Touching From A Distance

Apologies for the oversimplistic and patronizing tone of my last post, it is for the magazine I write for in Jordan aimed at bored upper-middle class housewives who incidently have to be spoken to like that. The editor of coarse told me that I had to cut out all the "communist propoganda" so it would be nice to show people the whole undoctered version. Anyways, feel free to comment

If you haven't already been hit by the global economic crisis, the chances are you've been following it with huge anticipation and anxiety, as the world's leading economists and commentators predict an economic Armageddon, set to hit every family in the world, it might spark more than a few butterflies to set in your stomach. All that's missing from the present bleak and dire apocalyptic landscape are the four horsemen, but they may come in time. For now, it's probably a good idea to stock up on your fuul beans and rice, because if is all goes as predicted, then there's going to be some very tough days ahead.

Since the days of Thatcher and Reagan, much of the western world has been almost blindly committed to free-market capitalism, a set of economic policies which was widely considered to be behind the rapid growth of much of the world's economies in the past decade, despite a couple of hiccups. A dismantling of previous financial restrictions, regulations and market restraints in the eighties and nineties contributed to an unprecedented fiscal boom, with the financial sector in particular profiting substantially from this growth. A class of yuppies, the intelligent and entrepreneurial boys in pinstripe suits on New York?s Wall Street and in London's City district, were said to be the masterminds of this financial boom, leading to a general rise in wages ensuring most people now had enough disposable income to own their own homes, holiday abroad with the family and buy new cars. Wherever you went, economic growth seemed palpable, lining everyone's pockets.

However, in the past few months, reality kicked in. Although the I-pods and new mobile phones we bought during these years of prosperity may be quite real, the economic growth we thought we were witnessing was nothing more than smoke and mirrors, a mirage of opulence which city bankers exploited to the extreme, and now this bubble has burst. 'What went wrong?' seems to be the question on everyone's lips, 'how could my house price drop from a nice 6 figure sum, to the price of a Mars Bar?' The truth is that houses are worth little more the bricks and mortar they?re built from. House prices being vastly overvalued, and banks giving out mortgages to anyone who could sign their own name, regardless of their credit history were elementary behind the crash in the housing market. With increased liquidity and a property boom, banks and building societies were able offer 'sub-prime' mortgages to aspirational working classes and middle-classes, mostly figures which were considerably higher than their wages, or than they could realistically afford. The speculators gambled people's savings to for a bonus to buy a new Porsche and when it all went horribly wrong, they panicked.

Although it's too not helpful to compare modern events to that of the Wall Street Crash of 1929, economists have noticed some similarities in the culmination of economic crisis' hitting the world at today, with what could be end in situations similar to that of the Great Depression, with the Roaring Twenties ended on Black Tuesday and lead to the Great Depression. America too, since 1919, had been similarly enjoying an economic boom, sustained high levels of unemployment and banks with enough liquidity to offer loans and credit to individuals and big businesses alike. With the plummet in the price of stocks on Black Tuesday after mass, and then panic selling after collective recognition that stock prices were disproportionate to actual profits, shattering public confidence with $14 billion lost on that day. The result was nothing short of a catastrophe across the world, with millions of jobs lost, homes reprocessed and savings lost. Businessmen resorted to selling apples on street corners, proud homeowners forced to live in shacks and of coarse, huge political upheaval, with Fascism spreading in central and Eastern Europe, the catalyst for the world?s bloodiest war.

If it was to reach these levels today, the impact of globalization would make it much more far reaching, and certainly not limited to a European field. The lack of effectiveness of an increasingly desponded and divided EU to Russian encroachment on Eastern Europe would make huge changes on the current power-political landscape, with an increasingly confident and aggressive Russia bullying many smaller nations they feel are in their zone of influence. The USA will of coarse lose its influence and effectiveness on the global political scheme, which may not be a necessarily bad thing, but it will most likely mean a reduction in aid to developing nations such as Jordan, and pressure on human rights in certain developing countries will most likely take a back seat. Put into the put a reduction in demand for commodities and fall in the number of tourists from the developed to the developing world, the fall of Americana could contribute to a very dire situation for the whole world.

This crisis, if it hits the predicted depression levels will of course be very different in its impact and appearance, it most likely that not will just end in a recession and eventual rise in consumer and public confidence. There has, as of yet, been no mass panic selling of stock, but that could change at any time, but if it did happen, the results would be catastrophic and there has been much speculation about a financial meltdown and collapse of the fiscal system as we know it. Features of this depression would be high unemployment, mass closure of businesses, inflation or price deflation in some areas, such as houses and possibly repossession of homes. Indeed, even the Director General of the IMF, Dominique Strauss-Kahn, for some the bastion of free-market capitalism, admitted that global financial systems have been pushed "to the brink of systematic meltdown"

What is almost certain is that for the majority of us, we will be slightly more out of pocket that in previous boom years. Major changes in our daily lives are certain to come about, credit will be much more difficult to obtain from banks, so most who of us will have to put off that dream car or home for the time being. Unemployment figures are already at record levels for decades in many countries across the world and are expected to get gloomy, with an expected increase of 350,000 more redundancies in the UK over the next year predicted by the CBI, and the largest trade union, the TUC, predicting figures closer to 700,000. New York alone is predicted to lose 165,000 jobs and two-thirds of the largest 381 metropolitan areas in the states already in recession, with many more on the brink. With banks reluctant, or unable, to provide short-term loans to businesses, a common business procedure, many enterprises will then have to cut personnel to balance the account sheets.

Politically, change is already about, with the once dirty words of 'nationalization', 'Marxism' and 'Socialism' being banded about everywhere from newspapers to the workers? floors and sending jitters down the spines of some. The once respected bankers of high-finance have been criticized en masse by the media, described as 'vampires', one commentator urging the government to ?walk them to the Wall Street roofs used in the 20s for suicide missions and play Van Halen's Jump? and even the British, ultra-conservative tabloid exclaiming 'the greed and stupidity of the spivs in high-finance' on its front-page. Indeed, the public appears to hold bankers and brokers, the chiefs of capitalism at this time in the same esteem as serial killers.

If the economic slump hits hard then it is likely that there will be a pronounced political shift to the left and far-right, with political discourse becoming much shriller. Obviously, many will blame the current laissez-faire capitalism for the job losses, wage cuts and shorter working hours, and back the re-nationalization of key industries, which will be a very appealing prospect to many in Europe. The far-right has traditionally benefited from increased popularity in times of economic woe, and the current situation has worried many centrist politicians across the world, especially with the prospect of gaining the support of the out-of-pocket middle-classes. The recent election triumphs of the far-right in Austria were largely put down to the worsening economic conditions in the country.

These prospects will assert new challenges for current governments, and many leaders it appear to recognize the will for change and become more attentive to the needs of voters, who will never tolerate the settings of malnutrition and unemployment which was so prevalent in the thirties. Ironically, it seems the public and politicians have been struck with a good deal of hindsight, as the ongoing US elections testify too. Perhaps due to collective blame of the current neo-conservative administration, or the sentimental impulse for a Democratic President of the same caliber as President Roosevelt who pulled the US out of the last major economic crisis, it seems highly probable that Barak Obama will be awarded the presidential title in November, after a recent surge in popularity.

The world has come to understand the need for drastic and immediate action will stave off a financial meltdown. One unlikely hero came into fruition. After consistent batterings on the domestic stage and repeated threats to his leadership, with a dour face and awkward posture, Flash Gordon stepped forward as the man with a plan to save the world's economy. With an uncharacteristic smile, Gordon Brown asked to be called 'just Gordon' when one reporter suggested he should adopt this superhuman title, and at present he seems to be the man in the know, with an economic initiative of visionary proportions, which world leaders from Washington to Tokyo have adopted. The plan itself was one not just of restoring public confidence but also of increasing the dependability of banks. In typical superhero style, inefficient and unpopular bank bosses (some world say crooks) were thrown out of their executive offices, with more than a little pressure from the government. The economic initiative included part-nationalization of these citadels of finance, restoring public confidence and relief, as a bank run by the government will think again before evicting potential voters from their homes because they missed a mortgage payment.

The economic scheme has seen a united effort from international community, at a time it would be extremely tempting for nations to squabble, initiating insular and conflicting economic policies. Britain has initially purchased a $63 billion share in struggling banks, the Eurozone paid out over $2 trillion and the USA announced a package worth $700 billion. Whatever happens now, it will almost certainly be nothing short of a revolution of the financial system and political landscape. Regulation and overview of the financial and banking sectors will be put firmly into place. It will probably not be enough to stave off a recession, but it will most likely be enough to avert a depression. It also looks like a time when the state gets more involved in business affairs, and I would predict the government to oversee a mass building of homes, along with eco-friendly power plants, which would not only create jobs but reduce the west's reliance on fossil fuels and oil, which had a hand in the current crisis. So as the stocks plummet, it could be a slightly better time for our environment.

Whatever happens now, of coarse nobody knows, but there will be changes which affect every one of us. The times of plenty have passed, and the days of tightening our belts are upon us. We may not be able to afford the latest technological gadgets and holidays to Mediterranean islands, but do we really need these things? Instead, we have a chance to build the world anew, to think about the wider impact of our actions on the planet, environment and people, to redress the problems that globalization brought too many in the third world and learn from our mistakes. It will be back to basics for the time being, banks will treat us as customers rather than their personal piggy banks, and even if not, at least we can sit back with smug smiles on our faces at the pictures of bankers and speculators who caused this crisis, with their office belongings in cardboard boxes as they join the lines of unemployed that they helped to create. We the people are in charge of your ivory towers of capital and we won't get fooled again.