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The system’s broke – and Larry can’t fix it

Any lingering doubts that the global financial crisis of 2007 would presage a deep, worldwide recession evaporated as 2008 opened for business with a quick-fire salvo of bad news for the economy. US manufacturing slumped to its lowest since April 2003, and global manufacturing growth slipped closer to negative territory – contraction – adding to fears that the US recession is spreading.

Despite slowing growth, prices paid by factories worldwide for inputs to their production rose to a six-month high. And that was before the key input, oil, breached the psychological barrier of $100 for a barrel of crude as news of increased tension in Nigeria, a major producer, added to the pressure of increasing global consumption led by China and deepening concerns about the approaching global peak of production.

As the news piles up, house prices drop, food, fuel and mortgage repayments rise, where can you go for some explanation, forecasting and even advice? Surely Larry Elliott, The Guardian’s economics editor for 11 years must have a good handle on events? After all he spends his working life studying these things, no doubt with considerable help from the paper’s staffers.

In a long article uncertainly titled Is this the Big One, Elliot takes us on a dance through the contradictory views and opinions of a select group of politicians, accountants, business advisors, professors, bankers and sundry experts about the likelihood that current problems will coalesce into “a perfect storm” in 2008.

Elliott is either confused or he is hedging his bets. Maybe both. Nowhere in the article will you find a hint of his own analysis, if he has one. In the face of so much contradictory evidence and opinion it seems as though Elliott just hasn’t got a clue. Advice for the government? None. Suggestions to the Bank of England? None. Like most of those convinced by the argument that capitalism is the only game in town, he is left floundering when reality departs far from the theories of how it is supposed to work.

But just in case, Larry’s got some advice for us on “How to survive a recession”. And he’s trying to divert your attention from any new ideas for solutions we, or anyone else can come up with. He’s got a copy of A House of Cards. We sent it to him. But, so far, he’s ignored it. His ideas are, in comparison, disappointing. Its all about personal survival. He says: “You and I can't do much more about the economy than we can about the weather.” All we can do is live within our means, minimise our debts, spend less. Fat chance!

The Financial Times looking out through its rosy pink pages, is at least calling for more of the “financial liberalisation” – by which the paper means easy credit - that facilitated the globalisation process, after a survey of economists predicted a dire year for capitalism.

One thing anybody with half an eye on events can see is that the system’s broke and nobody seems to know how to fix it. Most kinds of regulation having been dismantled in the last half-century to remove barriers to corporate profitability. Governments and central banks can do little more than tinker with interest rates and move credit and debt around from one balance sheet to another. And the old medicine just seems to make things worse.

But help is at hand. Just as the previously “alternative” energy principles and technologies have become mainstream in the face of climate change, so our proposals for composting capitalism are beginning to make sense to a lot more people. Join us in London on 24 January for a discussion about creating sustainable alternatives to the market economy.

Gerry Gold
AWTW economics editor
4 January 2008

Titos says:

Reality has a way to always take revenge. But who are going to be the losers? Fantasy game erected mountains of fictitious capital, but the dance only survived because the multitudes bought the dream, just when it was so (profitably for the few who are always there from the beginning) when it was so expensively glittering. In short, the many always buy at the top. Last to enter, first to go. Isn't this always the story? Yes, fantasy game for all, but the consequences are always for real. And now, whence comes the new bubble? I define a bubble as that which causes pain when deflated. OUCH!

Penny says:

Merrill Lynch and Goldman Sachs have both now announced the arrival of a recession in the US. According to CNN the tipping point for both was a report showing a sharp jump in the US unemployment rate in December, coupled with little growth. "Friday's employment report strongly suggests that an official recession has arrived," wrote David Rosenberg, North American economist for Merrill, in a note entitled "Recession a reality."

It is obscene for Larry Elliott to talk about individuals cutting spending and borrowing when he and others have cruised along in a global economy whose growth for many years has been based on fatal recklessness - both fiscal and environmental.

People may well follow his suggestions, but not from choice - they can't pay back their existing loans and won't be able to borrow more - and they may have to cut spending to the bone if they face unemployment thanks to a recession caused by capitalism's recklessness.

But can the Guardian or the Observer or any of the liberal papers dare to review, or even acknowledge, a publication like A House of Cards. If they do, they will have to address the issue of the alternatives to the current economic structures. Their version of Star Trek's "prime directive" is that capitalism (even when they think it is "flawed" as Elliott does) is the only possibility for humanity. Not-for-profit alternatives don't get a look in.

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