An Economic World In Flux
Following up from yesterday's post, here's more on that "global economic crisis" thingie:
A world in flux: crisis to agency
The world's financial convulsions are a rare opportunity to reform global governance in ways that address the systemic inequalities of the neo-liberal age.
By Paul Rogers
The extraordinary series of bank collapses and bailouts that have swirled round the world's financial markets in September-October 2008 continues to unfold. It is palpable that in relation to the global economy (as to global security), no one - bankers, traders, politicians, national governments or international agencies - is in control. But even at this stage of the crisis (whatever that stage proves to be), it is clear that the world's major economies are moving into recession.
This in turn poses two questions: how deep and persistent will the recession be; and what are the chances of a real reform of international financial institutions so that they begin to meet the needs of citizens in all parts of the world?
The parallel view
There are no direct historical parallels to provide an adequate route-map here. The 1929 crash and subsequent depression was in a world where the globalisation of financial markets was far less developed; while later crises (the late-1980s downturns, Russia's mid-1990s economic collapse, and the east Asian problems of 1997-98) were only national or regional in scope. The most appropriate comparison is with the ten-month period immediately following the Yom Kippur/Ramadan war of October 1973. This saw 450% oil-price increase, and was accompanied by a surge in the prices of other commodities and by a widespread food crisis (see "The world's food insecurity", 24 April 2008). The commodity bull-market of the time benefited speculators on the futures markets more than the producer countries of the majority world, but still affected the economies of the industrialised world.
What followed that crisis was not an egalitarian restructuring of world-trade relations but the rise of a neo-liberal ideology in the late 1970s that was embodied in Reaganomics and Thatcherism in the global north and the Washington consensus and structural adjustment in the global south (see Walden Bello, "Afterthoughts: A Primer on the Wall Street Meltdown", Focus on the Global South, October 2008). There was a shortlived opportunity in 1974-75 to move to the United Nations ideal of a "new international economic order", but the industrialised states of the north Atlantic and west Pacific would have none of it and the opportunity was lost (see "The Financial Crisis and Sustainable Security", Oxford Research Group, September 2008).
The considerable financial and political shocks of September-October 2008 make it just possible to envisage a new start. Britain's prime minister Gordon Brown has called for a Bretton Woods-type summit that might launch the process of creating a better model of financial governance. This would certainly be welcome, but past experience suggests that there is little desire for any kind of fundamental reassessment of the structure of the globalised liberal market.
This is because the common understanding of the crisis relates very largely to faults in the working of the world's banking system, with the consequent belief that what is required is cooperative transnational regulation. There is little or no appreciation of the deep structural problems that go far beyond the buccaneering behaviour that took so many banks into the sub-prime risks.
The wider angle
The globalised liberal market of the 1970s-2000s may have produced worldwide economic growth, but the great majority of its benefits have been concentrated in the hands of barely 20% of the world's people. This trans-global elite which claims over 80% of total annual income includes most (but by no means all) people in north America, western Europe and Japan, as well as sizeable minorities in many countries including the wealthier developing ones such as India, China and Brazil. The wealth differential is even more extreme, with just 10% of the world's people possessing 85% of household wealth against half the people owning barely 1% (see James Davies, Susanna Sandstrom, Anthony Shorrocks & Edward N Wolff, "The World Distribution of Household Wealth", WIDER Angle, 2/2006 [World Institute for Development Economics Research, Helsinki]).
(Keep reading ...)
The world's financial convulsions are a rare opportunity to reform global governance in ways that address the systemic inequalities of the neo-liberal age.
By Paul Rogers
The extraordinary series of bank collapses and bailouts that have swirled round the world's financial markets in September-October 2008 continues to unfold. It is palpable that in relation to the global economy (as to global security), no one - bankers, traders, politicians, national governments or international agencies - is in control. But even at this stage of the crisis (whatever that stage proves to be), it is clear that the world's major economies are moving into recession.
This in turn poses two questions: how deep and persistent will the recession be; and what are the chances of a real reform of international financial institutions so that they begin to meet the needs of citizens in all parts of the world?
The parallel view
There are no direct historical parallels to provide an adequate route-map here. The 1929 crash and subsequent depression was in a world where the globalisation of financial markets was far less developed; while later crises (the late-1980s downturns, Russia's mid-1990s economic collapse, and the east Asian problems of 1997-98) were only national or regional in scope. The most appropriate comparison is with the ten-month period immediately following the Yom Kippur/Ramadan war of October 1973. This saw 450% oil-price increase, and was accompanied by a surge in the prices of other commodities and by a widespread food crisis (see "The world's food insecurity", 24 April 2008). The commodity bull-market of the time benefited speculators on the futures markets more than the producer countries of the majority world, but still affected the economies of the industrialised world.
What followed that crisis was not an egalitarian restructuring of world-trade relations but the rise of a neo-liberal ideology in the late 1970s that was embodied in Reaganomics and Thatcherism in the global north and the Washington consensus and structural adjustment in the global south (see Walden Bello, "Afterthoughts: A Primer on the Wall Street Meltdown", Focus on the Global South, October 2008). There was a shortlived opportunity in 1974-75 to move to the United Nations ideal of a "new international economic order", but the industrialised states of the north Atlantic and west Pacific would have none of it and the opportunity was lost (see "The Financial Crisis and Sustainable Security", Oxford Research Group, September 2008).
The considerable financial and political shocks of September-October 2008 make it just possible to envisage a new start. Britain's prime minister Gordon Brown has called for a Bretton Woods-type summit that might launch the process of creating a better model of financial governance. This would certainly be welcome, but past experience suggests that there is little desire for any kind of fundamental reassessment of the structure of the globalised liberal market.
This is because the common understanding of the crisis relates very largely to faults in the working of the world's banking system, with the consequent belief that what is required is cooperative transnational regulation. There is little or no appreciation of the deep structural problems that go far beyond the buccaneering behaviour that took so many banks into the sub-prime risks.
The wider angle
The globalised liberal market of the 1970s-2000s may have produced worldwide economic growth, but the great majority of its benefits have been concentrated in the hands of barely 20% of the world's people. This trans-global elite which claims over 80% of total annual income includes most (but by no means all) people in north America, western Europe and Japan, as well as sizeable minorities in many countries including the wealthier developing ones such as India, China and Brazil. The wealth differential is even more extreme, with just 10% of the world's people possessing 85% of household wealth against half the people owning barely 1% (see James Davies, Susanna Sandstrom, Anthony Shorrocks & Edward N Wolff, "The World Distribution of Household Wealth", WIDER Angle, 2/2006 [World Institute for Development Economics Research, Helsinki]).
(Keep reading ...)
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