Economic Recession may be bigger than the great depression.
There are 3 imbalances:
1. Finance and the Real Economy
2. Macro Balances between Economies
3. Ecological Imbalance
A. Finance
The extent of financialization affects the global markets and everyone’s real income. It is a counter party risk, in that the people that you lend money to may not be able to repay you the money and thus you sink deeper into a pit.
Eventually not only finance will have to be controlled but that banking will have to be nationalized. The banking system as it stands is unsustainable and to get back on the right track will have to be governed by a certain amount of social control. Nationalization of the banking system is not necessarily good, though it can be, but it might implement the socialization of losses, in where we tax the people and then eventually hand it back to them.
B. Macro Balances Between Economies
In America and Major Countries we have huge deficits. There is a limit in where you cannot spend your way out of trouble any longer. So we have to get the deficit to shrink. We cannot continue to play the same role as the engine of demand for the global system,.
There is talk about coordinated expansion, in where countries will unite in order to try and work out of the problems. This has to occur to a certain degree but it does not necessary solve the problems because of the 3rd imbalance.
C. Ecological Imbalance
The stimulus packages that we have seen are more the same. They are trying to create another bubble of fiscal expansion on the same patterns of demand and consumptions, which are false and unsustainable. You cannot revive an economy by trying to recreate something that is not going to work, more the same is not good.
The environment has a huge part to do with it. Its not just global warming or climate change its congestion, pollution, and degradation of resources. We must design our fiscal packages to be fundamentally different. A huge bailout for the automotive industry for example does not solve the problem but creates it all over again.
Conclusion:
As the economic recession progresses it is not entirely a bad thing. It does not mean that fascism will take over or the end of the world will come. What it does is provides us with an opportunity of genuine capitalistic change. Change has to be based on a greater imagination that has been shown so far by policy makers. Policy makers have to be pushed by the people to create a new economy that is more equal and provides greater access to operate in a more democratic way. It is easier to change the existing model when more people agree that it has to be fixed. Historically periods of crisis have been periods of opportunities in terms of politics, power balances between regions, and groups that have been oppressed and excluded by the system at bay.
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Notes taken from a lecture by: Jayati Ghosh
http://therealnews.com/t/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=3419&updaterx=2009-03-17+09%3A45%3A25
Filed under: Economics
