Vol.6 No.2, 18 January 2006

Happy New year? Depends where you sit


Margaret Legum

I think it was Harold Macmillan who famously said that The Times newspaper had been consistently wrong on every major issue in the previous half century. Macmillan, himself a Conservative, implied that a solid conservative approach was, at best, necessarily short-sighted.

Business Day, I fear falls into the same trap. Martin Wolf’s prologue to the economy in 2006 (5 January) faithfully reflects your unblinking support for the global economy that leaves half our population in destitution or dire poverty – and then describes a continuation of this state of affairs as a ‘happy new year’. More: ‘the world is priced almost for perfection’, he concludes. Perfection presumably includes the fact that half our population is hungry because food is too expensive for them, while our farmers stop planting because the price is too low.

It is true that Wolf fears that ‘unknowable’ factors might turn up to disturb this perfection. He worries that ‘current exceptional profitability’ in the asset market might not last forever; clearly believing that it should. You would never know from his article that the corollary to that profitability is that year by year working people in South Africa, as in all industrial countries, earn a smaller proportion of the national income. The unemployed or casually employed are left out altogether. People who live by buying and selling currencies and shares and properties are getting a larger and larger share of the cake.

So you would not know that the national figures Wolf quotes for growth forecasts say nothing about distribution: especially in the US the whole increase in growth goes to the top 10%. And so you would not know that this gross and growing inequality of incomes and assets is likely to produce serious anger.

Already it is showing in voting patterns – two EU electorates rejecting the new charter; and the rest backing off holding referenda. Small and large revolts globally, rioting and burning reflect growing underclass alienation, potential terrorism, mob rule and resort to oppression.

So if you did not know from Wolf that such suffering and such dangers exist, you would not know that these are the product of precisely that set of policies and prescriptions the continuation of which he advocates as a sine qua non of a prosperous new year. They are:

First, developed markets ‘staying open to exports from developing countries’. This is a misnomer: it is our markets that are open to their exports; and our future depends on our regaining control over the rate of imports as long as theirs is rigged in their favour. Second, ‘finance flowing smoothly’ from countries with capital to those without. That would be a fine thing: currently the flows are the other way, the US being the biggest importer of capital; that is the way the global market works.

Third, ‘debtors must be willing to go on borrowing’. That may well be forced upon poor countries and poor people. It is hardly a path of choice considering their past experience of creditors. Finally, he thinks there must be low inflation and therefore a low rate of interest. When economists in this mould measure inflation they leave out property prices, because these are the result of the parasitic nature of the financial sector in the global market and benefit the already rich. So they are not counted.

Wolf refers to the world’s expanding demand for energy as a possible risk, but astonishingly fails to relate that to the peaking of oil production, wondering instead whether we will be vulnerable to small or large ‘accidents’. Sensibly, he warns of the clearly inevitable results of the bursting of the debt bubble in the US. But no proposals, apparently, to preempt or cope with that.

Clearly whether you take Wolf’s view or not depends on your values, whose interests you support and therefore whose successes you celebrate. But hindsight might show you up as, like The Times, consistently short-sighted.

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© South African New Economics Network 2006. Page generated at 17:18; 24 September 2006