In January 2009 we made an assessment of the nature of the economic crises and how it would affect the TEFL industry. Whilst we see no reason, in the light of events over the past year, to ammend our perspectives on the actual causes of the crises or the consequences of the speculative boom in higher and further education, it would be useful though to reassess the current “economic recovery” and its effect on the EFL industry.
The Inventory Bounce?
Most major Industrial countries now report that they have actually climbed out of technical recession (such a recession is defined by a contraction over two successive financial quarters in the total volume of goods produced). This emergence from technical recession, however, does not equate with substantial growth rates or rises in income and spending. One reason for this could be what economists term an inventory bounce. The inventory bounce is well-described by Krugman below:
Imagine a company that produces widgets (companies in these examples always produce widgets), normally selling 100 each month. The company tries to keep one month’s sales, 100 widgets, in inventory. But for some reason sales drop off, to 90 per month. And it takes a month before the company realizes what has happened.
At the end of that month the company, having produced 100 widgets but sold only 90, finds itself with 110 in inventory, but wants to hold only 90. To eliminate the excess inventory quickly, it might slash production to 70 for the next month, then bump production back up to 90. But unless sales increase again, that’s where it ends: production never recovers to its original level.
As go the widget-makers, so goeth the economy. When demand drops, inventories build up, then production drops sharply as businesses work off the overhang. Finally, there’s an “inventory bounce” when the overhang is gone. But the bounce doesn’t necessarily presage a true recovery. To get that, you need increased sales to final buyers.
This inventory bounce would be further complicated by the availability of credit. As is well recognised, the last “economic boom” was premised on considerable and unsustainable credit levels. Now it is clear that banks have cut back on loans and were enormously cautious on issuing loans they would have otherwise issued prior to the start of the last economic boom, but the availability of credit can clearly not restore growth rates. Moreover, the massive injections of capital to rescue the banking system have left the US and the UK with spiralling national debt which must itself be repaid and they are not in a position to launch massive public programmes to stimulate demand. While it is true that Germany, Japan and China are not so encumbered with debt it is unlikely that they will risk their economies by creating massive export possibilities for the more indebted nations. Indeed, the massive stimulus package in China has not been to create more home demand (better pension schemes, more hospitals and schools) but rather to create more infrastructure for export led growth.
Whether what we are seeing is merely an inventory bounce or not, what we know for sure is that most governments throughout the world are looking to cut back on public expenditure in an attempt to balance the books. Should they cut back too rapidly, however, causing rising unemployment and falling demand, they risk exacerbating the crises. This is the background to the convulsive struggles that are currently shaking Greece and well-documented by Sara Hannam over at Critical Mass. They are also the background to the fightback at Leeds University in the UK, where staff are attempting to repel a management onslaught to deliver 35 million pounds worth of cuts.
Well, we believe the industry best exemplifies the current economic situation. It is like a war of attrition. Some companies are cutting back and some individuals are preferring to spend extra hours in the office rather than do English classes. Other companies, however, are restructuring their classes to achieve savings or asking their staff to contribute more in terms of money and time. However, in an increasingly competitive job market students and workers still see the benefit in achieving a high quality of English. It is like Japan after the economic crises of the 90’s, there is not a technical recession but neither is there a feeling of significant growth. Numbers are staying more or less steady, but teachers and students are feeling under increasing pressure.
In place of a conclusion
We imagine this situation will continue for some time unless some department of international capital makes a significant move, this could be a move to the right (as witnessed by the rise of far right parties) and protectionist policies or a concerted effort to drive down wage costs even further while attempting expansion in another department (say further expansion of military Keynesianism). What is clear is that capitalism is riddled with contradictions, and every attempt to rid itself of its own contradictions brings further problems. Our future lies with the examples of air traffic controllers in Greece and university staff in Leeds. It is not only our jobs which are at stake but the very future of the planet as we know it.