(Part 2) – Published on Current Concerns no. 19, by Werner Wüthrich, november 2010.
Increasing numbers of soup kitchens – However, there are other statistics as well. Two examples:
- 1. The number of Americans living on food vouchers rose by 7 million last year. More than 40 million US-Americans rely on this federal support, which is today´s equivalent of soup kitchens. (That was how communities and private organizations had eased the misery of Americans during the Great Depression in the 1930ies.)
- 2. Despite economic growth only few jobs are created. Why? Another example for illustration. The US company Apple has made record profits in the last three months. Business ran better than ever before – China and other Asian countries is where production takes place. Rescuing efforts of governments and reserve banks have led into absurd situations.
Some more examples for that:
State owned mortgage financing: … //
… More construction sites:
Other areas call for similarly robust interventions. In the globalized world there are huge disbalances: Roubini and Mihm sharply critizise budgetary debt and trade deficit of the US – mainly towards China –: “The status quo is unsustainable and dangerous, and absent some difficult reforms it will ultimately unravel. Indeed, if the United States doesn’t get its fiscal house in order and start saving more, it’s headed for a nasty reckoning.”
Regarding Europe they are just as frank: “Some of these nations – particularly the so-called Club Med countries of Greece, Italy, Portugal, and Spain – may default sooner rather than later, threatening the European Union and potentially plunging these regions into the sort of chaos that touched Argentina in 2002 and Iceland in 2008. These tremblors will shake the global economy. But they’re minor compared with the “big one” – a rapid, disorderly decline of the dollar.”
Whatever the reasons for global disbalances and increasingly unjust distribution of wealth may be, they enhanced the uneasiness towards globalisation and freetrade. “The recent crisis has made it clear that the “Great Instability” may be a better description of the coming era than the “Great Moderation”.(…) globalization may well usher in far more frequent and virulent crises. The speed with which financial capital and hot money can move in and out of specific markets and economies has increased the volatility of asset prices and the virulence of financial crises.”
The authors reckon that some countries might regulate global trade more tightly in future, control and capital flows and things like that. Also a «broad reaction against free market economy is conceivable».
What are the responsibilities the nation state has to fulfil? “Paradoxically, making free markets function better, and enabling workers to be more flexible and mobile (…) requires more, not less government.”
The nation state provides necessary education and training, creates a safety net and mitigates unequal distribution of wealth and income.
Noriel Roubini and Stephen Mihm conclude their very interesting and well written book with the appeal to move forward: “In the shadow of the worst financial meltdown since the Great Depression, many policy makers and pundits have observed that “a crisis is a terrible thing to waste.” This is true. We will plant the seeds of an even more destructive crisis if we squander the opportunity this crisis has presented to us to implement necessary reforms. That opportunity would be a terrible – indeed, a tragic – thing to waste.” (full text).