From time to time, leaders from the financial services industry are invited by a well known intermediary to brief prime ministers and key ministers from the Caribbean. Those present might include the heads of banks, credit rating agencies, hedge funds or the regulatory authorities who share their views on market trends or the overall economic outlook world economy. For those like me who do not come from this world, an invitation offers a rare opportunity to absorb what those who lead or control the markets believe is happening and to learn more about the challenges ahead.
At a recent event of this kind the talk was about the global financial crisis and how and when it might end. But exceptionally one participant spoke about the dangers that will arise when the world begins to exit from recession. His view, much simplified, was that the decision by political leaders in the developed world to spend their way out of the crisis carried unspoken risks. If their approach succeeded, it would be essential to determine when and how to turn off the tap. Otherwise, he argued, it would be tempting to governments to let inflation run in order to reduce the cost of the huge borrowings they had created. Inflation, he suggested, might be further exacerbated if market expectations of a global recovery caused a stampede of speculators back into oil and commodities causing a price surge that further stoked inflation.
What was being suggested was that any failure to get the timing right on when interest rates should rise and the stimuli introduced be withdrawn, could lead to stagflation – slow growth, high unemployment, rising prices and economic stagnation – and a prolonging of the recession.
What these comments suggest is that successfully ending the global recession is likely to be as complicated as finding a way out, not least because measures to address a crisis in the global economy are being taken nationally with uneven outcomes. The consequence is that while some nations are sensing that aspects of the crisis may be behind them – particularly in respect of the financial sector – others are still moving in the opposite direction. For instance in Latvia, government’s recent failure to raise money on the bond markets and a possible devaluation threatens financial institutions in euro economies that unwisely lent to Latvians when its economy was booming. Conversely, banks in the US or in Britain are already in the process of repaying billions of dollars governments lent to ensure their survival.
For the Caribbean this is a confusing picture. In the absence of any alternative model for growth all it can do is stand by and hope that growth will come from recovery in China, the US and Europe and renewed economic confidence and stability will bring back to the Caribbean, visitors, remittances, investment, and lending.
What is striking about the recession has been the absence of any new and alternative vision of the future from any government anywhere. Despite the shortcomings of globalisation and market-led growth illustrated by the economic crisis, the assumption is that the world will, with increased regulation, continue down the same path and that this will as it were ensure happiness and social equity will somehow emerge.
Interestingly, however, a number of papers have started to appear questioning the sustainability of the global economic consensus. What these documents have in common is the thought that the recent economic turmoil offers an opportunity to reconsider whether it is possible to have successful satisfied societies without the constant pursuit of economic growth. For the most part they have not been written from an ideological perspective but from a desire to ask fundamental questions about where economic globalisation is leading and whether for developing and developed nations, growth is limitless.
One such study comes from an unlikely source: an arm of the British Government. Entitled ‘Prosperity without growth: the Transition to a Sustainable Economy’* and written by Professor Tim Jackson, it asks why for five decades, economic growth has become the most important policy goal without an understanding that for it to be sustained at present levels to 2100, the global economy would have to grow to eighty times its present size.
Questioning growth might be seen, it suggests, “the act of lunatics, idealists and revolutionaries,” but argues that present approaches that provide prosperity for the few can be no longer basis for stability, shared prosperity and fairness. Space does not permit me to write at any great length about its content other than to say the range of issues it touches is startling but highly accessible.
In what is fundamentally an extended economic paper, it develops arguments on issues as diverse as opulence, status, the human need for material possessions, the efficiencies of capitalism, novelty and consumerism, the relationship between consumption and growth and the difficulties of bringing about changes in attitudes, status and social structures in both developing and developed societies. It touches too on religious belief and personal liberty.
This may all sound wildly utopian, but what sets this document apart is its concentration on developing new aspirational models for growth that result in a more equitable relationship between small nations such as those in the Caribbean, the impoverished in the least developed, nations that are developed, or like China, Brazil and India, that are emerging as first world powers.
As such it suggests ideas that offer new avenues to address the difficult and as yet unresolved debates taking place within the WTO, in the context of the environment and climate change, or in a very different way over atomic power and arms limitation, by proposing the creation of alternative objectives to achieve a more equitable global balance.
A younger generation of politicians, academics and those in business in the Caribbean are trying to break out of the twentieth century dichotomy between capitalism and socialism to find new ways to issues of growth and social equity in order to find a more comfortable place in the world.
Whether it is in a Cuba being tempted by US materialism; a Jamaica trying to overcome urban poverty and economic inequality; or an Eastern Caribbean environment that cannot endlessly be exploited for tourism, new thinking is required.
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