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Editorial: Britain desperately needs out of the imperialist alliance

THE victory in Argentina’s primary presidential election last week-end for the Front for All alliance over right-wing incumbent Mauricio Macri was followed immediately by a crash in the financial markets there.

The peso, which had already been collapsing for two years against the dollar, dropped a further 20 per cent. The central bank raised its interest rate to 75 per cent, to slow capital flight. The stock market contracted 38 per cent in just one day.

Macri, whose accession to office was assisted by US interests, is unlikely to be able to overturn his 16-point defeat in time for October’s formal election. His imposition of neoliberal austerity policies demanded by the International Monetary Fund — eg cutting pensions, slashing the civil service, raising utility costs — have thrown the economy into recession, with unemployment officially at double-digit levels.

The record US$65bn loan from the IMF has simply gone to pay Argentina’s debt to global bankers and investors, including “vulture capitalist” hedge funds.

Rising interest rates, such as Argentina’s 75 per cent, further slow the real economy, so that stock and bond markets collapse further. But Argentina is just the leading example of a global decline in financial asset prices.

The US stock market, which fell 20-30 per cent last November-December, has started to drop again, after the Federal Reserve cut interest rates by only 0.25 per cent in July, and Donald Trump announced more tariffs on US$300 bn of Chinese imports. His recent delay of that measure is seen only as a temporary reprieve.

On Wednesday for the first time since 2007, both the US and UK treasury bond yield curves “inverted” — ie shorter-term borrowing costs exceeded longer-term ones. Such a US inversion, considered a classic recession signal, last occurred in 2007-08 and has happened before every US recession in the last 50 years, with just one false signal.

Government bond rates are falling everywhere in the advanced economies, with over US$15 trillion-worth globally yielding negative interest rates. Property prices are levelling off and global oil futures, a financial asset, have dropped again from US$75 per barrel to the low US$50s.

Across the board, investors are dumping financial assets for cash — a sure sign of impending global recession.

Meanwhile, in Germany, the economy is already on the edge of recession as exports have stuttered, and growth in the eurozone as a whole has halved to only 0.2 per cent.

When such a global recession does occur, Britain will not be immune. But outside the EU there will be opportunities for trade which will help to soften the impact — for example with China, whose manufacturing output still rose 4.8 per cent in July, while retail sales rose 7.6 per cent.

It would be a mistake, however, to put all the eggs in the basket of the piecemeal trade deals promoted by US national security adviser John Bolton, who visited Britain earlier this week.

For Bolton, like his boss Donald Trump, trade deals are an instrument of politics as much as of promoting the interests of US-based transnational corporations. Hence the embargoes on Cuba, Venezuela and Iran.

Trump and Bolton are certainly looking to shore up support for Boris Johnson, in case of a snap general election, because a Corbyn-led Labour government would be anathema to them. But there would also be a price for Johnson’s government to pay in terms of supporting the US imperialist posture.

What Britain urgently needs are independent foreign and domestic policies that begin to transform the economy from one in which return on capital investment is the decisive factor. In current circumstances, a start can only be made on that by electing a Corbyn-led Labour government. But such a government would need to be free from the restrictive requirements of EU treaties.

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