked in 2014 at approximately $18.4 trillion, declining to approximately $16 trillion in 2015, and $15.5 trillion in 2016.

The cause for the peak, and the decline from the peak was marked by rise, peak, blowout, and collapse of oil prices in the 2014-2016 period.  For 40 years, overproduction in capitalism has been distilled in the overproduction, and subsequent price oscillations in oil.  “Managing” overproduction has meant “managing” the overproduction of petroleum.  Changes in the price of oil have precipitated recessions, interest spikes and collapses, bankruptcies, trade wars, and wars, all the while keeping in motion to some degree,  the contracts, the securities, the deals, that have to circulate, change hands, so that some money can stick to some fingers somewhere.

Oil took profitability, and with it, trade, up and oil took profitability and with it, trade, down.  The recovery in world trade in 2017 from the shadow recession of 2015/2016 proves that.  The recovery in oil prices, based on “managing” production through OPEC and Russian quotas produced a 13 percent growth in the value of world trade, which left the value of the world’s exchanges still some three to four percent below the 2014 peak.

To be sure, the political economists employed by and for the bourgeoisie have long defined a recession as two consecutive quarters of negative economic growth of a national economy.  World economic output grew 2.7 percent in 2015, and 2.3 percent in 2016.

Capitalism is, and is not, a national formation, or rather it is not simply a national formation.  It is a global network, and the two consecutive years of declining trade are the results of an acute condition, the decline in the profitability of oil production that is the marker for the chronic condition of capital, which is the tendency for the rate of profit to decline.

It is that chronic tendency that casts its shadow in and through the shrinkage of world trade.  It is that shadow recession, illuminated by an apparent “recovery” that cannot best a previous peak, that determines the trade conflicts among the capitalist “partners.”

August 24, 2018

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4 thoughts on “The Shadow Recession”

  1. Shadow Recession, great article, was published a month before the Invisible Recession was published. I wonder if NYT had read the Shadow Recession and got the idea 🙂
    In the NYT article “There was a sharp slowdown in business investment, … , a drop in the price of oil and other commodities, and a run-up in the value of the dollar.”
    Your article points to slowdown in business investment due to drop in oil price. But I am curious about your take on the impact of rising interest rates engendering stronger dollar. It looks to me that Michael Roberts speaks from the two sides of his mouth. For him rising interest rates by the Fed pose risks of recessions but on the other hand the Fed does not control the economy. The NYT article believes it was the Chinese who caused the drop in oil price because they wanted to clamp down on credit bubble. So governments can induce or prevent recessions by loosening credit which can be done by lowering interest rates. What’s your take on the impact of interest rate manipulations?
    Thank you,
    Cameron

    1. Cameron,
      Thank you for your comments. In truth I’m as confused as anyone about whether or not central bank intervention can impact the peaks and troughs of the capitalist cycle. I, for one, don’t believe that the raising of interest rates throttles a capitalist “recovery,” or that the raising of interest rates causes a capitalist contraction, or that the driving down of interest rates can produce the so-called recovery.

      Neither 2001 nor 2008 was caused by the (modest) stepping up of the Fed’s funds rate, and it certainly clear that the driving of rates into negative territory did not produce a resumption of growth at pre-2008 rates.

      That being said, it seems entirely probable that action by the US Fed in the 2008-12 period did mitigate the severity of the contraction; did keep the system from totally imploding; did “paper over” what was truly a solvency crisis with…liquid paper.

      I am convinced that the changes in production, in particular, the change in the relation between the living and dead, or accumulated , components are the source of expansion, contraction, and the movement of interest rates. Can I establish a direct, immediate, linear, correspondence between that change in the production process and the changes in the valorization process? No, or not always, but I keep trying.

      Sorry to be so ambiguous here, but that’s the best I can come up with.

      SA

      1. Thank you very much.
        The Fed has been raising rates for almost two years now albeit at a glacial pace. I just don’t see that it has been a risk. A recession next year, if that happens to be the case, cannot be blamed on rising interest rates because by then it’ll have been almost 3 years since the start. No doubt that at that time the Fed will lower the rates at an astonishing speed but I bet that it’ll not be able to get the system out of the slump.

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