What are the root causes of the global economic crisis?
by chilywilly
In the past decade, the world has seen the kind of power that unaccountable institutions wield. The effects of globalization since the mid 20th century have revealed highly centralized structures of power, from financial conglomerates to pharmaceutical monopolies and oligarchic neo-corporate states.
These dominant institutions not only have extensive control over resources and capital, but make social, economic, and political decisions outside the public’s sphere of influence. Their links to one another became ubiquitously apparent during the global economic crisis of 2008, and their alliances continue to pose the greatest threat to economic stability internationally moving forward.
Extensive analyses of global institutions have been done in the past by intellectuals and by courageous journalists. Much work has been done on explaining the roles that both businesses and states have to play in what's called a market society, and their respective (and general) interests have been closely examined. The work of populous intellectuals and muckraking techniques used by whistleblowers like WikiLeaks has inspired activists in communities all around the world to socially pressure powerful institutions for various humane purposes.
But pushing society’s institutions to their limits is, by definition, not enough to significantly alter the concentrations of power inherent in the modern economy. Rather, the limits must be removed and replaced with whatever level of democracy upon which independent communities may choose. How society progresses toward that point remains in question, let alone at what rate. But understanding how far-removed and undemocratic the linkage between the corporate sectors and governments reveals an honest glimpse into the underlying causes of the economic predicament with which the world continues to struggle.
Correctly indentifying the powers inherent in the marketplace, both positive and negative, is the basis for gaining a perception of the world’s democracy deficit. The most recent major deregulation of financial markets, first suggested by former Clinton adviser Dick Morris in his arguments for ‘triangulation’ (a political strategy designed to please everyone in power, rather than just select wealthy groups), that began in 1997 is nothing more than a marginal byproduct of the rise of ‘too big to fail’ institutions.
These massive, complex institutions rose to their exceedingly obese statures in accordance with undemocratic laws dating back to the Nixon era. In the 1970s, New Deal era constraints (the Bretton Woods system) created by the US government to control capital flows were repealed, leading to the first finance-related giveaway of public-power to private financial organizations. Prior to this, massive transfers of public funds or materials (research) to private firms was done more obscurely; through tax giveaways, ‘military’ expenditures, and communities diminishing their standards by providing what businesses and the World Bank call a “better climate for investment.”
By now, private financial firms and investors had the power to regulate public finance to the extent that the free market would allow them to do so.The world would soon learn that in reality, only states could prevent the monopolization and takeover of the financial markets. Thus, one logically assumes that the state may serve as a counter-balance to the corporate systems of power. Alan Greenspan’s unremitting beliefs in the “self correcting power of free markets” combined with presidential capitulation to the corporate campaign financiers led to numerous pieces of deregulatory legislation in the late 20th century that decimated this assumption.
Reality occurred to government at the peak of 2008’s financial crisis, and the US government anxiously began pouring liquidity into the ‘private’ economy and rescuing gargantuan financial institutions from illegitimate activity. All of this was bitterly opposed by the so-called left-wing groups and right-wing tea party groups, which were unified in their public voice against the bailouts. Despite the media narrative explaining a culture of divisiveness that has just recently infiltrated America, the population was united in its opposition to an unprecedented economic role for taxpayers to play.
But the US government closely followed a record of power dynamics, the uncontroversial root of socioeconomic instability, namely that governments do not listen to their populations. This makes all the above history nothing more than a footnote, because if the public voice had been strong enough to force its position upon its rulers, there would not have been any bailout of the financial institutions. The democracy deficit, or the political distance between institutions and the people, remains the culprit for the reaction to the financial collapse.
The global economic crisis, in turn, became the end result of the public voice’s inability to scream its position loud enough to pierce the ears and hearts of those who make our decisions for us: those in power.
William Shaub (U/N: chilywilly)