Global Economic Revolution Is Overdue
Hema Senanayake
When a business makes profit, perhaps labor unions might define that the profit resulted from the exploitation of labor power. When a business makes losses, how do we define it? Here, I mean across the board loses made by most businesses. At least we cannot use the word “exploitation” when businesses make loses.
China is the largest steel producer in the world. Chinese steel industry accounted more than 50% of world’s steel production. This industry is in crisis now. The second largest manufacturer namely Baosteel has recently reported approximately $900 million loss only for the third quarter of 2015.
A few years ago especially in 2008 and 2009 the American Industrial production shrank by 13% while having physical capacity to produce more. Many American industries including auto industry made heavy losses. The U.S. government had to rescue them. During the same period, the situation in Europe was no different.
In economics we accept the failure of individual businesses. This is necessary for the progress of the economy because we must allow the inefficient businesses or industries to be replaced by more efficient and more productive businesses. Therefore, we agree that businesses should be allowed to fail and new businesses should be allowed to emerge based on efficiency and consumer preference (choice). As Karl Marx had explained consumer preference and choice is an important tool or mechanism in order to ensure that the labor expended in producing something is useful and necessary. But the above mentioned, across the board business failures, occur not due to any inefficiency or consumer preference. This is a global crisis happening due to one different reason.
This crisis cannot be explained simply as a problem of “exploitation” or capitalism or Chinese capitalism. None of the label such as liberalism or neo-liberalism or any other label to define economies has no validity any more. When this crisis erupted in 2008 in the United States, many leading economists including a few Nobel laureates tried to identify reasons for the crisis. They believed that global trade imbalance was one of the main reasons because by that time China, Japan and South Korea were amassing dollar reserves resulted from the trading with the United States. But they never explained as to why Japan went into a crisis mode in early 1990s while having enormous dollar reserves.Read More
