Wednesday, 14 September 2011

Poor Circulation & Economic Disorder

Imagine as blood circulates through the body, a few parts that have become excessively rich in fat start to prevent sufficient blood from getting to the rest of the body. Not only has the heart got to work harder to keep the blood flowing, but as proper circulation is blocked by the fattened parts, others are deprived of the oxygen they need, and the whole body risks shutting down.

Unfortunately, that’s how the economy – at the national and global level – has been functioning. Those who become fat in wealth siphon off money for themselves and don’t put it back in the economy. And then we get dire warnings about insufficient spending to keep the economy going. Within nations, the corporate elite takes out an ever-larger proportion of the country’s wealth and leaves the rest increasingly starved of resources to make ends meet. Instead of letting workers have a fairer share of the proceeds from their labour, the rich pretends the problem can be solved by sinking people further into debt.

But debt-fuelled bubbles inevitably burst. With the majority left without money to spend – as their income has been shrunk while corporate bosses divert more of the revenue generated by shared enterprise into their own pockets – recession hits us. Plutocratic friends of the rich, through malice or sheer stupidity, proclaim the solution is to transfer even more money from the poor to the rich. Get rid of the minimum wage, they say, cut taxes for the minority who are paying themselves astronomical sums, cut public spending which has helped those with less to afford a decent life without falling into greater debt, and increase job insecurity for workers by undermining what employment rights they have left.

At the international level, deregulated financial institutions are able to move money around to satisfy those with the richest accounts. Fair trade is sacrificed for the interest of predatory trade, where the resources of the poorer countries are stripped to enhance the productive capacity and balance of payment of the rich ones. Countries accumulating wealth from the deficits of others are not placed under any obligation to act in a responsible way to sustain global economic wellbeing. Middle Eastern oil producers ignored the plight of the rest of the world in the 1970s and 1980s, but in the long term they reap the social and economic instability that comes back to haunt them. Through the 1980s and 1990s, Japan pursued a policy of wealth accumulation in relation to the rest of the world, gradually and inexorably weakening the purchasing powers of the latter, until in the 2000s, with demands dropping worldwide, it entered into the flatlining era of no growth. China and the other emerging economic powers will have to address a similar problem.

The UK and the US, instead of protecting the banking elite, and siding with global wealth hoarders, should work with other countries to establish international arrangements to promote fair trade, equitable distribution of surplus, and taxing unearned excesses to invest in the healthy functioning of our inter-connected world.

The problem of economic disorder will not go away. So long as some can persist in blocking a good circulation of wealth in society, causing vital arteries to clog up, depriving many of the share they need to lead a healthy existence, we will lurch from one economic crisis to another.

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