Writing about web page Economy, sovereign debt crisis, banking crisis
The world economy is at the precipice, in dire straits, at the verge of a meltdown or whatever the new buzzword used by commentator and the proletariats alike for the current state of the economy. Some might say this crisis highlights the failure of capitalism (to me this view is rather extreme), while others see it as the consequence of the greed of financiers (bankers chiefly), the failure of government to act both as a regulator and the guarantor of last resort.
I am not here to pontificate or proffer solution as many eminent minds have done that (not that I shouldn’t because my guess is equally as valid as theirs in light of how often they got it wrong), however I want to highlight the troika of problems that the global economy faces and how our philosophical view of growth and the economy needs to be re-examined in order to get out of this quagmire.
On the unset of the banking crisis caused as a result of sub-prime lending and complex financial instruments in 2008, the concern of world leaders was to patch things up and make sure that the economy did not collapse. At that time, it was the sensible thing to do, however, all that it did was to push the day of reckoning further down the line.
In 2008 it was only the banking crisis, today, it has metamorphous into a troika of problems namely:
1. Sovereign debt crisis
2. Low growth and unemployment crisis
3. Banking crisis
We were told in 2008 that the banking crisis could have resulted in the death of world finance as we know it, then imagine if these three crises today are allowed to spiral out of control what superlatives will be used to describe such an economic nightmare.
The philosophical argument is thus, we have been made to believe that economies must grow as we advance in technology and human innovation. This in an ideal and a closed system is feasible and the argument could be offset by lack of growth in Europe and the US with growth in the BRIC nations, Asian Tigers and other developing economies making the system in perfect equilibrium. This is however not the case, we are working less, personal responsibility is being abdicated, growth in the value of assets especially homes are over-inflated and other ills in the global economy yet we want to carry on as if things are all OK. In the name of maintaining the fallacy of continued economic growth, governments and individuals alike borrow to keep up the fallacy and the day of reckoning is finally dawning upon us.
On the European sovereign debt crisis, Greece should be made to default so that it can restructure its debts into something that it can manage. This should first be done by Greece getting out of the Euro monetary union and adopting back its old currency the Drachma. It should then default and restructure, pegging the currency to the Euro paving a route back to the currency when it has sort out its house. This will be in line with what Argentina did in during its sovereign debt crisis between 1999-2002. The parallels are not the same in the sense that Greece is in a monetary union as such cannot be compared to Argentina as some might opine, thus the idea that Greece should readopt back its currency which was a lot lower than the value of the Deutschmark, the eventual value of the Euro.
On low growth and unemployment, I will advice the young generation to look towards a future where the notion a job for life with entitlements upon retirement as an outdated model of a bygone era, rather we should look towards aligning with each other to form new and novel ventures that will make us self employed with the raft of new tools - mainly the internet - that are available at our disposal rather than waiting to be on someone’s payroll. The future of employment will be governed by the well-educated and supremely talented commanding wages and remunerations of significant proportions while rest must look up to fending for themselves or being on unemployment benefits.
On the banking crisis issue, the processes and mechanisms of modern banking needs to be fundamentally changed so that banks act as facilitators for growth in the real economy i.e. manufacturing, agriculture and other sectors rather than the engine of growth in which value is not created or added to as they are today.
The main distinguishing factor that made the human race superior to other beings is not only our intelligence but our ability to adapt to our environment be it physical, intellectual or emotional as such this crisis will one day be looked at by future generations as a blip on the economy but only if we wake up to the realities, change our world view and look for a sustainable solution through global collaboration and overhauling of the financial system rather than tweaking of processes as we are currently doing.