ECONOMICS
Imagination spent on global financial solutions
Colin Long November 27, 2008
The global economic crisis is not just a financial crisis. It is a crisis of western capitalism in its post-industrial, post-modern form. The debt-fueled hyper-consumption that has driven growth in the West for the last two decades has come to its inevitable terminus.
This process had to end at some stage, either through the contradictions built into the financial system (endless growth based on easy credit can't go on forever) or through the contradictions between the economic system and the limits posed by the natural environment.
Despite the wishful thinking of the world's politicians and business leaders, climate change and the broader environmental crisis always would have halted this mode of production at some stage. The question was whether the system's own contradictions and instabilities would preempt the greater calamity of environmental crisis. Only the scale and rapidity of the systemic collapse of the post-modern capitalist model is truly surprising.
Most of the politicians of the world, Australia's included, have predictably and unfortunately shown themselves once again to be men and women of limited vision. Their solutions reveal them to be devoid of imagination. They are bound by what they have known rather than animated by what could be.
The outcomes of the G20 meeting in Brazil demonstrate this clearly. The differences between the Europeans and the Americans, emphasised in many media reports, amounted to little more than the precise placement of the deckchairs on the Titanic. They neither fundamentally questioned the endless growth model, nor acknowledged the scale of the environmental crisis and its ramifications for global economic recovery.
We should not portray governments as white knights coming to the rescue of a failing system. Nor should we target bankers as greedy and irresponsible, as if they were somehow different from the rest of us.
We all had a stake in this system. The bankers were merely at the pinnacle. They oiled the machinery of easy credit that fueled rampant house price increases. We could all then feel so much wealthier, encouraged to go out and buy big Tvs and new lounge suites to fill our ever-expanding houses — all on credit, of course.
Governments such as Australia's provided subsidies for home buyers that simply drove house price inflation: they subsidised the housing industry, not home owners. Tax cuts of all sorts further encouraged unsustainable asset price increases and the diversion of resources into unproductive speculation in property.
They also encouraged unnecessary and environmentally-destructive consumption. All this at a time when the resources of the nation needed to be harnessed to deal with the great challenge of climate change.
Through our superannuation contributions we have all participated in the great expansion of the global financial sector. Our retirement savings only added to a massive pool of footloose capital whose controllers were schooled in the shibboleths of neoliberalism.
They directed these savings, not to where it has been most needed — dealing with the environmental crisis, building education, eradicating poverty, improving infrastructure — but into the stock and property markets. There it created a massive bubble that only served to destabilise the economic system as a whole.
And when this crazy system collapses, what is the response of governments like that of Kevin Rudd? Our PM, trying desperately to seem statesmanlike, cautious and responsible, announced that he would spend half the government surplus. It would not go to change a system that is rotten to the core, but to prop it up with more of the same. The tragedy is that he persuaded most commentators that he was responsible.
He will pump billions of dollars into the economy to keep people investing in real estate and buying more and more consumer goods. He will also pump more money into the banks so that they can continue to offer credit and continue the whole process of living on the never-never.
Thus the economic system that has brought us to the brink of a second Great Depression will not be restructured. If Rudd and his counterparts in Europe and North America can get people to spend their way out of this current crisis they will only have sown the seeds for an even greater calamity in the future.
This model, based on never-ending consumption and growth, will finally run up against the limits of resource depletion and environmental degradation— if its own untreated contradictions don't intervene first.
The election of Barack Obama aroused a universal hope that maybe, just maybe, politics could be different, that we might recognise that we don't live in the best possible world, that change is necessary.
There are encouraging signs from the President-elect. Seizing the chance that Kevin Rudd seems determined to miss, he has promised to spend billions to develop a renewable technology industry, improve health care and restructure US industry. These are positive first steps, although there is still no fundamental acknowledgement of the limits to growth.
Just imagine what we could have achieved in Australia with half of the budget surplus if we used it to redirect the Australian economy on to a low carbon, low resource-use path instead of more of the same work-borrow-consume madness. Imagine all the new jobs in renewable energy, public transport, electric cars, sustainable housing construction.
Imagine preparing ourselves for the coming environmental crisis whose impact on the economy will make the current turmoil look like a golden age. Imagine if we could mobilise the world's politicians, decision makers and resources to deal with climate change in the same way that they've been mobilised to deal with this self-inflicted economic crisis.
Imagine using our national and global resources to deal collectively with the challenges that we will eventually have to deal with as societies, not as isolated individuals hoping for another tax cut.
Imagine a different future. It is up to us to do so, because our politicians certainly can't.
Colin Long lectures in cultural heritage at Deakin University.
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SUBMITTED COMMENTS
Ray O'Donoghue26-Nov-2008
What you say Colin makes so much sense. Thanks for putting these thoughts so clearly and forthrightly. We all have a hand in our own destruction.
Sara Dowse26-Nov-2008
Couldn't have been put better. If only we could get the politicians and,equally important, the mainstream media to change their approach. Thanks, Colin.
Jim McCarthy26-Nov-2008
Colin, Congratulations on a pithy, condensed, intelligent piece.
Joe Castley26-Nov-2008
A splendidly lucid piece. The precise problem here in Australia, it seems to me, is that governments couldn't persuade people to want to move to a sustainable, low carbon economy while so much of their revenue comes from royalties on coal, and there is such enormous investment in fossil fuelled energy generation. Fear of the short term unemployment that would result makes real change appear political suicide. Perhaps there's a ray of hope in this week's announcement by Columbia U. researchers that Periodite, a rock that forms the earth's mantle and which has surfaced where tectonic plates have collided in places like Oman is capable of devouring all our CO2. But the article splendidly identifies the problem that would remain even if this neutralised a major element of the environmental crisis - the massive diversion of resources into the property market and financial speculation - and the work, borrow, consume mentality that prevails.
Phil Smith26-Nov-2008
JFK once said that politics is the art of the possible. That, unfortunately, is the world in which they act, Would you like to see the Rudd government do exactly what should be done only to be tossed out on its ear at the next election? Unfortunately politicians by the very nature of their environment cannot satisfy dreams.
Russell27-Nov-2008
Thanks Colin - best article on the 'crisis' I've read.
Phil, the reason the Democratic primary was between a woman and a black was because people imagined a world without sexism and racism and fought for that (remember the 60s and 70s?). whitlam brought in Medibank, and Fraser scrapped it, but it came back and looks like it's here to stay. Change is possible.
Ern Azzopardi27-Nov-2008
I echo many of the other commentators in expressing thanks for the clarity with which the hope for a reimagined economic order is put. I also pick up on the 'politics is the art of the possible' that Phil Smith has quoted. I agree but do not want to leave it there. While we cannot expect our politicians to commit political suicide by espousing solutions so unpalatable to the electorate that they are voted out of office at the next election, we can expect visionary leadership from them. They need to educate and persuade the electorate to accept necessary change and use funds responsibly. We too have a role to play and that is to voice our support to them for such change to occur.
chris warren27-Nov-2008
a good article Colin, thanks. is there a sequel - the part where we start talking about WHAT that new way, new future, new imagination will be?
TINA (there is no alternative) is the mantra of those in power with an interest in the status quo, and the alternative voices are so diverse, divided and incomprehensive that i struggle to see how they can be considered a viable alternative. is there an alternative imagination deep enough to provide a platform to which this world can make a transition, despite the objections of the current stakeholders?
is there a sequel, or at least a place to continue this conversation. I have written about housing before and want to continue that discussion too, in light of what you've written.
please don't read this as being negative, but searching. and i'm not criticising anyone, but calling for more.
Nathalie27-Nov-2008
This is an excellent article! Colin is saying what we are all thinking. The incessant growth is madness. We don't really need all the extra 'goodies'. Besides, capitalism belongs to the 20th century; time now to move to the 21st century with new ideas and ... COURAGE! I hope you can give lots of lectures like this Colin! And should be writing to the pollies about it!
Peter Beeson27-Nov-2008
1. Dont forget, nothing gets on this earth and nothing gets off.
2. Change is a constant.
3. The safest path forward is to make haste slowly. Radical change will never be accepted by the majority.
4. Certainly there is room for experimentation but very thoughtfully and cautiously while the recognised "fixits" albeit "temporary" proceed.
jennifer noyce27-Nov-2008
When was the G20 in Brazil? I stopped reading at this point but if you can assure me that I have missed something let me know & I will continue to read.
Angela Lindstad27-Nov-2008
I have a paper presented by Margrit Kennedy in 1987 which proposes radical changes of the monetary system, the taxation and land reform along lines proposed by Silvio Gesell, Yoshito Otani and others. It sounds extreme rereading it but it would fit the bill if we could entertain the vision during today's meltdown.
Pay a small amount of money for any cash held at every end of the month. Everybody including banks! Bills get paid, work gets done, nobody needs to be idle. The value of money remains stable, no inflation. (savings are allowed for-they don't attract interest, but remain stable value)
Land leased (land used to hoard value is a detriment to all of society), the income used for the community. Speculation would cease and highest, best and environmentally sound use of the land would be facilitated.
Abolish income tax altogether. Labour would become cheaper and affordable, resource use would be minimised.
All this is difficult to summarise in 200 words. I wish some economic wizard could look at it and see if it could work.
Brian Long27-Nov-2008
Dear readers,
imagine you walk into a pub, at the other end of the bar you see a bloke wearing a Hawaiian shirt open down to his obese navel with gold chains and various pieces of bling for all to see. He has fallen to the floor in a drunken stupor and can't get back up. What should you do? Pick him up, lean him on the bar and buy him another drink? That, metaphorically, is all most of our pollies are proposing to do with our economy, drunk on easy credit and covered in cheap bling as it is.
Nice writing Col'.
Claude Rigney27-Nov-2008
What is 'sustainable house construction'? Does Colin have a mortgage? Does he recycle his grey waste? Does he have TV, central heating, a hybrid vehicle? Finally and most importantly does he have a doggie pooper scooper for when he takes little Al walking?
David Arthur27-Nov-2008
Colin asks us to “imagine a different future ... because our politicians certainly can't.”
I imagine the recent past: imagine that you are a financial market trader, and that it is 2006. All around you, your screen jockey colleagues are chortling to each other about how much money they are making for the company/bank/”institution”, and how much bonus they are scoring for themselves, trading these securitised vapidities. Do you ignore your qualms and join the rush?
In September 2001, George W Bush’s entreaty to his countrymen was to patriotically go shopping. In November 2008, Kevin Rudd chooses that $10 billion of taxpayer funds be distributed via Centrelink, and entreats his recipient countrymen to (patriotically) go shopping.
I can imagine the near future, in which that $10 billion is expended on a work for the dole scheme. The work is a reafforestation project, for all the degraded lands in Australia in all the compromised catchments in Australia.
Would our as-yet unborn heirs and descendants be worse off?
Colin Long27-Nov-2008
A reader correctly pointed out a mistake about the location of the recent G20 summit. The mistake was mine. I was thinking at the time of the meetings of central bankers and finance ministers of the G20 which are to take place in Brazil this year. Nevertheless, the location of the summit is completely immaterial to the points made in the piece. One can always find a reason to not read something one disagrees with...
John R. Sabine28-Nov-2008
Someone said, maybe I did - unless you imagine the future you can't plan for it, unless you plan for the future you can't create it.
Colin is spot on with the first requirement - we need more, newer, better imagination. But what of the second requirement? Where are the champions to start putting our fresh imagination to work - for newer and better planning?
richard28-Nov-2008
Thank you for these wonderful ideas.
Warwick30-Nov-2008
So, Colin, what should I do tomorrow? What should be my first step?
Gordon Young02-Dec-2008
Very well put Colin. Congratulations for a very clear articulation of the many and various thoughts that have been whizzing round my head since neo-liberalism realised it's been eating itself.
If only mainstream media was as analytical.