Economy – Page 3 – Mutual Responsibility

October 9, 2012October 9, 2012

International Monetary Fund Predicts Global Financial Crisis Will Take A Decade To Recover From

It is not yet a lost decade but it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape.”

– Olivier Blanchard, chief economist at the International Monetary Fund

The Daily Mail reports:

… with the eurozone crisis threatening to spiral out of control, the US approaching a debt storm, and the global economy slowing from China to Brazil, the outlook remains bleak.”

The Problem With Isolated Analysis

The unfortunate dilemma continually facing the global economy is a lack of unified integral analysis. For instance, the U.S. looks at the Eurozone and seeks to prepare itself for the worst, although not-much-thinking of providing aid. The Eurozone looks to the U.S.’s approaching fiscal cliff and thinks likewise—neither has proposed the need for mutual aid.

In an interconnected world, perhaps most represented in economic relationships, where markets are tied together, and therefore rise and fall in conjunction with one another; the idea of mutual responsibility is so fundamental that it is almost mind boggling that it has yet to be realistically proposed.

If markets remain connected, as they are now, and nations do not think of each other as parts of one global system, which is now in a growing crisis predicted to worsen, then how can it possibly be tackled by independent parties working towards different goals in an integral network?

The Family Analogy

The most simple interconnected group that exists is a family. In a family, we have a mother, father, possibly children, and extended family. The health of the family is predicated by the health of all of the units within it. If there is a baby in the family, it is given extra care. It isn’t asked a question like, “Why do you not go out and earn a living to support us?” It is naturally understood that a baby is a defenseless unit within the family, that it can not provide for itself, but being that it is part of the family, is provided for by the family.

The global economy is today like a dysfunctional family. Using the family baby analogy, we can perhaps look at Greece as a baby. Harsh austerity is imposed on it. Its public sector has been cut, those who have previously not paid taxes are now forced to do so. As a result, Greek depression and suicide have soared, poverty has risen, and the black-market economy has soared. The country is in no better shape now than previously, and the world sits and waits to see if worse conditions will present themselves.

But if the global economy were to act like a family, then it would look at Greece far differently. Obviously, it must grow up, to spend within its means, to not be a burden. But a baby is not asked to go and earn an income when it is unable to do so. The same analogy can be applied elsewhere as well, if it were allowed to, because the interconnection and interdependence of the global economy takes in many members who are strong, moderately strong, weak, and feeble.

In a family, all are equal.

The Need For Mutual Responsibility To Exit The Global Financial Crisis

Because the interconnection and interdependence of global markets does not subside, and because crisis between markets continues to escalate, the need for mutual responsibility presents itself.

When a family does not act for the mutual benefit of the family, all of its members suffer. If the baby in the family is not treated as a baby, but perhaps as the father of the family, then the baby suffers, and the rest of the family does also.

One key problem that exists within the global economy is that each is treated as if they must, “pull their own weight,” as if conditions are somehow equal existing within and between every nation. But they are not. As a result, the global economy continues to not act like a family due to its interconnection and the entire global economy suffers due to this continued calculation.

Mutual responsibility on the other hand, would necessitate each nation within the global economy to think of the needs of all the other members within the global economy. Greece then would not have to suffer such harsh and rapid austerity in order to bring it into line, but would be gently guided so as to not cause the incredible rise of depression and suicide which we see existing today. The U.S., likewise, would not be asked to face their upcoming fiscal cliff alone, and so on and so forth for each nation within the global economy.

But without mutual responsibility, the IMF’s prediction of perhaps a decade to recover from the global crisis is naïve at best. Global interconnection and interdependence is not ceasing, and mutual responsibility, sadly, is nowhere in sight on the current global landscape.

Image: ““I want all three of our hands together”” by emmiegrn on Flickr.

October 5, 2012

This Crisis Is Different

The observation that recoveries following a financial crisis are different suggests that standard macroeconomic policies might not work as one would usually expect…

On balance, it thus seems that this time – or, rather, this post-crisis environment – really is different, and that macroeconomic policies have done little to improve matters…”

— Daniel Gros, Director of Center for European Policy Studies, in the Project Syndicate article, “This Recovery Is Different.”

Today’s Crisis Renders Political Leaders & Financial Experts Helpless

Indeed political leaders, financial and economical experts seem desperately helpless in the face of the deepening crisis all over the world.

In Europe, for example, they switch from austerity to stimulus, and then back and forth. In the US, there is sharp debate about more market freedom or more State control, interest rates are lowered to even minus levels like in Denmark, but overall nothing seems to work.

All the debate and analysis is touching only the surface, the symptoms. It does not extend deeper trying to identify the core problem.

How Is It Possible That The Methods & Tools That Drove Progress Until Today Turn Out To Be Useless, Moreover Harmful?

Every day, the news increasingly exemplifies how the globally interconnected economy affects every country in the world, but when it comes to implementing solutions to global problems, no leaders or experts know how to do it.

A global, integral system means that all the elements are tightly intermingled with each other. When one part of the network moves, the whole network moves with it. All the elements are fully interdependent.

Today’s globally interdependent conditions are still being approached by methods and tools developed in the past, which were built for a world unlike today’s. In the past, tight global interconnectedness was not taken into account, and thus fragmented, protectionist, self calculating and many times exploitative measures proved to be successful. However, as the world today heads into a new integral era, those same methods and tools have become cancer-like, running down the whole system and making success look like a bleak objective.

Global Scale Problems Require Global Scale Solutions

For a solution that works, people around the world will need to first understand how the protectionist and self calculating attitudes that have been at the core of modern upbringing and education, which seemed to offer success in the past, lead only to increasing problems.

Secondly, people will need to learn about what living in today’s new globally interdependent conditions means for each and every person, and become motivated to rise above the previous thinking that considers only the success of individual people, organizations and nations, to a thinking that considers a truly global scale success.

With a full understanding about today’s globally interconnected conditions – how these conditions came about, what are today’s problems, what is their source, how should these conditions be optimally related to in order to reach globally interconnected solutions – it could become clear to each and every human being that the health, prosperity and future of every individual directly depends on the health, prosperity and future of the total, unified network.

Image: “humanity street – Voxefx” by Vox Efx.

September 28, 2012

Downward Spiral In An Interdependent World

The Slowing Down Of The Chinese Economy Continues

A recent article in the Financial Times, “Downturn in China spreads to key sectors,” outlines how the slowdown in China spreads into the key sectors of economy previously thought to be solid.

…China’s downturn is spreading to the sectors and companies that were expected to withstand the slowdown and drive growth in the region.

Financial Times analysis shows that a third of publicly listed Chinese companies suffered cash outflows in the quarter to the end of June as the combined effect of the slowdown in exports, a build-up in stocks and tightening local government finances begins to bite.

Cash balances at a tenth of 1,700 companies analysed by the FT using data from S&P Capital IQ have turned negative in the past two quarters.

For a further 6 per cent of companies that normally report an outflow, the outflows were worse than last year.

The results highlight that even the companies that are expected to help rebalance China away from an investment-driven economy – such as consumer and retail businesses, healthcare, pharmaceuticals and electronics companies – are being affected by the slowdown, along with construction, real estate, industrial machinery and chemicals…”

The Chinese Downturn Is Part Of The Global Process Due To The Interdependent, Integral System

For a long time many observers, and also leaders of the global economy, financial institutions and politicians look at China as a potential savior of the global economy with its unstoppable growth. But this belief did not take into calculation the interdependent state nations evolved into in today’s human network.

Individuals and nations alike are tied together into a single, integral system, depending on each other even for their necessities.

Or as leading economists and politicians have stated, “we are all in the same boat,” thus no individual or nation could pull away from the others, or pull the others behind them relentlessly without being affected by the crisis.

There is plenty of proof of this interdependence, one is how Australia’s mining boom suddenly halted as a result of the Chinese slowdown:

…Australia’s resources minister has said that the country’s resources boom, one of the biggest drivers of its economic growth, is “over.” His comments come after BHP Billiton posted a 35% dip in profits and delayed plans to expand its Olympic Dam mine. There are concerns that a slowing global economy may hurt demand for coal, metal ores and other commodities. A slowdown in its mining sector, one of the biggest employers, is likely to dent Australia’s economic growth. ‘You’ve got to understand, the resources boom is over,’ Martin Ferguson told ABC radio on Thursday…”

On the other hand China will continue to slow down as long as the consumer demand is weakening from Europe and the US, and all these changes are augmenting each other in an ever growing vicious cycle.

Any Solution Needs To Take Into Consideration The Global, Interdependent Nature Of The Human Network

The global economy has no chance for any revival as long as the individual nations continue with their fragmented, polarized worldview of ruthless competition. Humanity has reached the stage when only a coordinated, mutually responsible and considerate planning and action can provide any short or long term results.

Through learning about the nature and principles of the present interdependent human system based on factual, scientific information, politicians and people capable of changing public opinion could provide the positive motivation all over the globe for the transition from a self calculating mindset to an approach that considers the well being of the whole a priority above individualistic and nationalistic interests.

Image: “A Downward Spiral” by Peter Lee on Flickr.

September 22, 2012September 19, 2012

Redefining Prosperity

Prosperity – at least in economic terms – has always been defined within the remit of very narrow boundaries.> Typically it has always meant growth, a six letter word that obsesses politicians and economists. But when attempts to create growth prove counter-productive then it’s time for a rethink. The ultimate aim of growth is prosperity, yet – for the vast majority at least – it remains an elusive dream. The question that needs to be asked is: What is prosperity? And if our previous attempts to attain it have proved unsuccessful then how can it be achieved?

The following excerpts are from the book Prosperity Without Growth: Economics for a finite planet, by Tim Jackson. The excerpts are quotes from Zia Sardar, a London-based scholar, writer and cultural-critic who specialises in Muslim thought, the future of Islam, futures studies and science and cultural relations.

Prosperity Depends On The Society You’re In & Your Responsibility To It

The good life of the good person can only be fully realised in the good society. Prosperity can only be conceived as a condition that includes obligations and responsibilities to others.”

The prevailing vision of prosperity as a continually expanding economic paradise has come unravelled. Perhaps it worked better when economies were smaller and the world was less populated. But if it ever was fully fit for the purpose, it certainly isn’t now. Climate change, ecological degradation and the spectre of resource scarcity compound the problems of failing financial markets and economic recession. Short term fixes to prop up a bankrupt system aren’t good enough. Something more is needed. An essential starting point is to set out a coherent notion of prosperity that doesn’t rely on default assumptions about consumption growth.”

It is perverse to talk about things going well if you lack the basic material resources required to sustain yourself: food and water to be adequately nourished or materials for clothing and shelter. Security in achieving these aims is also important. But from at least the time of Aristotle, it has been clear that something more than material security is needed for human beings to flourish. Prosperity has vital social and psychological dimensions. To do well is in part about your ability to give and receive love, to enjoy the respect of your peers, to contribute useful work and to have a sense of belonging and trust in the community. In short, an important component of prosperity is the ability to participate freely in the life of society.”

Prosperity can only be conceived as a condition that includes obligations and responsibilities to others.”

Image: Responsibility by Marco Buonvino

September 20, 2012September 19, 2012

Global Youth Unemployment On The Rise

The current, unprecedented level of global youth unemployment has raised the risk of creating ‘a lost generation’… [Y]oung people account for 40 percent or more of all unemployed people in Jordan, Lebanon, Morocco, and Tunisia, and nearly 60 percent in Syria and Egypt.”

Nemat Shafik, deputy managing director of the International Monetary Fund.

The world is facing a worsening youth employment crisis: young people are three times more likely to be unemployed than adults…”

The International Labour Organization

The United Nations estimates that last year 74.8 million youth between the ages of 15 to 24 faced joblessness, with 6.4 million young people dropping out of the labor market in 2011 alone. The highest youth unemployment rates are in North Africa (27.1%) and the Middle East (26.2%)…

In the ostensibly prosperous Euro-area countries, over one-in-five young people (21.3%) cannot find a job. When this regionally-averaged figure is broken down to remove countries like Germany, the results are stark: In Spain and Greece, nearly half of all youth are without a job (48.7% and 47.2% …”

The Consequences Of Youth Unemployment

Lower life expectancy: Unemployment more generally has been linked to lower life expectancy, a higher incidence of heart attacks later in life, and even higher rates of suicide.

Higher crime rates: Increased unemployment has been linked to higher crime rates.

Increased costs to the economy: Youth unemployment results in higher unemployment insurance and other benefit payments, lost income tax revenues, and wasted productive capacity.

Lower lifetime earnings: Youth unemployment leaves a “wage scar” in the form of lower earnings that can last into middle age. The longer the period of unemployment, the bigger the effect.”

Nemat Shafik

The following video gives a brief overview of the youth unemployment crisis:

Is More Economic Growth The Answer?

Albert Einstein once said,

Problems cannot be solved by the same level of thinking that created them.”

Unfortunately, the current trend of solutions being proposed to tackle continued youth unemployment, and unemployment in general, has tended to steer towards further economic growth as the answer to the problem.

What do you think?

Is further economic growth the answer? Or is it from the level of thinking which has helped to create the global youth unemployment crisis?

Image: chitral photos 91, 95, 98, 102, 99 by groundreporter.

September 19, 2012September 19, 2012

World Economic Collapse Explained In 3 Minutes

A classic, funny skit showing how economically interdependent nations have become, and what a horrific cascade of events happens when everyone tries to make a profit off of one another.

…the banking system must continually expand – not necessarily because it is the right (or wrong) thing to do, but, rather, simply because that is how it was designed …the extremely wealthy are saving incredible amounts of money, while at the lower ends the savings rate is deeply negative. Why is this important? Because as the Greek philosopher Plutarch once stated, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”

– Dr. Chris Martensen, taken from his Crash Course In The 3 Interconnected E’s: Economy, Energy, Environment

September 16, 2012September 16, 2012

Are Politicians Kicking The Can On Hard Economic Decisions, Or Are They Out Of Options?

Nouriel Roubini, professor at the NYU’s Stern School of Business, and Chairman of Roubini Global Economics, in the Project Syndicate article “Fiddling at the Fire,” describes the precarious, and volatile state the economic and geopolitical world state is in, and challenges today’s leadership in the wake of the deepening global crisis, accusing them of “kicking the can,” avoiding hard decisions and action:

Politicians Kick The Can On Hard Economic Decisions When Approaching A Brick Wall In The Economy

Ineffective governments with weak leadership are at the root of the problem. In democracies, repeated elections lead to short-term policy choices. In autocracies like China and Russia, leaders resist the radical reforms that would reduce the power of entrenched lobbies and interests, thereby fueling social unrest as resentment against corruption and rent-seeking boils over into protest.

But, as everyone kicks the can down the road, the can is getting heavier and, in the major emerging markets and advanced economies alike, is approaching a brick wall. Policymakers can either crash into that wall, or they can show the leadership and vision needed to dismantle it safely…”

Is The Reason For Politicians Kicking The Can On Hard Economic Decisions Weak Leadership Or Something Else?

Indeed, politicians have their own calculations, they think about their personal legacies, the next elections, what the party line is, what the powerful lobby groups, sponsors want, but in general they are not “evil people” intentionally wanting to destroy the world or their own countries.

The Reason For Politicians Kicking The Can On Hard Economic Decisions Is Incomplete Knowledge About The World’s Current Situation

The politicians seem weak, they “kick the can” because simply they have no idea what to do with the crisis, or if they start to see the possible actions they do not dare to make them as they fundamentally differ from previous ones, they might seem like political suicide.

They are actually in a truly desperate state, since from their position they certainly see the direction the world goes, and most probably they are much more aware of the potential catastrophic events waiting for us if we do not change course than most others can imagine.

And still, they are helpless to change course.

The Problem Is That The World Has Shifted While The Approach To It Hasn’t

This is because a fundamental shift happened within the conditions we exist in, and the whole upbringing, attitude, the methods and the tool set of the present leadership have become obsolete, moreover destructive.

Everything they know, even the Nobel prizes given to eminent economists, the whole financial structure, political ideology they have always been using is based on a linear, polarized, fragmented world.

In that system there are friends, enemies, there are open markets and free, mostly ruthless competition, the stronger survives, and rules, and so on.

What Are The New Conditions In Today’s World? How Should It Change The Approach Toward A Solution?

All this thinking has become irrelevant. It’s as if one day humanity suddenly woke up on a different planet.

Today’s social and environmental conditions have become round, global and integral, which means all the people, individuals and nations are all totally interconnected as cells of the same body, or cogwheels of the same machine, and there is nothing that can be done about it. It happened as part of the evolutionary process, the interconnected parts cannot be separated.

As an example it is similar to highly individualistic sport stars, shining alone, receiving all the accolades, rewards, fame for themselves, suddenly being drafted and ordered to play in an All Star team, losing their individual recognition, simply playing for the team, in order to achieve a common goal. Or as an even more extreme example like cancer cell cultures, living purely to multiply and consume their environment suddenly merged together in order to build a healthy, living, balanced organism, where each needs to serve the whole.

Thus humanity urgently needs totally new concepts and ideology in politics, economics, and finances, the whole human system needs to be rearranged not along the lines of previously knows “isms,” leftist, rightist agendas, separatist, fragmented, polarized worldviews, but based on a full research and understanding of this new global interdependent system, where individual people and nations truly constitute cells, or cogwheels of the same united organism that has to find its way and future in a mutually responsible and considerate way.

Image: “Kick’n the can” by Anthony on Flickr.

September 15, 2012

A Mutual Approach: Economists And Politicians On The Need For Global Cooperation To Treat The Global Financial Crisis

We’ve got these big problems that require people to take a longer-term view than just their own selfish individual or national interest… We must now reform the international financial system around the agreed principles of transparency, integrity, responsibility, good housekeeping and cooperation across borders.”

– Gordon Brown, Former Prime Minister of the United Kingdom, in an interview with Piers Morgan on CNN.

Self Interest Gets In The Way Of Cooperation

At the London G20 summit on 2 April 2009, world leaders committed themselves to a $5tn (£3tn) fiscal expansion, an extra $1.1tn of resources to help the International Monetary Fund and other global institutions boost jobs and growth, and to reform of the banks. From this point, when the global economy was on the turn, international cooperation started to disintegrate as individual countries pursued their own agendas.”

– Larry Brown, The Guardian economics editor, in the article “Global Financial Crisis: Five Key Stages 2007-2011”

The Call For Mutual Cooperation, If Limited, Has Not Dwindled

We face the most difficult economic conditions in generations. The international community must unite to tackle the downturn and set the path toward a sustainable future… Only by working together can we meet the challenge.”

– Alistair Darling, Scottish Labour Party politician, in the article “International Cooperation Is the Way Out of the Financial Crisis”

A… new model is needed to acknowledge that we live together in a multicultural, multi-ethnic and multi-religious world. Prevailing values will have to increasingly accommodate diversity with substantial challenges for national and individual identities. We will only make lasting progress by recognizing that we are different but interdependent. Thus, we have to cultivate a much greater feeling of regional and global togetherness.”

– Professor Klaus Schwab, World Economic Forum founder and chairman, in the article “The Great Transformation – Shaping New Models”

It’s not a crisis that will be resolved by one group of countries taking action. It’s going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”

– Christine Lagarde, International Monetary Fund Chief, in a U.S. State Department conference.

September 15, 2012September 16, 2012

How To Redefine Prosperity To Get Through The Crisis Unscathed

“The credit and debt system … is a story about us, people, being persuaded to spend money we don’t have on things we don’t need to create impressions that won’t last on people we don’t care about.”

Tim Jackson, Professor of Sustainable Development at the University of Surrey and Director of the ESRC Research Group on Lifestyles, Values and Environment (RESOLVE), Economics Commissioner on the UK Sustainable Development Commission, and author of Prosperity Without Growth: Economics for a Finite Planet, in his TED talk Economic Reality Check explains the paradox of living in crisis times, the paradox between people’s needs to “save, save, save” and the continuation of an socio-economic influence to “spend, spend, spend,” and suggests a solution of redefining prosperity: for meaningful, altruistic values to spread throughout society in order to achieve a “we” vision of prosperity.

Graph: The dramatic rise in personal debt and the plummeting of personal savings in the U.K. the last 15 years before the 2008 financial crash [taken from the TED talk]

The Crisis’ Paradox – The Need To Save & The Social Influence To Spend

“In the crisis, in the recession, what do people want to do? … They want to spend less and save more.
But saving is exactly the wrong thing to do from the system point of view … saving slows down recovery. And politicians call on us continually to draw down more debt, to draw down our own savings even further, just so that we can get the show back on the road, so we can keep this growth-based economy going. It’s an anomaly, it’s a place where the system actually is at odds with who we are as people.”

The Crisis’ Solution – To Build Social Influence Of Meaningful, Altruistic Values That Allows People The Freedom To Become Fully Human

“It is about opening up. It is about allowing ourselves the freedom to become fully human, recognizing the depth and the breadth of the human psyche and building institutions to protect [the] fragile altruist within.

[It’s about] … redefining a meaningful sense of prosperity in the richer nations, a prosperity that is more meaningful and less materialistic than the growth-based model.

This is not just a Western post-materialist fantasy. In fact, an African philosopher wrote to me, when Prosperity Without Growth was published, pointing out the similarities between this view of prosperity and the traditional African concept of ubuntu. Ubuntu says, “I am because we are.” Prosperity is a shared endeavor. Its roots are long and deep – its foundations, I’ve tried to show, exist already, inside each of us.

This is not about standing in the way of development. It’s not about overthrowing capitalism. It’s not about trying to change human nature. What we’re doing here is we’re taking a few simple steps towards an economics fit for purpose. And at the heart of that economics, we’re placing a more credible, more robust, and more realistic vision of what it means to be human.”

Watch Tim Jackson’s ‘Economic Reality Check’ TED Talk

September 15, 2012September 27, 2012

Battle Of The Century: Our Addiction To Economic Growth Vs. Our Finite Planet

Crisis = The Clashing Point Between An Economy Of Infinite Growth And The Limits Of Finite Resources

Economic growth is effectively over.

There are practical limits to debt, and we’re hitting them. There are practical limits to energy sources, and we’re hitting them. There are real limits to the planet’s ability to absorb our wastes and industrial accidents, and we’ve hit those too.

We’re being told that the economy is recovering. But take away new debt the government has taken on since 2008 to stimulate the economy, and there’s been no real economic growth. There is no recovery. It’s all been done with more debt. We’ve already mortgaged our grandchildren’s future, but to keep the economy from relapsing, we’ll need to borrow even more. The game is up. We’ve reached the end of economic growth as we’ve known it.”

Unlike Many Think, There Is No ‘They’ To Blame For This Crisis: Everybody’s Addicted To Economic Growth

We all got hooked on growth. Rising GDP numbers became our main measure of success. ‘More, bigger and faster’ meant ‘better.’

We’re all addicted to growth. We all want better jobs and higher returns on investments. But we live on a finite planet.

The end of growth is not the fault of any one politician or a political party, but some people benefited from growth more than others.”

To Live Without Economic Growth, We’ll Have To Start Doing A Few Things Differently

We can live without economic growth, but we’ll have to start doing a few things differently:

We have to measure and aim for improvements in life that don’t require increasing our consumption of fossil fuels and other depleting resources, or piling on more debt.

Freedom, being with the people we love, good health and the time to enjoy it, a secure happy community.”

Video: Who Killed Economic Growth?

All the quotes in this post are by Richard Heinberg, senior fellow of the Post Carbon Institute who has written extensively on energy, economic, and ecological issues, including oil depletion, taken from this video made by the Post Carbon Institute, Who Killed Economic Growth?