Economic Recession and Political (In)Stability

Financial help now or spending peacekeepers later… that is the alternative put on the table by Liberia President Ellen Johnson-Sirleaf as the effects of the economic downturn are deeply felt in Africa, with dramatic reductions in investments, trade and tourism. Countries that, not too long ago were embroiled in civil wars might find themselves again in conflict. However, President Johnson-Sirleaf assumes that rich countries would actually care about yet another African conflict, which, is recent history is any indication, is doubtful.

Nevertheless, African countries are pushing their case for increased access to aid:

It is interesting to see the African leaders making the case for a stimulus of the world economy through aid to Africa as more productive than national programs.

However, for one thing, Western countries are also facing their political battles related to economic conditions and stimulus-related class conflicts. And for another, if these countries are going to pay attention to conflicts, Iraq and Afghanistan and potential conflicts in Pakistan will be the chosen ones (to use Virgil Hawkes’s concepts) whereas African conflicts are more likely to remain stealth.

Not unrelatedly, Muhammad Yunus made the case for reforming the economic system to make it work for the poor.

Moreover, Yunus also argued that the financial crisis is not the only crisis around but because it affects mostly the richest countries, more attention is paid to it. After all, the financial meltdown was preceded by a major food crisis and we still have not adequately dealt with the coming energy and climate crises. Ultimately, for Yunus, all these crises are the product of structural faults in the global economic system that is exclusively geared towards the maximization of profits.

At the same time, this crisis is an opportunity to radically change this failing system, after all, according to none other than Martin Wolf:

So, for Yunus, time to design a system that works for the people and not just the Transnational Capitalist Class and the Transnational Corporations. Indeed, it is this small number of people that have created such a disastrous situation. The real victims, for Yunus, are those who are losing their jobs and incomes and there is no bailout in place for them. [Heck, even Maddoff’s victims will get tax privileges while people will have to absorb their losses on their pension plans and 401ks.] I am guessing (since the article does not mention it) that he is referring to his social business model.

And since this crisis is global, then so should be the reforms of the financial system, and maybe, just maybe, the reforms should start at the bottom:

But that is, again, bypassing the structural issues that Yunus mentioned and that Joseph Stiglitz also brings up:

Color me unconvinced. As much as I find Joseph Stiglitz one of the most persuasive economists, and with all due respect, we already have global economic institutions and they were not able to prevent this disaster and are not able to provide solutions or reforms. And the proposed world economic council would be useless if it is made up of the same kinds of people who already shaped the global institutional structure of the world economy.

And besides, designing a reformed global economic system would require some calm reflection and analysis and that is just not going to happen as long as global financial institutions keep shocking the system to extract more money from the US Treasury with some high class form of blackmail.

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