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Monday, October
10, 2011 The Five Macro Crises of Our
Times
“Men
accept change only when it is a necessity, and they see a necessity only in a
crisis.” Jean Monnet (1888-1979), French political economist and statesman “I have two great enemies, the southern army
in front of me and the financial institutions, in the rear. Of the two, the
one in the rear is the greatest enemy….. I see in the near future a
crisis approaching that unnerves me and causes me to tremble for the safety
of my country ... corporations have been enthroned and an era of corruption
in high places will follow, and the money of the country will endeavor to
prolong its reign by working upon the prejudices of the people until all
wealth is aggregated in a few hands and the Republic is destroyed. I feel at
this moment more anxiety for the safety of my country than ever before, even
in the midst of war." Abraham Lincoln (1809-1865), 16th President of the United States
(1861-65) “The
faster the present generation draws down the fossil energy legacy upon which
persistently exuberant
lifestyles now depend, the less opportunity posterity will have to
live in anything like the same way or the same numbers. Yet most contemporary
political proposals for solving problems of economic stagnation or inequity
amount to plans for speeding up the rate of drawdown of non-renewable
resources.” William Catton,
American environmental sociologist and population ecologist "Societies
characterized by enduring deep divisions of income and wealth, such as most
third-world societies, are wounded societies with little sense of the common
good... As America drifts in this direction, ending poverty and
redistributing income should be at the top of the national agenda." Charles Derber,
Corporation Nation (p. 203) [There are] “three ways to be
influential in American politics: make donations to political parties,
establish think tanks, and control media outlets.” Haim Saban,
Pro-Israel billionaire and major political contributor, (2009) Our world has become very complex,
and, as a consequence,
it is increasingly open to macro crises of huge proportions. Indeed, what
makes our time such a dangerous period, I think, is the fact that we are
facing simultaneously at least five intractable worldwide crises that it will
take years to solve or to outlive. They are a financial
crisis that
it will take at least twenty years to jugulate, an
energy crisis that's
looming on the not too far horizon and which threatens the very foundation of
the economic prosperity of the last half century, a double-barreled demographic
crisis of a
magnitude never encountered during the entire history of humankind, a
political crisis that is related to the ingrained inability of governments most
everywhere to solve society's problems, and, as a general background, a
moral crisis that
corrupts most institutions and makes them ineffective in promoting the common
good. I-The Financial
Crisis The misguided
experiment with new
synthetic financial instruments under the coat of hardly any
government regulation is proving to be very disastrous to the world economy.
They led to the near complete collapse of the banking and credit system in
the fall of 2008, and are very much instrumental today in destabilizing the euro
monetary zone and the European economy,
the largest in the world. In fact, these new financial instruments play a
central role in pushing down the American and European economies. Indeed, these so
called financial “innovations” have turned the world financial
sector into a vast casino
in which international bankers and speculators reign supreme. One may ask how
was it possible to allow a casino-like
financial capitalism to develop,
especially after the hard lessons learned during the Great Depression of the
1930s? When President
Bill Clinton accepted the Republican proposal (GLBA) to gut the 1933 Glass-Steagall
Act, that had regulated investment and commercial banking
until then, he had no idea that his simple signature would herald, less than
ten years later, a financial crisis of historical proportions. With this
deregulation move and with the dismantling of other financial safeguards that
had been in place for a long time, some since the financial panic of 1907,
international bankers were allowed to merge their investment banking and
commercial banking activities and discard many traditional banking rules.
They adopted the new model of asset securitization,
through which large banks de facto ceased being banks to become brokers, that is they
ceased being lenders to become sellers of the sophisticated but untested new
synthetic financial securities. Their names are now well known if not yet
fully understood by many: Asset-based
security (ABS),
"Collateralized Bond Obligations" (CBOs), "Collateralized Debt
Obligations" (CDOs), and credit default swaps
(CDS). — In financier Warren Buffett's words, they turned out to be
true financial weapons of mass destruction, and they are still doing their
ravages, because politicians have as yet refused to rein them in and put an
end to excessive financial speculation.
II- The Energy
Crisis Economic
prosperity and population growth over the last half century have been
sustained in large part by the access to relatively cheap energy and by an
elevated capacity to produce food. But, the age of cheap energy
is about to end, and this basic source of economic growth will disappear,
unless some untapped cheap oil discoveries come to the rescue. If the age of
cheap energy is coming to an end, can the world economy continue to support a
fast rate of population growth? This is unlikely. Already, we
observe a reemergence of hegemonic
wars for oil and resources in some parts of the world that can
be explained, at least partly, by the looming energy crisis. Not
surprisingly, the United States, with less than five percent of the world
population while consuming about 25 percent of the daily world oil output, is
at the center of this crisis. Nobody can deny
that oil access under American control played an important role in the
Bush-Cheney decision to launch an unprovoked war against Iraq
in the spring of 2003. Similarly, the recent Anglo-French involvement in
Libya, under the cover of NATO, had something to do with Libyan oil riches. In a globalized
and shrinking world, geopolitics and the approaching energy crisis are
closely intertwined. III- The
Demographic Crisis The world is
about to have a population
of 7-billion to feed and equip with the necessities of life. And a larger
share of that population is going to be older as the 21st century
unfolds. Indeed, between now and 2050, the share of the population aged 60 and
over is projected to increase in nearly every country in the world. All
countries, both developed and developing, will be affected by this
demographic shift, although in different ways. In the developing world, where
fertility rates are still high (although declining), the crisis will come from
too many young people without employment and too many old people living in
poverty. In advanced
economies, the crisis will come from an onslaught of older citizens requiring
more health care and social services at a time of economic stagnation and
fiscal tightening. The aging of the
population will have a major impact on a society. For one, it will profoundly
affect the economy during the next two decades, as the large contingent of baby
boomers (USA: those born between 1946 and 1964; in Canada:
1946-1966) enters retirement and as mortality among the elderly continues to
decline. In the U.S., 75 million people and close to one quarter of the
population are baby boomers. The
retirement of baby boomers at the rate of between 3 and 4 million persons each year will redefine the basic economic structure and will
create new economic, social and fiscal challenges. Currently, in
the United States, there are 3.3 workers to support each retiree, but by 2030,
less than twenty years from now, this number will fall to only two. Consider
also that twenty percent of Americans will be over 65 by 2050, up from 12
percent in 2005. As the consequence of the graying
of America, payroll taxes and other taxes may have to be
raised, which in turn will exert an important drag on economic growth. With
so many retirees as a percentage of the working population, I would not be
surprised to see a serious pension crisis developing in the coming years. It could arise
either through uncontrolled inflation or through a general decline of the
real return on capital. Either way, an erosion of pension income could ensue. Secondly,
it can be expected that some basic industries, such as manufacturing, will
contract while those other industries related to health care and social
services, like medicine and senior care, are destined to expand. The overall
saving rate is also bound to decline, thus diminishing the pool of financing
available to support new productive investments. The
result will be an economy that will become, even more than today, a
service-based economy and also a more knowledge-based economy
rather than being primarily a goods producing economy. With such a structural
shift, unless per-worker productivity were
to pick up substantially, considering that such productivity is lower in
service industries, economic growth is bound to suffer and taper off. In Canada, http://www.ic.gc.ca/eic/site/eas-aes.nsf/eng/ra02068.html for instance, average
annual economic growth has registered 2.8 percent, between 1977 and 2010, but
it is expected that between 2011 and 2086, mainly due to demographic shifts,
economic growth could slowdown to a meager annual average of 1.6 percent. A
slower economic growth means less government revenue at a time when demand
for public services can be expected to increase. That
is why governments should prepare, fiscally speaking, for the expected
onslaught of older citizens requiring more health care in the not too distant
future. IV-The Political
Crisis In many
democratic countries, government has become the near exclusive tool of
powerful private interests who use it at will to promote their narrow
agendas. The cause is well known—the need to have tons of money to have
access to the media, especially the electronic media, to get exposure. The
result is everywhere to be seen: The people end up with the best politicians
that money can buy. The source of
embedded corruption in politics is the overwhelming influence of money in
politics. In the United States, things went from bad to worse on Thursday
January 21, 2010, when the
U.S. Supreme Court took upon itself to profoundly change the U.S.
Constitution and American democracy in ruling that legal entities, such as
corporations and labor unions, have the same purely personal rights to free
speech as living individuals and can therefore use as much money as they wish
to elect public officials of their liking. In doing so, the
U.S. Supreme Court severely devalued the individual's right to vote and made
sure that the percentage of people who will bother to vote in the future will
keep declining. Mind you, voter participation during the mid-term 2010 U.S.
federal election, for example, was a meager 42 percent of registered voters.
When a majority of the people don't even bother to vote, democracy is
morbidly sick. Even though voter turnout
is generally higher in American presidential elections than for midterm
contests, it was nevertheless as low as 49.1 percent in 1996 (Bill Clinton vs
Bob Dole) after it had reached a high of 60.1 percent during the 1960
presidential election between Richard M. Nixon and John F. Kennedy. A question must
be raised: Who profits the most when democracy dies? V- The Moral
Crisis Our times mark
the triumph of Machiavellism,
i.e. of the corrosive ideology that politics and business should not adhere
to any moral principles but should only be guided by narrow political
interests and by the ruthless pursuit of profits. In this endeavor, the only
principle that counts is the one that says that
“the end justifies the means” and that craft, deceit and
greed are OK in the pursuit of political power or of economic resources. —It is against this very destructive ideology
that I wrote my book “The
Code for Global Ethics”. I
have the deep conviction that many of our other macro crises are the result
of this moral vacuum. If we go back in
history, we see that the big financial crises of the past, those of 1873-1880
and 1929-1939 for example, had pretty much the same type of causes as the one
we are experiencing today: They were basically caused by a general collapse
of public and private basic morality
among a very small elite that pushed its exploitation of public institutions
to the breaking limit. For such a small elite, there comes a time when all
means justify the supreme goal of enriching itself at the expense of the rest
of society. All combines, tricks and schemes become acceptable and justified
by pious ideological slogans such as “the market always knows
best”, the new “wealth (no matter how acquired) will trickle
down”, or, for the more delusional ones among them, “God is
placing all that money in my hands, therefore, I must be doing some
good”! When that frame
of mind takes hold, a decline of civilization can be feared. Unfortunately,
that's where we stand today. __________________________________ Rodrigue Tremblay
is professor
emeritus of economics at the University of Montreal and can be
reached at rodrigue.tremblay@yahoo.com.
He is the author of the
book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/ The book “The Code for Global Ethics, Ten Humanist Principles”,
by
Dr. Rodrigue Tremblay, prefaced by Dr. Paul Kurtz, has just been released by
Prometheus Books. Please visit the book site at: www.TheCodeForGlobalEthics.com/ See it on Amazon USA See it on Amazon Canada See it on Amazon UK or, in Australia Please ask your favorite bookstore and your local
library to order the book: The Code for Global Ethics, Ten Humanist
Principles, by Dr. Rodrigue Tremblay, prefaced by Dr. Paul
Kurtz, Prometheus Books, 2010, 300 p. ISBN: 978-1616141721. ***** The French version of the book is also now available. See:www.lecodepouruneethiqueglobale.com/ or on Amazon
Canada _____________________________________ Posted,
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