It has been a month of global instability. We have seen rising tensions in the US-China trade war, further signs of a looming global recession, and diplomatic clashes over climate change.
In August, a great deal of commentary erupted in the mainstream press when yields from 10-year US government bonds fell compared to the yield from 2-year bonds, a potential early indication of a coming recession.
Bond yields fall when the demand for bonds goes up, meaning that a layer of capitalist investors are putting their money into longer term bonds. Normally they would weigh up the return from the bond against the cost of missed opportunities from being unable to invest the same money elsewhere. Those missed opportunities are less rewarding to them now.
In effect, capitalists are choosing not to invest some of their available capital into businesses, which could boost employment and productivity, because they believe there is less profit in it than in looking to long term bonds.
This is a reflection of their lack of confidence in their own system. Factors around the world have them spooked, chiefly the impact of the trade war between the US and China.
As a result of these fears, share prices in Australia dropped drastically in mid-August. The Australian Stock Exchange saw two months of gains wiped out in a day, the largest one-day fall since February 2018, as investors withdrew their capital.
Trump’s trade war is destabilizing the world economy. The global nature of capitalism means that no one country is fully insulated. And each country’s ruling class pursues its own narrow interests at the expense of all others. Nowhere is this more obvious than on the issue of climate change.
At the Pacific Islands Forum last month, a number of South Pacific governments tried to commit the Australian government to a modest pledge to reduce carbon emissions. In response, the ‘Minister for the Pacific’, Alex Hawke, stated “Australia’s position on coal is we won’t have a communique where coal and coal-fired generation, or phasing it out now, is a realistic proposition.”
The Australian ruling class is in an awkward position, as they are in the middle of a drawn-out rivalry with China over influence among South Pacific elites.
When asked about the tensions with Pacific representatives over climate change, Morrison could only manage the limp comment, “If you’re going to step up, you’ve got to show up, and Australia’s going to show up.”
Tensions between the Australian ruling class and China have also entered a new phase as a result of the massive protest movement in Hong Kong.
The protests have seen millions of people on the streets, and political strikes carried out by Hong Kong workers. Our sister organization, Socialist Action, has been reporting from the front lines. The protests were initiated in response to a law that would allow people to be extradited to China, exposing political dissidents to enormous danger.
Hong Kong police have engaged in horrifying brutality against the protests, including assisting armed thugs in attacking demonstrators.
The extradition law is an attempt by the Chinese ‘Communist’ Party (CCP), and their allies in the Hong Kong legislature, to extend the CCP’s control into Hong Kong.
Western capitalists usually have no problem with CCP repression, as long as it is done in the name of capitalism. But the Australian Chamber of Commerce in Hong Kong (‘AustChamb’) has now come out against the police violence.
They have been alarmed at the implications of the extradition law for Australian businesses in Hong Kong, and at the bold reaction the CCP has provoked from Hong Kong’s working class including the first political strike in almost a century. AustChamb want to see the situation de-escalated.
The world is so connected that neither the Chinese, Australian or US ruling classes can do what they want without international consequences. The ruling elites of different nations are forced into conflict by the logic of capitalism.
A victory for workers in Hong Kong would be a victory for workers everywhere, and this, in part, is what drives AustChamb’s fears of the situation the Chinese regime has created. Similarly, workers everywhere have an interest in a serious approach to climate change, and in an economy where investment is democratically controlled, working for the common good.
Only working people, united in a global fight for a socialist alternative, can provide a real solution to economic crisis and climate change.
Editorial comment from the September 2019 issue of The Socialist