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While looking through Izvestia, a Russian broadsheet daily, I have come across some interesting statistics in an article on the retail sector. The global trade has now reached its lowest point since the Great Depression, according to WTO experts. Thus, the global trade turnover officially fell 12% in 2009, while in late 2008 experts expected a contraction of only 2.1%. This forecast was later revised several times. The newspaper also points out the factors of the pre-crisis 6% annual growth rate for the global trade, which are increasing consumption and a constant rise of production capacities. Now that external demand is down, the largest exporters are trying to tap into domestic markets.

Now, isn’t that interesting? Let me paraphrase that. For many years, the global trade was on the rise as long as consumption was going up. Major manufacturers on global markets were boosting production capacity in hopes that consumption would continue to grow. When their hopes were dashed by the falling global aggregate demand, they turned to domestic markets. Doesn’t it sound like an over-production crisis with capital owners running for new markets? Surely, it does.

In view of the above, it is very amusing to hear comments from some Wall-Street representative or governmental official (there seems to be very little difference between the two since many former high-ranking Wall-Street employees often end up holding governmental positions) that the economy is recovering. The jobless recession is believed to have turned into a jobless recovery, only employment has not been thoroughly restored with lending around the world still at record lows. Bailouts have propped up financial superstructure (still prone to senseless speculations) while the economic basis is still struggling.

These data confirm to me that those who call this crisis an ECONOMIC one are right. No boosting of lending will help increase consumption since consumers in the largest consuming country in the world are up to their eyeballs in debt. I am personally running out of patience with those who keep on claiming that this is a financial crisis or just a recession. This is more than that – this is a collapse of an entire economic model which provided artificially-stimulated consumption in order to protect profits of transnational corporations, whose excessive capacities had long exceeded any natural consumption levels, which is a classical definition of an over-production crisis. Welcome to the real world, dear financiers!

Boris Anisimov

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