The crisis in the world economy

Economics Australia

At a superficial level world economic growth appears relatively robust. The world economy has grown by five per cent each year since 2004. Such growth has led to claims that the crisis in the world economy, evident in the years of stagflation of the 1970s, has now passed, even that we are now entering a ‘new growth paradigm’. While not disputing growth in the world economy in the past decade, this article draws a much more critical assessment of the situation. The world economy has still not resolved the fundamental weakness that dragged it down in the 1970s, to wit, the rate of profit is not high enough to stimulate the world economy into a new round of comprehensive all-round international growth. In addition, the world economy is plagued by fundamental financial imbalances and by an increasing skewness towards financial speculation as against accumulation in the productive sphere of the economy.

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