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by Pierre Ivorra


Translated Thursday 9 October 2008, by Gene Zbikowski

Economist Pierre Ivora sets out the preconditions for a successful bail-out plan.

In what hidey-hole is economic growth going to take refuge, amid this unprecedented financial crisis? France is now in a recession according to the latest figures from the French National Institute for Statistics and Economic Studies, and the forecasts for 0.6 to 1.1% growth in 2009 are certainly over-optimistic. The euro zone is not expected to experience more than 1% growth in 2009 according to the official figures. As for American leaders and economists, they make no secret of their fears. Just about everywhere there are more and more signs that the economic situation is worsening. The emerging markets seem to be resisting better, but this is likely to be only temporary.

And yet, the above is probably still an underestimation of the impact that this financial crisis may have on economic life. For example, the United States’ effort to pour or inject hundreds of billions of dollars to prop up shaky banks and financial institutions is no sure bet. The American authorities are financing the resulting “hole” by issuing Treasury bonds, which the Japanese and Chinese central banks, in particular, have been buying. One cannot rule out the possibility that, at some point, these central banks will want to get rid of some of the colossal dollar reserves that they have accumulated – triggering a collapse of the dollar and devastating knock-on effects.

We’ve already underlined the fact that, in our opinion, this crisis expresses the contradiction between the insufficiency of the means devoted to human development and the enormous accumulation, on a world scale, of capital devoted to speculation and finance. But it remains for us to insist on the role of credit in both the exacerbation of this contradiction and the role that it could play in solving it, so that we can begin to get out of this crisis.

It can’t be repeated enough that the banks financed, and with a vengeance, the external growth operations, the securitization of debt, and the leveraged buy-outs that whipped up speculation like some diabolical soufflé. They did so by granting credit, to the applause both of the central banks and of right-wing and certain left-wing governments, in Europe notably thanks to a “strong” euro.

Now they’re telling us that the house is on fire and we can’t just stand around doing nothing, we’ve got to come together in a veritable “sacred union” (1) to put out the fire and consequently shell out even more billions of dollars, euros and yens to avoid going over the brink. In the United States, they’ve bullied through the adoption of the federal government plan to create a 700-billion-dollar fund to buy up all the toxic assets that are lying about. But is it a question of cleaning the poison out of the system just so the same people, or their blood brothers, can go back into dealing toxic assets? Obviously we can’t just stand around doing nothing, we’ve got to act fast, but to do so, we’ve got to define the conditions and review the rules governing the financing of the economy by the banks, and right away. Before doing anything else.

Obviously, that means big changes. Thus, particularly in France, the government’s 2009 budget looks like a worst-case scenario, it seems to be specially-designed to worsen the expected fall in growth. For its part, the French Socialist Party has taken the opposite tack and is demanding reflationary measures. Of course – but what is to be reflated? Financial growth, or helping the French electric company to buy out another big energy company, after having gobbled up British Energy? As concerns bank credit, it’s not just a question of the amount that’s needed. It’s a question of pushing through demands regarding the nature of these credits, their object, their goals, in order to favor investment, production, research and training rather than finance profits. That’s a crucial question, if we are to put out the fire.

(1) The Sacred Union is the name given to the French left’s support for imperialism and its betrayal of proletarian internationalism during World War I.

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