Chile, periodico-solidaridad - Impact of the economic
cycle: Are we facing a crisis? by V.N. (ca, pt) [machine translation]
Have recently appeared in the media all the impact of the "crisis" on economic growth,
balancing public finances by lower revenue than projected, the alleged lack of business
expectations for the reform processes, etc. In fact, the main argument put forward by the
New Majority to announce it would not take forward the reforms proposed in its program was
the context of "economic slowdown". Now, we all know that entrepreneurs always claim that
there a slowdown? Are we facing a crisis? Is it true that there is no money? ---- Indeed,
it has ended the upward part of the economic cycle that began in 2003. In a country whose
growth form is the export of primary goods, that cycle is determined by international
prices of raw materials. And therefore, the current crisis is but the downward part of the
cycle: the many consequences of the fall of raw materials, and particularly the fall in
copper prices.
Which is a consequence of the economic growth model does not mean it ceases to have
effects on workers: falling growth, collapse of investment, capital outflows. How deep
will the fall? Nobody knows exactly, depends on the behavior of the price of raw
materials. The so-called "commodity super cycle" was a process that began in 2003 and took
the price of raw materials of historical trends. The reasons for this are controversial,
but mainly, has been linked to two things. Some give greater importance in rising prices,
increased international demand due to rural-urban migration in China. Those who defend
this position argue that the process has strong roots, will be hard-coded, so that will be
sustainable over time. Other economists have argued that there is a speculative bubble
around these commodities, added to use as a deposit to get credit in the Chinese financial
system. The truth is that prices are falling, nobody knows for sure fall far or for how
long. And that actually affects the levels of economic growth. And in doing so, no effect
on domestic consumption, construction, trade, etc. There will be fewer jobs.
Then one could say that everything is due to international variations is nobody's fault,
nothing could be done. And it is true that international and thus prices of raw materials
cycle is not controlled. But how this cycle affects our economy depends on its degree of
openness, export concentration, dependence on such income tax, of the situation prior to
the fall of the trade balance and payments. And in all this, Chile is very exposed. You
can not escape the costs of a model of economic growth in primary export. And the most
characteristic feature, for which he was questioned deeply in Latin America during much of
the twentieth, is the exposure to the economic crisis.
So, is it true that there is, or there will not be money, and therefore it would be wise
to monitor social demands? That is not true. Silver there, the question here is who takes
her home, who accumulates, how the spend. Chile is an extremely unjust country, in which a
small group of families, a faction of the bourgeoisie, a huge part of takes the cake. If
one observes with what remains 10%, 5% or 1% richest of the population, there is evidence
that in other countries they focus quite as much revenue. And this inequality is
maintained and increased during much of the cycle Why should we be cautious now? When the
bad part of the cycle affects us as it does not arrive later this month, and affects them
as you do: among the most obscenely rich, a percentage change in monstrous sums they would
have to have dozens of life spend the rest of the richest 5%, restricting consumption of
luxury goods inaccessible even on good days for the vast majority of the workers.
Other arguments you hear is you have to be careful because if entrepreneurs are to scare
more, with which they will invest less, so there will be more unemployment, and wages
fall. It's a threat; "You do not know what they do, they want improvements now in bad
times, if achieved, unsuspecting, you end up being worse for yourself." It is clear that
the investment will reduce the cycle. Less clear is the effect of the demands on that. The
issue is that even those who stay with obscenely large part of the wealth, invest very
little. Consume some luxury expenses, and the rest are used in acquisitions of other
companies, concentration, not having a big impact on investment.
So the issue is not that there are no silver. The issue is how the money is distributed.
And what do they use those left with most of it.
The treasury (ie, the state treasury) will go through a period of lower revenues from the
fall in entries by CODELCO (since tax revenues to private mining are so low that its
variation has less effect). Tickets VAT (which is the main form of revenue) are also
falling by the reduction in economic activity (sold and bought less stuff, so you pay less
VAT). That will impact, no doubt. Impacts on such a small economy can not be contained by
savings abroad (SWFs). That could be solved, no doubt. Raising taxes on the rich, or even
just on the obscenely rich. Increasing taxes on the extraction of copper (Chile has the
pressure level tax on the income of the lowest natural resources of Latin American
countries that export metals or energy). Needless to say nationalizing. But none of that
will happen. That would require a will that does not exist in the forces of parliament,
nor exist in the immediate. In other words: the level of tax burden (in terms of revenue
the state remains) is very low compared to countries with similar income from other parts
of the world, or in rich countries when they had a similar revenue we now. If that did not
increase during the boom period, unless you do so in this context, given the current
structure of political forces. In this context, the State's action may aggravate the issue
(if cut social spending and public investment, that is, if you have a pro-cyclical
behavior). But it is unwise to expect an improvement in the living conditions of the
workers by means of a strong state action in the coming lean years.
Where you can come an interesting element, which could have consequences it is to sharpen
the demands in negotiations between workers and their employers, both at company level and
de facto joint negotiations by allowing branch or sector. That is the dimension in which
the workers today can affect your near future. We do not know how much copper prices fall,
or how the duration of the contraction cycle. But we do know that that is not reflected in
worse conditions for the workers, it depends on us and us. It will not come magically from
the international economy will not come from investment pattern of the local bourgeoisie,
also not come from the expansion of public spending would not even dare to do when there
were funds in droves.
[Published in the No. 30 edition of Solidarity]
http://www.periodico-solidaridad.cl/2015/09/24/impacto-del-ciclo-economico-estamos-frente-a-una-crisis/
