Crisis: The stupidity of the western approach

Crisis: The stupidity of the western approach. 45992.jpegSo blind are the blinkered pupils of Milton Friedman, so stupidly obedient are the Thatcherites and the pith-brained followers of the market-economy approach that they are unable to see the idiocy of their policies in handling the global financial and economic crisis.

It is clear that taking money out of the economy is not an option. Europe and its mentor across the seas could learn a lesson from Latin America.

As Britain's Chancellor (Finance Minister) delivers his Autumn speech today, no doubt replete with self-justification and blaming everything on everyone else but himself as Britain is set to ask for a further 100 billion pounds in borrowing over and above what it had planned (what was that they were saying about Labour?), we take a look at the sheer idiocy of the policies adopted to handle the crisis not only in the UK but across Europe.

The bottom line is "we are all in this together and we all have to pay". Now just a minute there, who put us in "this, together"? Was it the working (wo)man who studied hard, got a job, saved to buy a house, worked hard and paid taxes and did everything that was asked? Or was it some po-faced simpleton with University degrees as long as your arm, apparently pulled from packets of soap, implementing laboratory policies from some office, protecting banks and bankers while leaving the person in the street to pick up the tab?

What have Governments done to protect the people they are supposed to be protecting? It is not the people's fault that economies have been mismanaged, for nobody ever asks the people to make a decision through a referendum and nobody ever bothers to explain the issues and choices open to them. It is not the fault of the private sector that the public sector has been irresponsible, become top-heavy and in many cases filled with people who appear to earn a lot for doing very little.

And now, precisely when the mismanagement bubble of previous years bursts before our very eyes, what happens? The price of utilities is sky-rocketing, the ratings agencies are allowed to directly interfere in our daily lives by dictating the price (interest rate coupon) at which a country sells bonds and borrows funds, public spending is being cut, salaries are being reduced, pensions are being lowered and benefits are being withdrawn. Precisely the social policies which could and should be implemented as a safety net are being taken away.

It is as if the trapeze artist is told to perform, with the tightrope raised to 300 feet, without a safety net while all the time he is being pelted with broken bottles and stones by a jeering crowd of suited officials standing on a raised platform. It is as if the man lying in the street dying of hunger is being treated by kicking the plate of bread crusts away from him, denying him access to water and thrashing him with chains.

It comes as no surprise at all that these types of policies are adopted by those faceless cliques who serve the lobbies who in turn have seized positions of power in most countries, on either side of the political divide, offering cynical choices for "change" which as we saw in Obama's case was a raspberry in the face of Humankind. Is there any difference between Democrat and Republican, between Labour and Tory, between Socialists and Social Democrats?

How can countries be expected to overcome the crisis when money is being taken out of the economy in increased taxation, when more money is being taken out of the economy by cutting public spending and when yet more money is being taken out of the economy by reducing salaries and benefits? And on top of that, how are countries to reach the heady growth rates needed to service their debt repayments when these are linked to staggeringly high interest repayments? Add to this the poisoned chalice that countries taking IMF medicine receive and that kills any hope of progress or growth for decades to come. Taking the IMF pill is like being force-fed an overdose of strychnine.

Are these people stupid, or what?

It does not take a rocket scientist to understand that the man dying of hunger in the street must be treated by providing him with food and water, it goes without saying that the trapeze artist has to work in safe conditions, in a work-easy environment which will allow him/her to perform to the best of his/her ability.

Forcing the economy to the limits pushes people over the edge, more days are taken off work, the number of people requesting psychological leave or treatment skyrockets, companies are forced to close, States have to make more payments in sickness pay and unemployment benefit; conversely, by curtailing these, the already elevated social cost rises, translated into cycles of crime and violence which also have a cost.

What is the alternative?

Contrary to what western governments are claiming all the time, that there is no alternative and there is no money, then suppose we treat the world economy as if it were a bank and the national economies as if they were bankers, and lo and behold, trillions will suddenly become available. When it is to save a bank, there is money and a lot of it, but when it comes to building a hospital or saving jobs, it vanishes.

The alternative was ably demonstrated by forward-seeing and socially progressive policies adopted in Latin America, which is no oasis on the world stage and which is as intrinsically tied into the global economy as anyone else. Yet in 2010, exactly through the adoption of social policies which put money into the economy, creating jobs, getting people back to work so as to contribute towards and not take from the economy, Latin America and the Caribbean region reached GDP growth rates of some six per cent (1) (2).

Unemployment fell in the region by 0.2% in 2010 and is set to register a higher decrease in 2011 (between 0.2 and 0.4%). Macroeconomic policies stimulating growth created jobs, and a lot of these jobs are related to the green economy. By strengthening and investing in factors which fostered greater social equality, Latin America created a growing middle class which in turn has made an increasing contribution to the economy. In the west, the divide between haves and have-nots is widening, and those without are increasing in number.

So if Latin America can create sustainable green economies which respect its population, which respect the environment and the planet, why can't the west? Do we conclude that the Governments in Latin America and the Caribbean knock streaks off the idiots running western governments? Probably. And if we accept the adage "where there is a will, there is a way" we can see that those who govern western countries could not care less about the people they are responsible for, being instead far more tied to pandering to the whims of the lobbies they represent.

And that, ladies and gentlemen, is what they call democracy.

(1)   Economic Commission for Latin America and the Caribbean (ECLAC)

(2)   International Labour Organisation (ILO)

Timothy Bancroft-Hinchey



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Author`s name Timothy Bancroft-Hinchey