Ever since the subprime market collapsed in America things haven’t been looking so good for global markets.
Our current situation has come to be known as the GFC (Global Financial Crisis) which has to be a euphemism if ever I heard one. What we are seeing is not a ‘crisis’. Crisis is too specific a word: a plane crash is a crisis; a terrorist attack is a crisis. A global collapse of capitalism is NOT a crisis…it’s a disaster of incalculable proportions.
So let’s have some linguistic clarity and call a spade a spade. We are in a global depression.
I’m not an economist and I don’t pretend to understand the way these things work or unfold…but there’s two things floating around in cyberspace that have caught my attention and I want to point people towards.
Despite my lack of economic knowledge, I have been making a feeble attempt to try and at least understand what it was that caused the financial crash.
Veritable mountains have been written about this – including Kevin Rudd’s much discussed article in The Monthly – and yet there is no single, unified understanding of where and why it all went wrong. We can accurately predict to millioneths of a second what happened after the Big Bang. We can explore the deepest trenches of our earth’s great oceans. We can map the synaptic pathways of the human brain (with some accuracy). We can unlock the humane genome. But we cannot make sense out of the intricacies of global capitalism.
That’s why my eyebrows almost rose up off my forehead when I read Paul Krugman’s recent opinion piece in the NY Times.
The more one looks into the origins of the current disaster, the clearer it becomes that the key wrong turn — the turn that made crisis inevitable — took place in the early 1980s, during the Reagan years.
Attacks on Reaganomics usually focus on rising inequality and fiscal irresponsibility. Indeed, Reagan ushered in an era in which a small minority grew vastly rich, while working families saw only meager gains. He also broke with longstanding rules of fiscal prudence.
On the latter point: traditionally, the U.S. government ran significant budget deficits only in times of war or economic emergency. Federal debt as a percentage of G.D.P. fell steadily from the end of World War II until 1980. But indebtedness began rising under Reagan; it fell again in the Clinton years, but resumed its rise under the Bush administration, leaving us ill prepared for the emergency now upon us.
The increase in public debt was, however, dwarfed by the rise in private debt, made possible by financial deregulation.
The change in America’s financial rules was Reagan’s biggest legacy. And it’s the gift that keeps on taking. [my bold]
Perhaps it’s not rocket science – but it helped clear up my thinking a lot. This global collapse was Reagan’s biggest legacy. And it is a gift that keeps on taking.