FacebookTwitterGoogle+RedditEmail

The Looming Financial Crisis

As the prospect of global financial crisis beckons once again, will our elected leaders finally accept the need for an entirely new economic approach that breaks away from the primacy of growth and profit – or will their hand be forced by a resurgence of mass public protest?

A full six years after the global financial crisis, not only have governments failed to rethink the way we organise our economic systems, but politicians across the world have pressed forward with an obsolete political agenda that has paved the way for yet more financial chaos. The failure of our elected representatives to adopt a just and sustainable alternative to neoliberal capitalism has also set the scene for years of increased hardship and popular unrest that will inevitably follow any future economic crash.

The very real prospect of a repeat of the 2008 meltdown is now widely accepted in the mainstream media, and the many possible factors that could trigger it are readily discussed in policy circles. As the International Monetary Fund makes plain in its latest World Economic Outlook report, for example, the risk of a worldwide recession is of particular concern – especially as the Holy Grail of achieving respectable levels of economic growth is becoming ever more elusive.

Of particular concern is the Eurozone where five countries, including Spain and Italy, are already experiencing economic deflation. All eyes are currently on Germany, which is teetering on the brink of recession as its economic activity continues to contract over consecutive months. The implications for the Eurozone as a whole if Germany enters a contractionary cycle will be far-reaching, since Germany is widely regarded as the main engine for growth in Europe and often props-up neighbouring states when they experience financial hardship. The overarching concern is that this entire currency block could soon succumb to a deflationary spiral, which would plunge it back into a full blown Euro crisis.

The expansion of the shadow banking industry, especially in Europe, has also been flagged by senior officials within the banking industry and the IMF as a threat to global financial stability. This shrouded sector of finance is far less regulated than mainstream banking, partly because they make use of tax havens and complex speculative instruments. Assets managed by investment funds operating within this sector, which include hedge funds, have risen by 30% in the past two years alone.

Global debt and other tipping points

Mounting levels of debt, largely fuelled by historically low interest rates that encourage excessive borrowing, are another potential cause of future crisis. According to the latest Geneva Report, global debt has reached a staggering $158.8 trillion, which sets a new debt-to-GDP record. China has been the real engine driving this indebtedness – their external debt has risen by 50% in the last year alone, making them particularly vulnerable to financial crisis at a time when their economic growth rate is also stagnating.

The impact of debt will, of course, be most keenly felt in developing countries. According to the Jubilee Debt Campaign, reckless lending to a set of 43 developing countries has surged by 60% since 2009 – raising the prospect of a new debt crisis in the developing world. Undoubtedly, this will leave many governments with crippling debt repayments over the next decade, which will further thwart government efforts to reduce poverty and provide essential public services.

As James Medway of the New Economic Foundation explains, the real problem arises when high levels of debt (as are currently evident across the globe) combine with low rates of growth, which will almost certainly decline further in the period ahead. If there is not enough economic growth to repay these debts with interest, then the entire system will inevitably come to a grinding halt.

On top of this already lethal cocktail of stagnant growth, excessive debt and burgeoning speculative activity, we can also add the recent drop in oil prices, which will have dramatic implications for oil exporting countries. Venezuela, Iran and Russia, for example, are all heavily dependent on their income from this commodity to finance government spending or maintain the strength of their currency. And these economic concerns do not even take into account the financial impact of Ebola, the economic consequences of ISIS in Iraq and Syria, or the cost of climate change if we fail to reverse our current trajectory of inaction.

From any angle, the world financial outlook can only be regarded as rapidly deteriorating, and this starkly reflects how little policymakers have done to address the root causes of the 2008 crisis. Instead of dramatically overhauling the global economy and safeguarding the needs of the majority, governments have chosen to resuscitate a discredited economic ideology that preaches more of the same deregulatory, consumption-driven, austerity-backed neoliberalism. As the social and environmental impacts of the ongoing economic crisis become ever more apparent, how long will concerned citizens be willing to tolerate a political elite that is largely self-serving and neglects the needs of ordinary people?

The road towards system change

Despite the palpable frustration being expressed everywhere since the current cycle of public protest began, our leaders have failed to listen to the voice of the people, preferring instead to continue pandering to the same corporate interests they are so closely allied with. Consequently, the top 1% of the world’s population are richer now than they were before the financial crisis and this tiny minority own almost half of all available wealth. Meanwhile, half the world’s population now share a mere 1% of the world’s combined wealth, a staggering 2 billion people remain undernourished, and global income inequality has returned to 1820 levels.

There can be little doubt that we are entering a prolonged period of economic hardship, which will be accompanied by a steady escalation in public protest as large swathes of ordinary people join activists and civil society organisations in calling for social justice, environmental stewardship and true democracy. As is happening right now in Hong Kong and London’s Parliament Square, it will be in iconic public spaces that these citizens will make their demands and thereby gain mainstream media attention and support from within the wider populace.

If governments across the world intend to avoid the inevitability of economic upheaval, social unrest and public protest, they need to finally accept that the existing economic model is wholly responsible for the current crisis. At the very least, any solution will require a decisive break away from the myopic pursuit of economic growth, the maximisation of corporate profit, and the relentless promotion of consumerist values. As campaigners have long been demanding in response to the convergence of crises we face, we urgently need a new economic paradigm – one in which wealth, power and resources are shared more equitably and sustainably within nations and internationally.

Will politicians make these changes willingly and in accordance with the many sane alternatives that are widely discussed among progressives? A transformative shift in public policy is certainly not on the cards any time soon. But with prolonged financial crises on the horizon and public protest intensifying across the globe, it will remain impossible for governments to ignore the voice of the people indefinitely.

Rajesh Makwana is the director of Share The World’s Resources. He can be contacted at rajesh(at)stwr.org.

More articles by:

Rajesh Makwana is an activist and writer at www.sharing.org (STWR), a London-based civil society organisation campaigning for a fairer sharing of wealth, power and resources within and between nations. He can be contacted at rajesh@sharing.org

September 24, 2018
Jonathan Cook
Hiding in Plain Sight: Why We Cannot See the System Destroying Us
Gary Leupp
All the Good News (Ignored by the Trump-Obsessed Media)
Robert Fisk
I Don’t See How a Palestinian State Can Ever Happen
Barry Brown
Pot as Political Speech
Lara Merling
Puerto Rico’s Colonial Legacy and Its Continuing Economic Troubles
Patrick Cockburn
Iraq’s Prime Ministers Come and Go, But the Stalemate Remains
William Blum
The New Iraq WMD: Russian Interference in US Elections
Julian Vigo
The UK’s Snoopers’ Charter Has Been Dealt a Serious Blow
Joseph Matten
Why Did Global Economic Performance Deteriorate in the 1970s?
Zhivko Illeieff
The Millennial Label: Distinguishing Facts from Fiction
Thomas Hon Wing Polin – Gerry Brown
Xinjiang : The New Great Game
Binoy Kampmark
Casting Kavanaugh: The Trump Supreme Court Drama
Max Wilbert
Blue Angels: the Naked Face of Empire
Weekend Edition
September 21, 2018
Friday - Sunday
Alexandra Isfahani-Hammond
Hurricane Florence and 9.7 Million Pigs
Andrew Levine
Israel’s Anti-Semitism Smear Campaign
Paul Street
Laquan McDonald is Being Tried for His Own Racist Murder
Brad Evans
What Does It Mean to Celebrate International Peace Day?
Nick Pemberton
With or Without Kavanaugh, The United States Is Anti-Choice
Jim Kavanagh
“Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program)
Jonathan Cook
Palestine: The Testbed for Trump’s Plan to Tear up the Rules-Based International Order
Jeffrey St. Clair
Roaming Charges: the Chickenhawks Have Finally Come Back Home to Roost!
David Rosen
As the Capitalist World Turns: From Empire to Imperialism to Globalization?
Jonah Raskin
Green Capitalism Rears Its Head at Global Climate Action Summit
James Munson
On Climate, the Centrists are the Deplorables
Robert Hunziker
Is Paris 2015 Already Underwater?
Arshad Khan
Will Their Ever be Justice for Rohingya Muslims?
Jill Richardson
Why Women Don’t Report Sexual Assault
Dave Clennon
A Victory for Historical Accuracy and the Peace Movement: Not One Emmy for Ken Burns and “The Vietnam War”
W. T. Whitney
US Harasses Cuba Amid Mysterious Circumstances
Nathan Kalman-Lamb
Things That Make Sports Fans Uncomfortable
George Capaccio
Iran: “Snapping Back” Sanctions and the Threat of War
Kenneth Surin
Brexit is Coming, But Which Will It Be?
Louis Proyect
Moore’s “Fahrenheit 11/9”: Entertaining Film, Crappy Politics
Ramzy Baroud
Why Israel Demolishes: Khan Al-Ahmar as Representation of Greater Genocide
Ben Dangl
The Zapatistas’ Dignified Rage: Revolutionary Theories and Anticapitalist Dreams of Subcommandante Marcos
Ron Jacobs
Faith, Madness, or Death
Bill Glahn
Crime Comes Knocking
Terry Heaton
Pat Robertson’s Hurricane “Miracle”
Dave Lindorff
In Montgomery County PA, It’s Often a Jury of White People
Louis Yako
From Citizens to Customers: the Corporate Customer Service Culture in America 
William Boardman
The Shame of Dianne Feinstein, the Courage of Christine Blasey Ford 
Ernie Niemi
Logging and Climate Change: Oregon is Appalachia and Timber is Our Coal
Jessicah Pierre
Nike Says “Believe in Something,” But Can It Sacrifice Something, Too?
Paul Fitzgerald - Elizabeth Gould
Weaponized Dreams? The Curious Case of Robert Moss
Olivia Alperstein
An Environmental 9/11: the EPA’s Gutting of Methane Regulations
FacebookTwitterGoogle+RedditEmail