Is the world burning?

The world is burning but not only because of the great global crisis that is hitting wealthy countries and threatens to spread to the rest of the planet, but also because of other crises that arose from the same causal matrix, although longer- standing. Those crisis are associated to rampant inequality; to the painful lagging behind of communities deprived of their own voices, healthcare, food, shelter, safety; to the existence of hundreds of millions of victims of injustice, greed, and fundamentalism; to the grievance inflicted on their own privacy and significance.[[This article correspond to chapter 1 of the book Global crisis: adjustment or transformation, Editorial Opinión Sur, to be published in 2013 ]]

The world is burning and it is worth paying attention to the noisy sound of alerts, but it is even more important to face the challenges. Our socially inflicted ills can be overcome if we act differently from what we have done until now; if we review what we have become in order to understand the dynamics that condition us; if within these flows we can identify the achievements worth preserving and what is indispensable to change; if with a fair mixture of determination and caution we change course and the way of functioning.

No one owns the whole truth or has magical recipes, even though a hegemonic thought has been forced upon us, trying to convince that its perspectives, partial and subjective as they are, represent what is objective, valid and right. How much damage this fatuous attempt to homogenize the heterogeneity of understanding, interests, needs, emotions and hopes has inflicted upon humankind! This diversity holds the key to our destiny and the enriching synthesis that day after day we may elaborate will support better ways to conduct ourselves and live together.
The deep crisis affecting wealthy countries cannot be solved by acting only upon the mechanisms that transmit effects (such as fiscal deficit, lethargic competitiveness, and explosive indebtedness); we must tackle the causes that -not by accident- have been concealed, ignored or discredited.

From my own imperfect and partial point of view, I say the following:

(i) The main challenge is to configure a new systemic course and a different way of functioning; it is to transform, not to restore. Some perverse economic dynamics have become established that lead us to recurrent crises. Unless we dismantle these dynamics, the huge efforts being deployed in order to deal with the crisis will not only be utterly useless but will also end up benefiting the perpetrators.

(ii) The dynamics that have led to the crisis have several axis and dimensions, all of which call for review and transformation. One of the most important features of those processes has been the concentration of wealth and revenues by some privileged minorities, globally and within each individual nation, province and city.

(iii) Concentration generates enormous gaps and injustice, which in turn undermines social cohesion and frustrates or misguides much of the talent and potential of nations. It also drives us farther from organic growth, exposing our economic functioning to bottle necks that lead to systemic instability.

(iv) Demand is segmented among those whose resources greatly exceed their basic and cultural needs, those who live in poverty and cannot meet their livelihood needs, and middle-class sectors that expand in times of growth and whose demand is supported by the sources of financing they can access. Thus the way the system “resolves” the gap between the supply of a productive apparatus that permanently seeks to expand and a demand that would lag behind if it was not for the spare wheel provided by consumer financing.

(v) This mechanism works up to a certain point: the limit is the repayment capacity of borrowers. When that limit is exceeded, the situation becomes untenable. At first, the problem is concealed by injecting additional financing, time after time, until –to the surprise of those who ignore the artificial nature of these dynamics- default rates grow geometrically and cause destructive chain reactions. The crisis breaks out.

(vi) The crisis was not generated in one day; the concentration dynamics long predates the crisis, but its effects have been repressed for as long as the dam could hold. When the pressure of bankruptcies turned into an eruption, lava started pouring out and burnt families, companies and institutions along the way.

(vii) Was this inevitable? not at all. If instead of preserving concentration at any cost, a sizeable portion of the new wealth would have been devoted to increasing genuine income of middle-class sectors and taking huge majorities out of poverty, the system’s path would have been very different. Demand would have organically accompanied the growth of supply, and financing would have remained within safe limits; accordingly, the gap would not have existed or would have remained within manageable levels. Why was this path not taken, then?

(viii) There are several answers to this question but all heavy: those who benefited from concentration would not give up their privileges; rather, they chose to exercise them as fully as possible; untamed greed took over major corporations, speculators, those who disregarded regulations with the impunity that comes from disproportionate power, the control they exercise over the State and its strategic decisions. How did they do it? In many ways: by subordinating other players through the use of force, bribery, buying their conscience; by taking control of economic policy and opinion leaders, thus imposing their own views of the political and economic agenda on almost the whole world; by funding strategic think tanks that provided ideological justification to their own interests; by destroying diversity and imposing the supremacy of their resources and influence; by lining up petty interests of servants and scribes.

(ix) Was the process that ended up by imposing an almost universal primacy of economic concentration (and the resulting political, media and ideological concentration) so appallingly simple and straightforward? No; we would deceive ourselves if we thought that a few paragraphs are enough to describe all the causal relations and the full range of players who participated –whether fully, partially or not aware at all- in a number of simultaneous processes that influenced one another and –lest we forget- had their own characteristics depending on the circumstances and times involved.

(x) What other factors had a strong impact? From an economic perspective, there are a number of other variables: economic concentration is not an abstract phenomenon; it is expressed through specific players euphemistically referred to as the “markets”. “The most powerful players in the markets are investment funds that manage 18 billion Euros worth of assets: 55% of those assets come from individual investors in the United States, 32% come from Europeans, and only 13% come from the rest of the world [[The largest asset management company is Blackrock; it manages assets equivalent to twice the GDP of Spain.]]. Next in importance are pension funds that manage about 14 billion Euros. Then there are sovereign funds established by nations with a fiscal surplus; the most important ones are from Abu Dhabi, Norway, Saudi Arabia, China, Kuwait, Singapore and Russia, which manage 2.5 billion Euros. Then there are the influential hedge funds or high-risk funds that, although they manage 1.5 billion Euros worth of assets, use debt leverage tools and derivatives that enable them to multiply their actual impact on the markets: their aggressive goals and highly speculative strategies often result in major instability, accompanied by sprees and panic” [[Information gathered from several sources by David Fernández, from Spanish newspaper El Pais, which was briefly included in its edition dated August 4th, 2011.]].

(xi) Not only does this handful of players manage substantial resources; additionally, the way how they operate is terrifying; their goals, evidenced in their investment criteria, result in systemic instability. In fact, each fund is managed by professionals whose mandate is to maximize benefits weighted by the risks taken. As a result, allocation of their substantial resources depends on profitability expectations and not on other interests or goals. So much so that the manager of a fund that fails to attain the expected profitability goals will not be rewarded with the generous “success” bonuses usually paid to these managers. Thus, with a few honorable exceptions, the world is left at the mercy of financial results-oriented managers that are under no obligation to consider the consequences of their actions on society as a whole or on the system that favors them. We are in the presence of burocracies that have been trained and encouraged to speculate; that are compensated on the basis of their short-term financial achievements; that do not measure or consider the collateral effects of their decisions.

(xii) These funds (the hard core of the “markets”) gather savings not only from affluent sectors but also from middle-class segments that have substantial weight because of their number. The tragic thing for these small and medium-sized investors (eager to obtain the highest possible return on their investment) is that their monies are channeled to investments that, in the presence of a crisis and after crossing the first limits where the weakest succumb, end up generating systemic instability that attempts against their own interests

(xiii) Yet, these factors do not describe all the causes behind the crises. Another major factor is the diversion of consumption into irresponsible consumerism that, with the complicity of corporations and their advertising agencies, ruthlessly uses natural resources that are either non-renewable or difficult to renew, generates waste and combustion that pollute the environment, thus generating processes that have worldwide impact (global warming, land erosion, loss of aquifers, among others).

(xiv) Scientific and technologic development can play a contradictory role in a crises: on the one hand, it provides spectacular breakthroughs that have an impact on the standard of living of the world population that has never before been seen in the history of humankind; on the other, a substantial part of that scientific and technologic development operates to speed up the economic concentration process, the destruction of the environment, existential alienation, military destruction capabilities. As happens with all knowledge, the impact of science and technology on our lives depends on who controls their orientation and use. For example, if those who have the economic power to control medical research want to make sure that no cure is found for a given disease in order to benefit from the continued sales of medicines produced by them, they will hide or repress their findings for as long as it suits them. Likewise, if the industrial complexes that manufacture sophisticated weaponry [[According to US Defense Department figures, just the wars in Iraq and Afghanistan had cost an average of $9.7 billion a month.]] need to preserve a “market” that buys their products, dark forces will remain at play in order to destabilize already conflictive regions. This orientation of scientific and technologic development towards goals that do not help build fair and sustainable growth is present not only in the field of healthcare and weaponry, but in every field of human activity: from the production of seeds to the generation of energy, transportation, education, abuse of disposable goods, and the list goes on and on up to the extent we are capable of pinpointing good and bad use of science and technology. Obviously, it is not about blocking scientific and technologic development; it is about steering it firmly towards the welfare of peoples and the preservation of our planet.

(xv) While the affluent worry about a crisis that they believe to be only financial and the media print headlines that interest, scare and paralyze their audiences, just in Somalia 29,000 children under the age of five starved to death between May and July 2011. The difference in the concerns that move or paralyze the ones and the others can be understood even though they are unacceptable. Inequality, poverty, the political overlooking of majorities, trade oppression, ruthless speculation, seem to flow along separate riverbeds, but in fact they do not. We were shocked by the outbreaks of violence in the Arab world, Greece, London, Madrid, Chile and a number of other less known places, but it is clear that outrage and popular reaction is spreading like wildfire.

(xvi) In the face of a crisis, nations, corporations and individuals attempt to pass the cost of that traumatic situation on to others. It is obvious that the most powerful players have a greater ability to get rid of their own responsibilities. That is why the less powerful rise in an effort to protect their threatened interests. Neither panic nor a bewildered look will help. It is in the midst of a crisis that crucial decisions are made. Solutions designed to “bail out” those who steered the world into a disaster burden the weakest with the weight of a restoration that will reestablish dynamics similar to those that generated the crisis in the first place. As mentioned, the option today is to transform, not to restore.

(xvii) Any transformation needs to build upon what already exists not destroying valuable accomplishments; but it is essential to establish new ground rules that enable us to adjust the systemic course towards a more egalitarian and sustainable development.

(xviii) This is no minor challenge: we will need to develop a rightful way of thinking in order to ensure a rightful way of acting. It will be necessary to understand what is going on, no longer from the perspective of the privileged but from the perspective of social justice and a full-fledged democracy far less imperfect than the kind now prevailing in most nations. It will also be necessary to replace those leaders who lack the ability or willingness to step forward and lead the way towards a much-needed transformation.

It is true that the world is burning, that reality is complex and challenges are neither scarce nor simple. But those challenges are what we need to confront. There is also talent, determination, prudence and strength to move forward. We are at the threshold of a world in need of transformation and this is the time to do it, when the lava has not yet crystallized. It is up to every one of us to do our best in order to change course towards a more sustainable, fair and compassionate referential utopia. This epic march is not new; it comes from old times and is full of all the imperfections and perfections of human nature. All that has changed is that, today, we are the ones called upon to move forward.

Leave a comment