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Andrew Glyn

Summit For Nothing

(July 1978)

From Militant, No. 416, 28 July 1978, p. 3.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The Bonn Economic Summit between the heads of the seven most powerful capitalist countries was the fourth annual meeting of its sort. Taking place in a blaze of publicity and with statements from individual leaders as to their ‘purposeful’, ‘frank’ and ‘constructive’ nature, these meetings are supposed to give the impression that things are in hand, that the world economy is capable of being controlled in an effective fashion.

But the ‘currency’ issue by these summits – statements about the imminence of a sound recovery – has far exceeded their real effects. Just like any other currency issued in excess of real production, the result has been a devaluation – a scepticism about the real value of these jamborees. The cynicism with which the Financial Times greeted the Bonn get-together – “no real harm may be done” (July 15th) – was matched by the Economist’s verdict that “it steered just clear of disastrous failure” (July 22nd).

In 1976 they set a growth target of 5½% a year until 1980; the increase in production in 1977 was 3¾%, and in 1978 will be about 3½%. Unemployment has stuck at around 5½% since 1976, and the inflation rate has only inched down – from 9% in 1976 to a forecast 7½% this year.

In 1977 Japan committed itself to a 6.7% rise in output for that year, but achieved 5%; West Germany reaffirmed a 5% growth target but grew at 2½%.

This time they were more cautious. Federal Chancellor Schmidt undertook to take measure to boost demand by 1% of GNP, whereas Fukuda, the Japanese Prime Minister, said he was “striving” for growth 1½% faster than the previous year. The Italian Prime Minister undertook to raise growth by 1½% by, among other things, cutting public expenditure – a highly paradoxical ‘solution’ which will provide no consolation to the million Italian workers on the dole.

The Times (July 18th) summarised the prospects as follows: “If all the stimulus measures go into effect and if there is no downturn in other countries during the second half of 1979 it may be possible to get the overall growth of the world up to about 4 or 4½ per cent by the end of 1979. This would be enough to stabilise unemployment, although probably at a higher level than the 17 million in the industrial world at present.”

The fundamental reason for the stagnation of the world economy is, as explained many times in Militant, the world-wide refusal of the capitalist to invest.

The recent report of the “authoritative” Bank of International Settlements shows (p. 47) that in Europe investment in new factories and machinery is one third below the level it would have reached if the trend of the ‘Sixties has continued; in Japan it is less than one half of the trend level.

The National Institute Economic Review (May 1978, p. 38) shows that investment in the capitalist world fell by an unprecedented 11% in 1974 and 1975, and that its recovery subsequently has only been at half the 10% growth rate of previous expansions.

The capitalists themselves will not invest because their profits are low, excess capacity is very high, and they are totally demoralised about the prospect of a sustained recovery. The governments of the major countries know that their last attempt in 1972/3 to drive the world economy forward through tax cuts and money supply increases collapsed in a disastrous acceleration of inflation. The cuts in living standards and public services have not been enough to restore profitability but have further contributed to the stagnation of markets.

The mass unemployment has not materially weakened the trade union and labour movement, but together with the cuts has built up a legacy of bitterness likely to erupt in major industrial struggles. The prospect of ‘left’ governments in France and Italy has only been postponed. All these factors are reflected in the capitalists’ profound ‘lack of confidence’, against which summitry has no impact.

The summit statement says “we are concerned, above all, about worldwide unemployment because it has been at too high a level for many years,” and that “we need an improvement in growth where that can be achieved without rekindling inflation.”

But these are just crocodile tears and pious wishes. It was no accident that when pressed on what had been achieved Jim Callaghan hastily changed the subject to the agreement on terrorism.

NEXT WEEK: the competitive battle being fought out by the various capitalist countries.

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Last updated: 1 November 2016