The
crisis consists precisely in the fact that the old is dying and the
new cannot be born; in this interregnum a great variety of morbid
symptoms appear. (Antonio Gramsci)
by
Jayati Ghosh
Part
5 - Restructuring Economic Relations
The boom was
not stable or inclusive, either across or within countries. The
subsequent slump (or ‘secular stagnation’) has been only too
inclusive, forcing those who did not gain earlier to pay for the sins
of irresponsible and unregulated finance.
As economies
slow down, more jobs are lost or become more fragile, insecure and
vulnerable; and people, especially those in the developing world who
did not gain from the boom, face loss of livelihood and deteriorating
conditions of living. This is why it is so important that we
restructure economic relations in a more democratic and sustainable
way.
There are
several necessary elements of this. Globally, most now recognise the
need to reform the international financial system, which has failed
to meet two obvious requirements: preventing instability and crises,
and transferring resources from richer to poorer economies. Not only
have we experienced much greater volatility and propensity to
financial meltdown across emerging markets and now even industrial
countries, but even the periods of economic expansion were based on
the global poor subsidising the rich.
Within
national economies, this system has encouraged pro-cyclicality: it
has encouraged bubbles and speculative fervour rather than real
productive investment for future growth. It has rendered national
financial systems opaque and impossible to regulate. It has allowed
for the proliferation of parallel transactions through tax havens and
loose domestic controls. It has reduced the crucial developmental
role of directed credit.
Given these
problems, there is no alternative but systematic state regulation and
control of finance. Since private players will inevitably attempt to
circumvent regulation, the core of the financial system – banking –
must be protected, and that is only possible through social
ownership. Therefore, some degree of socialisation of banking (and
not just the risks inherent in finance) is inevitable. In developing
countries this is also important because it enables public control
over the direction of credit, without which no country has
industrialised.
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