Reflecting the concerns of the U.S. rulers, a January 12 Los Angeles Times article entitled "Around the World, a Slowdown in the U.S. Blows a Chilling Wind," pointed out, "Even a brief contraction in the U.S. economy, which consumes 30 percent of the world's total output, will have worrisome repercussions thousands of miles away thanks to the increasing interdependence linking Mexican assembly-line workers to Detroit automakers and Taiwanese chip manufacturers to Silicon Valley computer companies."

Commenting on the same subject, David Sanger, writing in the January 7 New York Times, stated, "For nearly seven years, the United States has so dominated the world economy that other nations have come to depend, more than ever, on constantly rising demand from the United States for products of all kinds."

Most affected will be the countries in Latin America, which, as a result of trade relations and imperialist investments, are more closely tied in with the U.S. economy than any other region.

Of Mexico's total exports, for example, more than 80 percent go to the United States. This accounts for 21 percent of Mexico's gross domestic product. Some 75 percent of goods imported into the country come from the United States.

Signs of a downturn in the U.S. economy are beginning to have an effect in this semicolonial country of 100 million people. The cutback in auto production in the United States has already resulted in the elimination of some 5,000 auto jobs in Mexico by Delphi, a major U.S. auto parts firm, which has dozens of plants and employs 80,000 workers in Mexico. The U.S. investment firm Goldman Sachs is now predicting a sharp economic slowdown in Mexico this year.

Many of the workers are employed in maquiladoras or U.S.-owned plants just on the Mexican side of the border where pay is low, working conditions poor, and the profits made by the giant U.S. companies high. Even prior to the latest slowdown Mexico has at least 27 percent of its population living below the poverty line and a foreign debt owed to banks in the imperialist centers of $155 billion.

In response to growing fears by capitalist investors, Mexico's currency in mid-January dropped to its lowest point since June 2000--9.85 pesos to the U.S. dollar.

According to the New York Times, "The slowing American economy seems likely to reduce oil demand, and with it prices." This will in particular affect Mexico and Venezuela, two of the largest exporters of oil to the United States. From 1990 to 1997 oil imports from both Venezuela and Mexico nearly doubled to close to 500 million barrels a year from each country.

Other countries with a significant percentage of their exports going to the United States include South Korea at 22.1 percent, Brazil at 21.2 percent, Thailand at 20.6 percent, Chile at 17.2 percent, and Indonesia at 15 percent. Argentina, which has pegged the value of its peso at one for one to the dollar, exports 11 percent of its goods to the United States. The imperialist giant is also the source of 22 percent of Argentina's imports.

One factor that will aggravate the extent of the crisis should a prolonged slowdown hit the United States is the underlying weakness of the economies in Latin America. The recent IMF intervention into Argentina to avoid default on payments of its foreign debt is one response by the imperialists. The IMF announced a new package of $40 billion in loan guarantees to stanch the crisis, after holding Argentina's austerity package up as an example for the rest of the continent to follow. This was the largest such "rescue" package by the IMF since the imperialist agency propped up the Brazilian economy with a $41 billion loan in 1998.  
 
Foreign remittances
Another growing source of revenue for countries in Latin America that will be deeply affected by a severe economic downturn in the United States are remittances sent by workers with jobs in the United States to their relatives back home. For Mexico, for example, remittances represent the second largest source of revenues in foreign currency after tourism.

Also particularly vulnerable are the regimes in the countries of Southeast Asia, including Thailand, Indonesia, South Korea, Taiwan, Malaysia, Singapore, and the Philippines, whose economies experienced a financial and economic collapse in 1997-98. The United States absorbs about 20 percent of all of Asia's exports, and, according to the Times, "Its insatiable demand for more was the key to the quick recovery in Southeast Asia and South Korea."

The last time the U.S. economy sank into a recession in 1990-91, exports from and the flow of capital to these countries was not significantly affected, because the electronics sector continued to expand. "No such luck this time round," commented a feature article in the January 8 Time magazine. "Far from escaping the downturn, America's paltry electronics purchases are leading it."

According to a report by Deutsche Bank Global Markets Research, electronics account for 75 percent of exports in Singapore, 60 percent in the Philippines, 58 percent in Malaysia, and 37 percent each in Taiwan and South Korea. This heavy dependence, the report says, "could be an important liability for these countries."

The looming economic slowdown stems from the crisis in the rate of profit reaped by the leading capitalist companies. The increased competition, particularly among the imperialist powers, for markets for their products and raw materials is accompanied by calls by a wing of the ruling class for protectionist measures. This would exact stiff tariffs and possible quotas on imports, such as steel, coming into the United States. Such steps further exacerbate trade conflicts.

Japan, which has the world's second largest economy, would also be adversely affected by a declining U.S. economy. Its economic growth rate has already been stagnating for more than a decade. Some 40 percent of Japan's exports go to the United States, and an additional 40 percent, much of it high-tech related, goes to other Asian countries.

"When the U.S. slows down, Japan will be jolted," stated Kenji Yumoto, senior economist at the Japan Research Institute in Tokyo.

Sounding a similar note, the New York Times quoted Kazuo Mizuno, a senior economist for Kokusai Securities, also in Tokyo. A quick decline by the United States "will be a double whammy for Japan," he stated, and the Times added, "a double whammy for the world's two largest economies could easily be a double whammy for the new administration."

As the banks in the imperialist centers insist that declining revenues available to Third World countries must go towards paying the exorbitant foreign debts they are burdened with, and as the bosses and the capitalist rulers in these countries attempt to implement deeper austerity measures in an effort to make working people and farmers pay for the brunt of this crisis, resistance by the toilers will continue to mount.

The protest actions organized in December by tens of thousands of unionists in Argentina against government plans to dismantle the social security system, and their plans for a March 1–2 national strike, provide one such example. The week-long strike in south Korea by 23,000 unionized employees at two major banks in opposition to their plans to merge and then carry out massive layoffs is another of the type of actions that working people will conduct to defend their rights and living standards as the economic crisis deepens.
 
 
Related article:
Cancel the debt, jobs for all!  
 
 
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