economic crisis

Our economic crisis is, without a doubt, the most interesting social event since the turn of the millennium; it has become the talking point of almost all conversations and it has gained a whole new mystical language of its own with buzz words like CDOs, CDO squareds, CDSs, ABXs, CMBXs, etc. While most see these financial products as an abhorrence of a corrupt system, I see them more as an anthem for human ingenuity and creativity. The unravelling of our economic crisis, its dimension and impact, and our chosen way of dealing with it, will shape our society in years to come and will place our generation at the centre of a new historical narrative.

In retrospect, the current economic situation is an absurd one; after reaching what some called the end of history (capitalism triumphed), living in the age of abundance (cheap everything) and living in the information age (all human knowledge is now instantly accessible) we arrive at the point of not knowing what to do next and possibly standing to lose all this prosperity!

How did this happen and nobody (apparently) saw it coming?

There were three main interconnected events that drove this crisis. First, there was a significant shift from the public to the private spheres in the late 70s and early 80s, in the developed world, and in the late 80s and early 90s in the rest of the world. The mass privatisation of that time was not only substantially contradictory to the social gains achieved since the beginning of the century, it also helped to push forward a level of perceived, and to some extent, real economic progress that earlier generations could have only dreamt of. Suddenly, we were all showered with extra cash without any need for extra production. The core objective of these privatisations was to stop and reverse, to some degree, the drift of democratic countries after the Second World War towards social democracy. And that was successfully achieved.

Second, this private ownership drove an agenda strongly based on efficiency gains. Societies collectively decided to forego long term investments that delivered most of the social and economic progress since the Second World War; key investments in education, health care, social security and transport infrastructure were put on hold indefinitely, because monetary returns were not immediately obvious. China, which abolished universal health care in 1979, has used these kind of efficiency gains to really push economic indicators, such as GDP, up and become an economic success and an example to other nations in the process; the real cost of this decision will only be unveiled at some point in a distant future. It is obvious that this kind of macro-economic decision would produce an extreme amount of surplus wealth with costs being deferred, first to the lower classes – now that their capacity for upheaval is greatly diminished with break up of the unions, etc – and second, to future generations in the form of credit.

More shockingly, this surplus of cash and wealth was not invested in anything that could benefit the society at large and instead was pocketed by few. The rest got a promise of cash and wealth – mostly in the form of credit. This drove inequality further forward and most social gains from the post-war period have been eroded. The consequences are being felt now, with the absence of a national health service in the United States making every lost job produce a larger exclusion for that individual than in previous recessions.

Finally, the private ownership philosophy changed our collective mindset. We became more selfish and atomised in the process – albeit, I believe and hope, momentarily – with increasing commodification of all aspects of our lives. For example, our homes became an asset: a shift from homes, a sacred place where individuals enjoy the company of each other, to houses, a tradable commodity where profit is the key driver. This turned out to be the key catalyst of the economic crisis. The housing crisis is certainly a massive, government sponsored, pyramid scheme that has left some extremely wealthy, but, as most pyramid schemes, left a majority to foot the bill.

Throughout this time no self-respecting commentator failed to call for reforms to cure society’s ills, for which the remedy was largely the need for more competition in services and education, more freedom for the market in production and consumption, and a more disciplined and streamlined state. The general philosophy has been focused on free markets and private property, where people can compete for resources using social status or money extracted from credit. This competition is not only for money, jobs and houses as we may have observed in the past, but the competitive philosophy now extends to all areas of society with education and health care taking the lead.

Another evidence of the increasing atomisation of individuals is that few think this crisis will affect them. Inflated property prices, alleged job security and personal financial investments have left an entire generation feeling smug about themselves and drunk in security. The mindset encourages competition and a belief that social equality is definitely not the best policy from an individual’s point of view.

This excessive individualisation has led to a gigantic stratification of society, where everyone has an exact social positioning and can compete for everything in an increasingly disorderly fashion – a societal league table. I do not think this symbolises who we are and, it is not the kind of society we ought to be promoting.


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