WHY THE GLOBAL ECONOMIC CRISIS IS NOT GOING AWAY

WHY THE GLOBAL ECONOMIC CRISIS IS NOT GOING AWAY

Lee Cahill

May 2012

WHY THE GLOBAL ECONOMIC CRISIS IS NOT GOING AWAY

As the Eurozone crisis deepens and budget deficits sink perilously below the limits set by the Maastricht Treaty, economists, politicians and citizens alike are beginning to ask why the global economic crisis is not going away. Some commentators are venturing to say this is because the capitalist system is irrevocably broken, and it is a debate that is gaining traction.

Although governments around the world have poured trillions of dollars into trying to stem the global economic crisis, there is little sign of it abating. The so-called PIGS (Portugal, Italy, Greece and Spain) continue to teeter on the brink of collapse, and the US national debt is now at a staggering $15.5 trillion, more than the entire countrys GDP (World Bank, 2012). In light of this, debate on the crisis has deepened to focus on more than bailouts and the double-dip recession. The question now being asked is whether capitalism itself has failed. This seems a startling question to be asking of an economic system that has been both ascendant and ubiquitous since the end of the Cold War but, as Citi SA economist, JeanFrancois Mercier pointed out in Financial Mail SA (2011, December 23), Karl Marx predicted that capitalism would eventually sow the seeds of its own destruction, unable to reconcile the contradictions in its own structure. The world is, however, a very different place to what it was in 1848 when Marx made that prediction, and fallout from the collapse of the entire global economic system would be so great that, truism as this may be, it cannot be allowed to fail. What seems clear is that capitalism as we know it must change - and the change has to be fundamental. This realization comes barely more than 20 years after Francis Fukuyama postulated that Western liberal democracy would be the final form of government, and that the world was possibly witnessing the end point of mans ideological evolution (Fukuyama, 1989).

WHY THE GLOBAL ECONOMIC CRISIS IS NOT GOING AWAY Events since the demise of Lehman Brothers in 2008 and the Arab Spring in 2011 have, of course, struck down this hypothesis, and the stability of the entire global economic system is now in question. Speaking on BBC News, Managing Director of the International Monetary Fund (IMF), Christine Lagarde, acknowledged that a light global economic recovery is being threatened by dark clouds on the horizon (2012, April 19). Despite this, the approach adopted by both central banks and the Bretton Woods institutions continues to be formulated within the orthodox capitalist framework. Much-

criticized structural adjustment programs (SAPs), which often require dramatic reform of the borrowing countrys economic policy, remain the cornerstone of their response to the crisis. Similarly, growth continues to be the Holy Grail, and complex new jargon such as quantitative easing disguises the fact that central banks are effectively printing money in a scramble to keep national economies afloat. Critics of fixes such as these, including NGOs and grassroots organizations, want radical change. Global economic justice networks in the US, the UK and the Global South are calling for profound transformation of the World Bank and the IMF, and the Occupy movement wants a complete overhaul of the global financial system. New Internationalist magazine points out that, as countries like Greece buckle under fiscal austerity measures, not a single senior executive in the US banking industry has faced jail time for fuelling one of the largest financial crises in history (2011, November 1). The battle lines, it seems, have been drawn, and the war is only beginning. How it will play out is anyones guess. One thing is sure, though. A new global economic order is in the making.

WHY THE GLOBAL ECONOMIC CRISIS IS NOT GOING AWAY References: 1. World Bank (2012). Current GDP data in US Dollars. Retrieved from: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD

2. Mercier, J. (2011, December 23). Dont break it - fix it. Financial Mail (South Africa) 24 3. Fukuyama, F. (1989). Have we reached the end of history? The RAND Corporation. Based on a lecture presented at the University of Chicago's John M. Olin Center for Inquiry Into the Theory and Practice of Democracy (1989, February). 4. Lagarde, C. (2012, April 19). Eurozone 'epicentre' of potential risk, says Lagarde. BBC News Business. Retrieved from: http://www.bbc.co.uk/news/business-17772284 5. Engler, M. (2012, November 1). Lets end corruption - starting with Wall Street. New Internationalist, Issue 447. Retrieved from: http://www.newint.org/features/2011/11/01/wall-street-corruptionprotests/?utm_medium=ni-email&utm_source=message&utm_campaign=intl-enews2011-10-04