Will the cash return?

2009-03-30 00:00

The University of Johannesburg’s deputy vice-chancellor, Professor Adam Habib, remarked at a recent lecture how odd it is that bankers now frequently invite an “old Trot” (Trotskyite) like him, to address them. This curious phenomenon of people who are familiar with left-wing territory being engaged by the previous “masters of the universe”, is an indicator of the extent to which the world has changed in the past few months. Mind you, it could be argued that being an ex-Trot is the epitome of respectability in comparison to the investment banking community of today, when finance guru-poseur Bernard Madoff, perhaps the greatest swindler of all time, is facing 150 years in jail.

It’s refreshing to have someone like Habib whose keen analysis enables one to appreciate better what is going on in this time of turmoil. Contrast his understanding with how many seem to be confused or indeed “in denial” when faced with these unpleasant realities. A most graphic manifestation of this kind of clinging to the past is the way investment bankers, who have been bailed out by unimaginable sums of taxpayers’ money, are still demanding their fat bonuses. Of course, they are legally in the right. Contracts have been signed, many of which predate the banking meltdown. However, as some have firmly pointed out, there is a lingering moral question about insisting on these large sums effectively from the common purse when their own recklessness has left many people with threadbare pensions or even minus house and home. One would have thought that shame, rather than the letter of the law would be the deciding factor in their behaviour.

Not so, it seems. I suppose it’s human nature to hold fast to the vestiges of the good times. Another example of how we try to hold on to the past is the way governments tried to claim that the recession either would not hit their countries or that its effect would be shrugged off.

First, it was the continental Europeans, smugly regarding the crashes of Northern Rock in the United Kingdom and Lehman Brothers in the United States as an Anglo-Saxon problem which would not touch them. That was before the full extent of the “sub-prime” mortgage morass in the U.S. and how everyone was fatally connected to it were properly understood.

Other countries persisted in the fiction that they were fully or partially immune. China and India hoped that their huge internal markets would cushion them. No doubt they did to some extent, and the momentum of China’s enormous economic growth looks as if it will carry it through. However, not before some 20 million Chinese and a half-a-million Indians in the textile industry alone have lost their jobs.

Even while jobs are being lost at an unprecedented rate here at home, we too seem to be prone to a similar nostalgia for the lost boom times. So far no banks have failed because of our more conservative regulations and Trevor Manuel’s last few thrifty years have enabled him to propose an inflationary budget in which the accent is on infrastructure development which will take the edge off the unemployment. But even so, as an exporter of raw materials, we are in for a rough ride in this convulsed new world where demand for metals has plummeted with the collapse of the vehicle market.

But lurking under all this denial is perhaps the question which only a very few have dared to pose, namely, will we ever get back to the status quo ante? Economist and social philosopher Bob Goudzward of the Free University of Amsterdam writes rather baldly that: “There is a somewhat peculiar, but nevertheless almost general, public impression that the present financial and economic crisis will be a relatively short one ... That looks very improbable to me”, (“When the Money Comes Back, The Tablet, February21, 2009). Goudzwaard believes that “the search for the deep underlying causes of the crisis brings us to levels that are not usually well discussed. They are avoided even by most analysts.”

Beyond the technical problems caused by allowing the banks effectively to print money at four times the rate of the increase of what Goudzwaard calls the “real economy”, there are those more philosophical questions about the nature and purpose of the economy of money and of growth that have been left aside and which may now finally need attention.

It’s commonplace to say that every system is built upon a number of assumptions. The Western economic system is built on the assumptions of the possibility of continuing growth and ever-increasing efficiency.

The question that Goudzwaard implicitly puts to us is: what if these assumptions turn out to be false? And since there is little evidence in our world that anything keeps growing and increasing in efficiency forever (did I hear the word “sustainable”?), the chances are that they are indeed false. So if he is right then it is quite extraordinary to think that we have been basing our current and future livelihoods on a setup, the fundamentals of which were not only untrue but unexamined. What is perhaps more unnerving, but ultimately liberating, is the thought that this current crisis may be telling us the truth and forcing us finally to face it.

• Chris Chatteris is the media liaison officer for the Jesuit Institute of South Africa (Jisa).

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