We never had it so good: “Financial Woes are not as bad as it gets”

“The important thing is not to stop questioning.” Albert Einstein

Max Hastings writes in the Guardian Weekly about the psychological impact of the financial crisis and recommends ” a little knowledge of history” to remedy the situation because “today`s  woes” pale in comparison with the “threats to health, diet or physical safety” that confronted earlier generations “over the past millenium”.

He begins his analysis by reminding us that “mankind almost always gets threat assessment wrong” and following his thoughts further one has to congratulate him for proving the point.

He then recommends reading Pepy´s diary for “anyone silly enough to suppose our own times extravagantly dangerous“.  At first glance this assessment seems right because the risk of epidemics (at least those based on poverty, lack of hygiene and lack of scientific knowledge about germs) or devastating fires (because fast arriving fire-brigades and other life-saving infrastructure was unavailable) is very low today compared to earlier centuries.

But this only applies to  affluent societies where some sort of social justice (income distribution) and has been achieved. For the poor and “developing” (adopting the unsustainable capitalistic system that we have forced on them) countries times have not changed so much and if we look at the Human Development Reports of the UN there is no reason to celebrate. Millions of people still live in abject poverty, with no sanitation, no potable water, no access to decent healthcare or education, no social safety net. For many of them, times may not be so different from 17 th, 18 th or 19 th century Europe. Here children no longer have to work 12 hours in cotton mills,  their rights have been acknowledged,  but as we all know, in many parts of Asia child labour is a “normal” part of the economy as are adult sweatshops where people are practically working as slaves. We know all that but prefer to forget about it when buying our trainers, clothes and Christmas decorations….

Hastings goes on to say that “crises of peace, precipitated by disease, natural disaster or financial collapse are often harder to bear than those of war” because people feel they are impotent to influence the situation.

This sounds not unreasonable but I would object to putting disease, natural disaster and financial collapse into one category (or appearing to do so by listing them together). The alleged financial collapse is 100% man-made, a longer systemic process, no sudden calamity and not the result of adverse fate.

While it is true, that “the illusion of useful activity” can help to live through a crisis we are seeing now that this principle – when applied to the perpetrators and accessories of the “crime” – (politicians, finance “analysts”, economists, gullible journalists) does not reduce the anxiety. And how could it?

First “Frankensteinian” Treasury Secretary Henry Paulson tells the US Congress to give him feudal discretion over almost a trillion USD (of debt passed off as real money)  because otherwise the sky would fall on us. Then President Bush steps in to “convince” his own party dissidents that “ordinary Americans” and the rest of the world would suffer terribly if this “bailout” pardon “rescue”-package is not passed in the quickest of time.

The same journalists (at least here in the German speaking world) who only weeks ago had written that the financial crisis had little impact on the real economy or the ordinary consumer now, in a remarkable about-face joined in the fear-mongering choir from Washington, London and later Brussels and when the stocks started to tumble, didn´t it prove them right?

No, says US progressive economist Dean Baker who warned of the coming crisis years ago and points out that the stock market is NOT the economy and its fluctuations have more to do with mass psychology than real economic values.

But it gets better: first the media( following the politicians) tells us not to worry because “experts” have told them that ordinary people will not be affected by the crisis (former top executive of Deutsche Bank says: Subprime loans are only a small segment of the whole business…). Only a few weeks later they amplify the alarm bells from Washington and, having successfully alienated the public, they now start lecturing us about “staying calm and not succumbing to panic“….

Hastings concludes that “capitalism is suffering a richly deserved shock to its hubris” but … “possesses enough resilience, energy and imagination to come out the other side.”

Judging by its past performance (last 200 yrs)  I doubt that very much. Talks about resilience have very little credibility now after former Goldman-Sachs CEO Paulson professed his trust in the financial markets on Fox News in March 2008 and the record of capitalism is disastrous if we bother to look at the whole system, not just the usual parameters like growth of GDP, trade balance, etc.

As Marx understood, capitalism suffers from a systemic fault: Overproduction – since there is no self-containing principle . To increase profits the system must expand, increase productivity  and consumption. But the inherent contradictions cannot be overcome:

  1. As part of  production labour costs (wages) must be driven down to increase profits.
  2. To ensure increasing consumption incomes must rise or prices keep falling to prevent a slump.
  3. Falling prices (per unit) can only be achieved by lowering wages and / or prices for raw-materials and /or automation (which replaces jobs) and increased productivity.
  4. Since the profits of all these measures are no longer re-distributed to the workers and the tax burden is more and more shifted from capital to labour, consumption is stagnating or declining and the real economy can no longer deliver increasing profits.

To overcome this dilemma, economists tried globalization (increased access to cheap labour, raw materials and new markets, formerly known (in another shape) as colonialization) and neoliberal “reforms” – both of which worsened the situation (but further enriched the business elite with “trickle up” policies). The last resort was “financialization”: In order to maintain rising profits more and more (actual and borrowed) money is being pumped into the financial markets (as mentioned at the beginning but the enormous artificial profits  are not backed by real value: they “created a hyperactive financial economy and a stagnant real economy“.

Greenspan flooded the market with cheap credit because he knew that creating another bubble  (as the only way to keep the system afloat (at least until he fled the scene of the crime, …). The extreme volatility of this system and risk for society this virtual casino created apparently did not bother him, the Fed or the bankers and politicians who worked hand in hand….

Social Welfare is obviously out, corporate and banking welfare is in.

Hearing economists and politicans now talking about “restoring stability to the financial markets” (by burdening the state (= the citizens) with more billions of debt is beyond irony. These guys took excessive risks with their derivatives and “securitizations(Orwell would have loved this expression) and did not give a damn about the consequences as long as they could find a sucker to pass on the toxic debt….

Capitalism is unsustainable because it ignores its inherent contradictions and – most of all – it is still not willing to acknowledge that “the economy” is a sub-system of the natural production cycle and must therefore respect ecological imperatives. Hastings assessment that we are facing “No threat to health, diet or physical safety” is blatantly false: (he meant it in the context of the financial crisis apparently , but  if we look at the crisis as a symptom of a bigger disease, in the context of capitalism as religion, where governments see themselves as servants of the economy the threat is enormous…)

The insane concept of exponential growth also causes huge environmental destruction (loss of habitat and functioning ecosystems, loss of biodiversity, “climate change”, etc.

Recent reports about the increasing threat to biodiversity (a quarter of mammals are now facing extinction) are really frightening, but they are just the tip of the iceberg (a metaphor with no future for the same reasons….) Many people used to laugh about environmentalists being concerned about the disappearance of butterflies, toads or certain types of bats, plants, etc.  because they thought that these species had no intrinsic value and no economic value. Now we know that this is completely wrong: They are all a part of functioning ecosystems and these are the pillars of the biosphere. Their services are indispensable and priceless (e.g. trees filtering the air, retaining water in the soil, etc.)

Hastings is insofar right  as we no longer have to fear the epidemics of earlier centuries and have achieved  remarkable increases in food production and in general great convenience in our lives but at what cost?

  • New invincible viruses (attacking and outsmarting the immune system itself and resistant bacteria are emerging and threatening our health (HIV, “bird flu”, MRSA, new forms of TB, etc.)
  • industrial farming requires tons of toxic pesticides, synthetic fertilizers and antibiotics; “outpout” has increased (energy input even more, the ratio is about 1:10) but the quality of our grain, vegetables and meat may be worse than 100 years ago….to say nothing of soil fertility;
  • Scientific “innovation” has brought us  a series of toxic and cancer-inducing chemicals (no immediate health effects but long-term damage like PCBs, plastifyers, Asbestos, etc.) Allergies and other auto-immune diseases are constantly on the rise and “scientists” are messing with the immune system – with terrible results…. (how can you find a cure for something when you haven´t even understood what causes the problem? )
  • Every year we find ourselves exposed to  more “food scandals” like BSE, “bird flu” in poultry (allegedly from wild birds but much more likely the result of factory farming…), the latest milk powder scandal in China, several salmonella outbreaks in the US, etc. Our food travels thousands of miles…
  • Having “externalized” all these  problems to society for decades, the industry is still trying to belittle the problems (see “Climate Change” and energy debates) and politics has little more to offer than useless conferences, the scam of “emissions trading” and greenwash like “clean coal”… They cannot solve the problems, they are part of the problem.

So, my final conclusion is: NO, the threats we are facing now are not less fearsome than those of earlier centuries, on the contrary. Massive environmental pollution and degradation – most of all with persistent toxic chemicals and mutagenic substances like radioactive fission-products that are going to threaten all forms of life for generations to come (see also use of uranium munition in Iraq, Afghanistan and former Yugoslavia) are a deadly legacy of our sick economic ideology which traded off survival for short term profits.

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1 Comment

Filed under Change, Economy, Environment, Managing Perceptions, Uncategorized

One response to “We never had it so good: “Financial Woes are not as bad as it gets”

  1. The threats are big – true – but we are still lucky to be living in this age, those of us who have been born with opportunity all around us. Thought-provoking piece – cheers!

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