Global production slowdown
The G20 conference, annual meeting of imperialist and capitalist countries, was held in Osaka Japan during the last week of June. This was conducted amid the stagnation of the global capitalist system and the intensifying trade war betweek the US and China.
The meeting culminated without arriving at a clear plan on boosting the deteriorating world economy and providing a solution to the decline in industrial production amid overproduction of basic commodities.
The trade war was not resolved as well. In a separate meeting, US President Donald Trump, and Chinese President Xi Jinping only agreed to call a truce and restart trade negotiations. This came after Trump’s declaration that he will impose additional tariff on Chinese products worth $300 billion.
Thus, contradictions will further intensify between imperialist countries while the rest of the world is further buried in crisis.
On April 2019, the World Bank issued a report stating the the growth of the world economy is “slowing down.” This was dubbed as “slowbalization” by bourgeois economists to highlight that globalization has already reached its limits since 2008. Actually, this only depicts the stagnation of the capitalist system.
The 3.9% world economic growth projection for 2018 and the first half of 2019 was not reached. From 4% in 2017, the growth rate decreased to 3.6% in 2018 and is expected to reach 3.3% this year. It is expected to increase but not exceed 3.6% in 2020.
Among the reasons cited by the World Bank are the deterioration of the Chinese economy due to the implementation of needed finance policies in shadow banking, its trade war with the US, slowing trade and investment activity within the European Union, and the overall decline in demand especially in Asia.
Except in the US, industrial production has generally slowed down, especially of capital goods. Trade rates declined sharply especially after US imposition of high tariffs on Chinese products.
Decline in production results in the falling of prices of basic commodities such as oil, basic metals and food—commodities that have long been overproduced.
From $81/barrel last October 2018 (highest in four year), the price of crude oil fell to $61/barrel by January this year. Its price has temporarily increased in October 2018 due to the US restriction of oil importation from Iran, but rapidly fell down again due to overproduction of oil in the US, and the non-compliance of other countries to the US-imposed sanction against Iran.
Only Valenzuela suffered a decline in production due to the US’ heavy sanctions and political intervention. There are also surplus supplies of natural gas and carbon due to low demand and the relatively cheaper price of oil.
In terms of basic metal production, there is an overproduction of iron, copper, aluminum, nickel and cobalt. The price of iron only rose because of mining accidents and tragedies which dirupt supply. In terms of nickel production, the Philippines was among the countries that recorded an overproduction last year. Local production declined in 2017-2018 after due to then Department of Environment and Natural Resources Secretary Gina Lopez’s issuance of a ban on open-pit mining in the Caraga region. China is the largest consumer of basic metals.
In terms of food production, there is an overproduction of grain products (rice, wheat and soy among others) in the US and Russia wherein a large subsidies are allocated for the agriculture sector.
Slowdown in capitalist centers
Economic growth slowed down in big capitalist centers. In the US, the government attributed the slow down to government underspending due to several delays in the enactment of the national budget.
Behind these delays is the Democrat Party’s (rival of Trump’s Republican Party) refusal to allocate funds for the construction of a border wall between US and Mexico. Trump promised to build the wall to purportedly prevent the illegal migration of Mexicans and other nationalities.
In Europe, the economy of the United Kingdom continues to experience investment and business uncertainty prior to exiting the European Union, with or without a Brexit agreement. In Germany, consumption of and demand for exports declined. In June, the US threatened to impose tariffs on German cars, the country’s main export. In France, the economy stagnated after the people, through “Yellow Vest” prostests, were able to prevent the proposed imposition of taxes on oil.
Meanwhile, Japan continues to experience recession despite recording a low 1% increase in its GDP due to fiscal measures implemented by its government.