Category: MNI View Created on Saturday, 19 May 2012 01:27
I am breaking a two month self imposed embargo from writing on anything political to address recent statements uttered by UN Secretary-General, Ban Ki-moon, on the changes required to fix the most pressing problem confronting the world today.
Mr Secretary addressing the UN General Assembly’s ‘high-level’ debate on The State of the World Economy and Finance and its Impact on Development stated, “It is time to recognize that human capital and natural capital are every bit as important as financial capital.”
It seems Secretary Ban was in an enlightened mood as he further chimed, “Let us face the facts: the old model is broken. We need to create a new one – a new model for dynamic growth,” said Mr. Ban, “A new paradigm based on stable economies and decent jobs and opportunities for all.”
I heard what Secretary Ban said, I digested it, but I fail to take his statement seriously. Certainly, a new paradigm is needed but a new paradigm for whom may I ask? This global recession that raised its devastating head in 2008 has gripped the world in a state of aching uncertainty. Families, companies, governments and all manner of institutions have felt the crippling effects of the new state of global affairs. Billions of dollars have been pumped into stabilizing regional and local economies, and the least favoured, often repeated word by politicians, is that of austerity.
Governments have implemented cuts across the board; some cuts so drastic that many economic analysts have questioned whether some austerity measures have gone too far. Snuffing expenses is vital, even in times of robust growth and prosperity, but it becomes more telling in tough economic times. As governments roll forward with their cuts, so too must there be a well thought out and actively pursued plan for growth.
What I have noticed is while governments and some economic theorists are busy advocating cuts, the global players- the big banks and financial institutions who got us into this mess - are continuing to make insane profits and are yet still taking risky bets, somewhat reminiscent of the causes that got us here in the first place.
US$2 billion in losses by financial institution JP Morgan Chase, yet CEO, Jamie Dimon's $23 million pay package has been secured at the bank's annual meeting last Tuesday. It is almost certain that JP Morgan’s balance sheet can absorb these losses. The Wall Street Journal reported the company announced a profit of over $5 billion during the last earning season.
The Wall Street Journal further reports in a recent editorial that “Mr. Dimon has been a vocal critic of regulatory excess—pushing back forcefully against schemes that he believes will strangle American finance and with it the economy.”
Surely, JP Morgan’s business is built to a large extent on taking risks but perhaps Mr Dimon should not be fighting so hard against better regulation as clearly, this massive loss seems symptomatic of wreckless behaviour on behalf of the banks, considering what transpired to cause the meltdown we are now undergoing.
Companies do need to operate at a profit, as is the expectation from the financial and economic models in which they operate. But I am inclined to think that there seems to be a flaw in the system. All around us the global economy looks to be standing on straws yet the big cats continue to eat the fattest pieces of meat at their own party. So yes, Mr Secretary General, we do need a new economic model. The New World Order, so enshrined in the grab all you can capitalist mentality has failed - or is it that it is failing?
Presidential election strategists in the United States on the opposing side are looking to frame this November’s race for the White House as a verdict on President Obama’s stewardship of the U.S economy. I do not know if I should switch off my television each time that argument is presented. For as much as job growth is lacking in America – the same problem is global and brought on mainly by the same proponents of Obama’s bad stewardship of the economy. And despite the dire straights in which the global economy finds itself, a few already wealthy tycoons have done exceedingly well in these tough times of increased austerity.
Capitalism has served up growth, innovation and progress for those that subscribe to it and follow it faithfully. So too I will say that the flaws of capitalism have once again showed us the destruction caused to livelihoods, and those flaws yet continue to gnaw a gaping hole in economies that are seeking desperately to rebound.
Money is there to be made in both a bear and bull market, it just seems as if those at the bottom of the economic pile are being further squeezed into financial oblivion. Look at Greece and the torment that is ongoing due to the mismanagement of its finances. Now we see the Greeks encountering political, financial and social instability. It does seem like an exit from the Euro is now the only saving grace both for Greece and for the wider eurozone.
But consider this; is it not ironic that the country that boasts of being the "birthplace of the Western democratic systems" is the very same country who may yet bring the whole deck of cards crumbling down?
So Mr Secretary General, I agree with you. We need a new global economic model, one that deals in a fairer distribution of wealth and resources. For the world and the global economy to continue along this path of volatility and greed, I fear our economic model will not sustain any prolonged growth for anyone, for much longer.
Photo Credit To The Coming Depression
Jeevan Robinson is Founder & Editor-in-Chief of MNI Alive, the Caribbean’s global marketing, news & information (MNI) news magazine.
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