The economic outlook is sombre across the world and there's little prospect of brighter days ahead.
GV Demonstration in Tokyo against inflation (2166/74)
Background: The economic outlook is sombre across the world and there's little prospect of brighter days ahead.
The industrial Western world is in the grip of perhaps the worst recession since the Great Depression of the 1930's and at the same time is suffering rampant inflation. The two economic ills have been lumped together under the names "stagflation" and "slumpflation".
The spectre of mass unemployment and the collapse of the international monetary system, has been raised largely by the drastic increase in oil prices a year, ago, which deprived the major industrial nations of a cheap, plentiful fuel source.
The United States, the most powerful of the industrial nations, is in recession. More than 5,500,000 Americans are out of work and another million could join them next year. The dismal landmark of 1,000,000 unemployed looms over West Germany, Italy, Britain and Japan.
The Paris-based Organisation for Economic Cooperation and Development (OECD) forecasts "scant" average growth for its seven major members of less than one per cent next year.
The motor industry was the first to suffer from the oil crisis and nowhere has the recession been more starkly falt than in Detroit, home of the car industry. The giant car manufacturing firms face a bleak future and have been laying off thousand of workers because of the slump in new car sales.
Chrysler has about 400,000 unsold cars and has temporarily closed five of its six assembly plants. Overall, sales of new cars fell by about 40 per cent this year, leaving the Ford company with 500,000 unsold cars and the General Motors company with 750,000 unsold. An estimated 200,000 workers have been temporarily or indefinitely thrown out of work as result.
President Ford has regularly stressed that international cooperation is the only way of solving the present energy crisis. He repeated the call at a White House reception recently.
Japan -- the economic wonder of the post-war years -- is now going through a period of zero economic growth with the rate of inflation still around 25 per cent -- the highest among the industrial nations. Hardest hit are the textile and motoring industries and their subsidiaries. Unemployment is expected to rise to 1,000,000 within a few months and thousands of sub-contractors face bankruptcy after being cut off from large manufacturing firms.
An economic growth rate of 5 per cent -- half the former annual average -- has been predicted for Japan next year. But even this figure is beginning to look doubtful.
Israel -- the flint that sparked the oil price explosion -- faces bankruptcy having spent a massive sum during the last Middle East war. The country is maintaining a high priority on defence spending and the Israeli standard of living has dropped dramatically because of high taxes and inflation.
Things do not look much better for the Common Market countries. The EEC's Supranational Executive Commission says unemployment will soar while real economic growth rates shrink during the next year. again, the motor and allied industries have been hardest hit. Thousands have been left jobless in Italy, France and West Germany and in Italy, the protests have been loud and long.
But the economic pressures have served to weld the nine members into a tighter union. A Common Market summit in Paris recently made solid progress towards a joint approach to the world economic crisis, after months of division and bickering.
Along with "stagflation", the five-fold increase in oil prices has bred another threat to the Western economies -- vast surpluses in the incomes of oil producing nations -- or "petrodollars" as they're know. These have caused a transfer of wealth - largely to the Middle East - on a colossal scale and created a problem which promises to bedevil the world economy for years to come.
The problem for Western financial leaders has been to find ways of making the "petrodollars" flow back through the world economy -- the co-called "recycling of petrodollars". A plan to this effect put forward by United States Secretary of State Henry Kissinger is expected to be approved by the leading industrial nations at a meeting in Washington next month.
The economic pressures on workers having to adjust to a sharp drop in living standards has led to violent demonstration in the major cities of most industrial nations. Initially, the targets of the protests were inflation and government anti-inflation programmes. But as the oil problem continued and recession and unemployment spread, the demonstrations were aimed more at the lack of jobs. Many countries -- in particular the Europeans -- have been implementing policies aimed at protecting workers from unemployment.
The shadow of the "Great Slump" looms large as the industrial nations struggle to cope with the era of expensive fuel. But there is a long way to go before things get as bad as they were 40 years ago.
The machinery exists -- in the International Monetary Fund, the General Agreement on Tariffs and Trade, the European Economic Community and the United Nations -- for the Western industrial nations to work out their salvation together. But for the moment, the only light is the light at the end of the tunnel.