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by Martin Hess
Friday, Jan. 30, 2009 at 6:27 AM
From a long-term perspective, the crisis could bring about a radical rethinking in politics and the economy away from the mantra of shareholder value and the pursuit of short-term profits. The neoliberal model of the Washington consensus has revealed its fundamental weaknesses.
NO ONE CAN ESCAPE THE CRISIS
The downswing strikes the whole world. Poor countries have hardly any chances to mitigate the consequences. Western Europe, Japan and the US are the big winners of the crisis
By Martin Hess
[This article published in: ZEIT-Online 12/16/2008 is translated from the German on the World Wide Web, http://images.zeit.de/text/online/2008/51/ausblick-krise-gewinner-verlierer.]
2009 will be a crisis year. In an interwoven worldwide economy, the downswing can now be felt in all regions and economic areas. Unemployment increases around the globe; factories close and governments of many countries try to stabilize their economies with state funds.
In the short term, everyone will lose. The purchasing power of consumers will fall along with worldwide demand. This strains businesses. Many will have to give up their independence. Some could profit from the consolidation process and gain market share: discounters like Aldi, Lidl or Wal-Mart for example or industrial firms that adjust on time to new consumer habits like Toyoto or Volkswagen in auto manufacturing or E.on and BR in the energy sector. However the economic situation of the supposed winners is also terrible. No one can escape the crisis.
A somewhat different picture is drawn for the time after 2010. For months, the headlines have been marked by horrible news on the economic future of western industrial states, above all the US, Japan and the leading western European economic nations. However these countries also have the best possibilities for overcoming the financial crisis.
Not without irony, the United States – the starting po9int of the credit- and banking crisis and shaken by serious economic turbulences – is counted among the medium-term winners. Supported by enormous state financial assistance and economic- and infrastructure programs, the land will master its problems more quickly than many developing- and threshold industries for whom the loans and structural adjustment programs of the World Bank and the International Monetary Fund often prohibit similar government aid for the economy.
For the US the sheer size of its market is impressive. As an independent state, California alone would be among the ten most powerful economic nations of the world. In addition, there is the military- and political leadership role of the land. Both make unlikely an economic crash that would be more dramatic and long lasting than the downswing of other nations.
Some European countries – not Germany – will also escape relatively lightly. They profit from an established welfare system that advocates of a deregulated market economy often criticized in the past as prohibitive. Like the US, they have the strength to support their economy with state funds and cushion the great social hardship.
Among the profiteers are those regions, branches and businesses that invested in innovations for a long time. Even in Germany there are examples that are encouraging, economically diversified regions like Munich, sectors with a high share of research and development spending like German mechanical engineering and firms with far-sighted environmental- and product policy. In the excitement over the problems of the financial sector, the construction industry and auto-manufacturing, the economic potential of businesses in environmental technology and alternative energy, in the health- and education sector has taken a back seat. Growth and employment in these areas should profit disproportionately from the infrastructure- and investment projects triggered by the crisis that are proposed by Japan, the European Union and the United States. This state assistance amounts to 1.5 percent of the gross domestic product, sometimes more.
Despite continuing economic growth, social and economic polarization has become a great problem in China, India and other regions of the South. India and China are less dependent politically on Washington than other states. However they are very dependent economically on the US as an export market. The integration of both countries in global production networks created an economic upswing but also produced or strengthened regional and social disparities. The result is a growing potential for conflict that endangers their economic development much more intensely than the economic development in the US.
From a long-term perspective, the crisis could bring about a radical rethinking in politics and the economy away from the mantra of shareholder value and the pursuit of short-term profits. The neoliberal model of the “Washington Consensus” that for decades set the framework for global economic growth and developmental possibilities of the South has clearly revealed its fundamental weaknesses. The rhetoric changes. The conditions formulated in the “consensus” still mark the political reality of countries like Hungry and Pakistan, which are not on the A-list of the International Monetary Fund. The chance of reforming this system is now offered. This chance is more than overdue.
A new order of the international political hierarchy of power is necessary. Those states that do not belong to the exclusive G8 circle must have the right to join the conversation in global negotiation processes. Reforming the international organizations to this goal would be a first step to a more just worldwide economic order.
Whether the pressure for change caused by the financial crisis will be enough to produce the necessary political will may be questioned. The powerful must share their power. The crisis will strike the poor the hardest. The money spent to bailout banks, auto firms and other businesses is lacking elsewhere – for urgently necessary measures to reach the millennium development goals set by the United Nations. A great chance is missed when the shortsightedness and self-interest of the main actors also determine the future agenda.
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