UN report says global economy could be heading for systemic crises

The latest UN Trade and Development Report, published earlier this month, presents a picture of a global economy wracked by lower investment and growth, the increased domination of giant corporations, financial speculation, a falling share of labour income and rising social equality.

The report contains an important chapter detailing the link between financial speculation in commodity markets and rising costs in basic foodstuffs.

IMF Headquarters, Washington, DC. [Photo by IMF / CC BY 4.0]

Setting out the overall situation, the report said: “Today’s global economic landscape is characterised by growing inequalities and divergence of growth paths between key regions.”

The world economy, slated to grow at only 2.4 percent this year, with a slight rise to 2.5 percent in 2024, “is flying at ‘stall speed’… meeting the definition of a global recession.”

“Compounding these issues is the absence of adequate multilateral responses and coordination measures. Without decisive action, the fragility of the global economy and an array of diverse shocks risk evolving into systemic crises.”

The growth rate shows no sign of returning to pre-pandemic levels in the absence of any “clear driving force” to propel the global economy onto a “robust and sustainable recovery track.” The figure is among the lowest in the past four decades, outside of crisis years.

One of the key features of the present situation, outlined in the report, is the increasing domination of the global economy by giant corporations and finance capital. This has led to the reduction of the labour share of income from 57 percent in 2000 to 53 percent today.

Roughly translated into raw figures, this means that with global GDP at close to $100 trillion, the income flowing to working people today is around $4 trillion less than it would have been had the already depressed share in 2000 been maintained.

In the words of the report: “The declining labour share and the rising profits of [multinationals] point to the key role of large corporations dominating international activities… [and] driving up global functional income inequality.”

The domination of finance capital and the rise in interest rates is already having a major impact on poorer countries.

“Some 3.3 billion people—almost half of humanity—now live in countries that spend more on debt interest payments than on education or health,” the report said, with the external and publicly guaranteed debt in these countries tripling over the past decade.

The proportion of government revenue used for debt service payments rose from 6 percent in 2010 to 16 percent in 2021. Nearly a third of these countries are on the “precipice of debt distress” with the situation to worsen as interest rates on bonds rise.

One of the major effects of the COVID pandemic has been to trigger a surge in inflation to the highest levels seen in four decades. This brought a major shift in the policies of the major central banks, led by the US Fed, to rapidly lift interest rates on the grounds that this was needed to “fight inflation.”

The objective was not to deal with the cause of the price hikes but rather with its effects—that is, to slow the economy in order to suppress the wages struggles of the working class in the response to cuts in living standards.

A major component of the inflation surge has been the escalation of food prices and other necessities such as fuel and energy which the UN report makes clear is rooted in the activities of the corporate food giants and commodity traders.

As with all reports from bodies such as the IMF or the World Bank, the UN report presents its findings as part of a case for reform. Its own analysis, however, demonstrates is impossible to implement such measures as long as the major corporations remain in the dominant position. Notwithstanding this approach, the report provides some important information.

Its chapter dealing with “food commodities” and “corporate profiteering” begins: “The stark contrast between the surging profits of commodity trading giants and the widespread food insecurity of millions underscores a troubling reality: unregulated activity within the commodities sector contributes to speculative price increases and market instability, exacerbating the global food crisis.”

It draws the conclusion: “Profiteering from financial activities now drives profits in the global food trading sector.”

That is, whether workers, in advanced capitalist and developing countries alike, can put food on the table to feed their children is determined by the activities of financial speculators.

The report noted there was a vicious interplay developing in which higher energy costs increased the price of fertilizers, leading to a reduction in their use and lower crop yields, which in turn led to higher food prices.