<\/p>\n
Readers of the mainstream business and political press may have noted that a consensus is emerging amongst policymakers and the financial community \u2013 that the world has now seen the worst of the recession and that a full-blown economic depression will be avoided.<\/span> <\/span><\/span> The leading optimists who express this view \u2013 such as the Head of the European Central Bank Jean-Claude Trichet \u2013 argue that the evidence now shows that the pace of global economic decline has been slowing and the \u201cmarkets\u201d may be \u201cbottoming out\u201d. The more optimistic, indeed Panglossian members of this fraternity, including market traders (this fraternity includes few women) are betting that signs of the so-called \u201cgreen shoots\u201d of recovery are now visible, heralding as it were the birth of a new spring for global capitalism.<\/span> <\/span><\/span>Here is an example from a <\/span>Financial Times<\/span><\/i> editorial on <\/span><\/span>May 8 2009 titled \u201cWorld discovers it is still breathing\u201d<\/span> The end of the world has been cancelled for now, if we are to believe recent market movements. Confidence is slowly returning to investors, who have discovered they are still alive after last autumn\u2019s near-death experience.<\/span> <\/span><\/span>Government policies \u2013 from unorthodox central banking to stress testing \u2013 have soothed the worst fears.<\/span> <\/span><\/span>The signs of rekindled optimism are everywhere. A long rally has brought equity markets back from the abyss reached earlier in the year. The oil price, though still far below recent records, is pointing up. So are sovereign bond yields \u2013indicating investors\u2019 wariness of where public finances are headed but also a renewed willingness to tolerate volatility in stocks. The mood has changed so much that people are even willing to buy bank shares. The ideological function of reports such as this is to justify bailout measures that have been designed principally to socialize the losses of capital \u2013 whilst demanding little from the financial sector which was the leading force that propelled the world economy into this disaster in the first place.<\/span> <\/span><\/span> Rarely mentioned in the mainstream media is the degree to which these measures are skewed heavily in favour of capital and how the bailouts have to be judged in terms of the opportunities forgone to spend the money in a variety of other ways (see my post on the opportunity costs of the G8 bailouts). Moreover, many of the conditions imposed involve very little real accountability and public commitments on the very financial institutions and regulatory authorities that are largely responsible for the mess.<\/span> <\/span><\/span> Pangloss was the eternally optimistic philosopher in Voltaire\u2019s novel <\/span>Candide<\/span><\/i>, who claimed in the face of 18<\/span>th<\/span><\/sup> century famines, waves of religious persecution and other man-made disasters that humanity as a species lives the best of all possible lives in the best of all possible worlds, a world that therefore it would be fruitless to attempt to change. <\/span> <\/span><\/span>It would take a Panglossian of the first order \u2013 or perhaps an editorial writer suffering from market-induced euphoria associated with the \u201cgreen shoots\u201d hypothesis \u2013 to ignore how the real burdens of the current global economic emergency are felt most intensely amongst ordinary people throughout the world \u2013 as their basic livelihood and security is threatened.<\/span> <\/span><\/span>Indeed the <\/span>Financial Times<\/span><\/i> had earlier noted this aspect of the global crisis just over a month ago: <\/span> Almost unnoticed behind the economic crisis, a combination of lower growth, rising unemployment and falling remittances together with persistently high food prices has pushed the number of chronically hungry above 1bn for the first time\u201d.<\/span> <\/span><\/span>(<\/span>Financial Times <\/span><\/i>April 6 2009). <\/span><\/span> Throughout the world governments and companies are using the crisis to force pay cuts and demand greater \u201cflexibility\u201d on the part of workers \u2013 perhaps another reason for misplaced market optimism?<\/span> <\/span><\/span>Pay cuts are economically irrational in a slump when aggregate demand is falling \u2013 higher wages and expanded social benefits for ordinary workers would help to produce greater economic stimulus.<\/span> <\/span><\/span> One of the key causes of the global financial collapse was the way that real wages of American workers stagnated and in some cases fell over the past 25 or 30 years \u2013 such that workers\u2019 growing consumption and expenditures on housing was financed by ever-higher levels of indebtedness.<\/span> <\/span><\/span>Wall Street compounded the problem by pressing for the deregulation or self-regulation of finance which allowed what is euphemistically called \u201cfinancial innovation\u201d to develop \u2013 specifically the bundling of mortgage and other securities in complex derivatives, as well as practices associated with a very risky borrowing and investment.<\/span> <\/span><\/span>This potent mixture triggered the crash in the United States which has now spread globally.<\/span> <\/span> <\/p>\n","protected":false},"excerpt":{"rendered":" Readers of the mainstream business and political press may have noted that a consensus is emerging amongst policymakers and the financial community \u2013 that the world has now seen the worst of the recession and that a full-blown economic depression will be avoided. The leading optimists who express this view \u2013 such as the Head […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-48","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=\/wp\/v2\/posts\/48","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48"}],"version-history":[{"count":0,"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=\/wp\/v2\/posts\/48\/revisions"}],"wp:attachment":[{"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stephengill.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/span> <\/span><\/span><\/span>