Humanity is sleepwalking to its own demise. Worldwide, there is no decent political leadership; instead, daily doses of petty politics and slimy sloganeering as usual. On the economic front, English economist Mervyn King reminds that the sleepwalking is likely to catch up with us soon.
Mervyn King was at the helm of the Bank of England during the 2007-2008 financial crisis.
The recovery from the last economic crash never happened for hundreds of millions of Americans and Brits. Official employment numbers in both countries are fantasy figures that hide massive unemployment and the ongoing financial struggles of the working class. The current of strong sentiment against immigrants stems (mostly) from economic insecurity (though racism is mixed in).
In the meantime, following the 2008 crash, the rich got richer. The maturation of capitalism has been at the expense of the vast majority of the population to the benefit of a relative few.
King: “Another economic and financial crisis would be devastating to the legitimacy of a democratic market system. By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.
“No one can doubt that we are once more living through a period of political turmoil. But there has been no comparable questioning of the basic ideas underpinning economic policy. Following the Great Inflation, the Great Stability and the Great Recession, we have entered the Great Stagnation.
“Conventional wisdom attributes the stagnation largely to supply factors as the underlying growth rate of productivity appears to have fallen. But data can be interpreted only within a theory or model. And it is surprising that there has been so much resistance to the hypothesis that, not just the United States, but the world as a whole is suffering from demand-led secular stagnation.”
The reason for the stagnation is that economies run on consumption. Demand is driven by consumers, who cannot spend if they don’t have money; the situation now throughout the world for struggling wage slaves. No, the picture is not black-and-white. It is instead a dark shade of gray: dark enough to read the proverbial writing on the wall.
King: “There has been excess investment in some parts of the economy – the export sector in China and Germany and commercial property in other advanced economies, for example – and insufficient in others – infrastructure investment in many western countries. To bring about such a shift of resources – both capital and labour – will require a much broader set of policies than simply monetary stimulus.
“It is the failure to face up to the need for action on many policy fronts that has led to the demand stagnation of the past decade. And without action to deal with the structural weaknesses of the global economy, there is a risk of another financial crisis, emanating this time not from the US banking system but from weak financial systems elsewhere.”
The environmental consequences of relying upon the inequity machine known as capitalism stem from its wastefulness: most notably chewing through natural resources and human lives with a system geared by greed and inhumane exploitation rather than planned rational sharing. The rot behind the sleepingwalking is even worse that Mervyn King acknowledges.
Larry Elliot, “World economy is sleepwalking into a new financial crisis, warns Mervyn King,” The Guardian (20 October 2019).
Larry Elliot, “The sluggish global economy needs to reform – and fast,” The Guardian (20 October 2019).
Larry Elliot, ” IMF warns there is ‘limited ammunition’ to fight recession,” The Guardian (15 October 2019).