But the global economic system is not merely inherently unjust and unequal. It is also inherently unstable, and tends toward the generation of periodic crises, and as events of the last few months have shown, it is increasingly vulnerable to collapse. Financial institutions, corporate investors and even mainstream economists have been aware of the dangers for several years before the recent crisis that erupted from the depths of faultlines in the housing market. In March 2006, an unprecedented IMF report Safeguarding Financial Stability criticized the twin strategies of deregulation and liberalization, the staple policies of the global economy, as “the potential for fragility, instability, systemic risk, and adverse economic consequences”. Deregulation has caused “national financial systems [to] become increasingly vulnerable to increased systemic risk and to a growing number of financial crises.”[16]
In mid-2006, Stephen Roach, chief economist for Morgan Stanley, warned that the world “has done little to prepare itself for what could well be the next crisis.” About a month earlier, Roach had already warned that a major financial crisis seemed imminent and that the global institutions that could forestall it, including the IMF, the World Bank and other mechanisms of the international financial architecture, were utterly inadequate. [17]
Consider also the prescient analysis of UC Berkeley economist professor Brad DeLong, for instance, who in March 2007 argued that a global economic recession was in motion, principally due to three factors:“1) A Federal Reserve that finds itself with less inflation-fighting credibility than it thought it had; 2) upward pressure on inflation from rising energy and, perhaps, import prices; and 3) millions of middle-class homeowners who for too long have treated their houses as gigantic ATMs, using home equity loans and refinancing to generate extra spending money.”
A crisis, he notes, is by no means guaranteed. But a key trigger could be the housing market -- the unprecedented use of home loans to squeeze cash out of equity, permitting middle-class consumers to spend well beyond their means.
“Someday this spending spree has to come to an end. If it comes to an end suddenly, at a time when the Federal Reserve has raised interest rates a little too much, then we have our recession… Make no mistake about it: The US economy is close to the edge... What can be done to head off the danger? Unfortunately, very little. The bag of macroeconomic tricks is empty.”[18]
And worse, in July 2006, came another high-level warning. Dr. David Martin, a former professor at the University of Virginia and founding CEO of M-CAM (a financial institution that is the international leader in intellectual property-based financial risk management) gave a speech at the Arlington Institute, a futurist think-tank in Washington set up by a former US Department of Defence official John Peterson. Dr Martin warned his listeners that a collapse of the global banking system could be imminent as of January 2008, and that it would start with the housing crisis. Martin’s warning may well serve not to be borne out so specifically – but clearly, over a year before the current economic crises, he was disturbingly on target. While US financiers may well be able to re-jig the system for a few more months, or perhaps even years, it is clear that we are fast approaching the end of the tunnel. [19]
The War Forward…?
All of these global crises are escalating on their own terms as a direct consequence of the very structure of the global social, political and economic system. Not only, by their own logic, do they threaten the future of humanity, they are currently intensifying and converging over the next few years. While their individual impacts are clearly devastating enough, their cumulative or simultaneous impact would be so devastating that it is perhaps beyond imagination.
This wide-ranging, but very brief, analysis of social and global systemic crises converging over the ensuing decades ultimately leads us to one major conclusion: the failure of the prevailing social, political and economic system. That we need an alternative is no longer disputable. It is a given, manifest reality.
What we need now is a civilizational paradigm shift. Not just a new economics, or new politics, or new social vision. We need a whole new vision of life itself to replace the dead, broken materialistic vision associated with the concurrent global imperial system. The good news is that the civilizational paradigm shift is not only happening now as I write – its seeds have already been planted. More on that in part 4, coming soon.
[1] Anjana Ahuja, ‘It’s hot, but don’t blame the Sun,’ The Times, September 25, 2006
[2] Richard Girling, “To the ends of the Earth”, Sunday Times Magazine (15 March 2007)
[3] Fred Pearce, “Climate report ‘was watered down’”, New Scientist (8 March 2007) http://environment.newscientist.com/article/mg19325943.900. Also see George Monbiot, “The Real Climate Censorship”, Guardian (10 April 2007) http://www.monbiot.com/archives/2007/04/10/the-real-climate-censorship/
[4] Postnote, “Rapid Climate Change”, (London: Parliamentary Office of Science and Technology, July 2005, No. 245) www.parliament.uk/parliamentary_offices/post/pubs2005.cfm
[5] Geoffrey Lean, “Apocalypse Now: How Mankind is Sleepwalking to the End of the Earth” Independent (6 February 2005) http://news.independent.co.uk/world/environment/story.jsp?story=608209; Michael McCarthy, “Global warming: passing the ‘tipping point’”, Independent (11 February 2006) http://news.independent.co.uk/environment/article344690.ece.
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