If politicians have been predisposed to acknowledge mistakes and make timely structural adjustments to correct deficiencies arising from the inevitable social and political transformations in their domains, many of history’s celebrated but defunct economic systems might still be around. The current political and economic system, which dates back to the 1944 Bretton Woods Accord, is no exception. Most importantly, this economic system which, unlike its forerunners, encompassed the whole wide world has simply become too complicated for its handlers, hence the need for a thorough reorganization of its structure that reflects the evolution of the last three decades.
Since the onset of the global economic downturn in 2008, it has become apparent that the “developed world”, the custodian of the current system, may not be able to usher the reforms necessary to keep it from an impending collapse, which may prove calamitous to the world. The reason: restructuring the system will involve a dilution of the western democracies’ uncontested political power. Given that the Bretton Woods Accord was conceived to benefit its architects; discarding or restructuring it will alter the present geopolitical reality, something that the US and the EU would forcefully resist in the event that changes were to be forced upon them by actual economic realities or competing entities.
Noticeably, the actual economic system has reached its apogee given that the economies of Japan, the EU and US can no longer grow in contrast to developing countries such as China, Brazil and India. The huge infrastructure projects in the US (highways and postwar housing boom) and rebuilding of Western Europe that fueled global economic growth for more than a quarter of century after WWII have crawled to a halt since the mid-1970s. That helps explain the recurring recessions, which have become a fixture of the current global economic system since the 1970s, as the economies of the developed world have come to rely on superficial but not actual growth. These economies’ overreliance on consumer spending, banking speculations and technological innovations has worked unimpeded because the developed world’s technological, cultural, political, and military supremacy was absolute. However, with the advent of competing centers of technological innovations, particularly in Asia, this approach may have seen its better days.
Unlike manufacturing and other labor-intensive industries, which use a higher percentage of any given workforce, technological innovations, banking speculations and other harebrained schemes associated with the current system only benefit a minority, regardless of the surplus of educated people in the developed world. It shouldn’t therefore surprise anyone that the march toward more egalitarian societies in the western democracies, which seemed an attainable goal a few generations ago, has come to an abrupt stop. As the economic pies in the developed world shrink further while the global economic center of gravity shifts to developing nations such as Brazil, China, India and others, the disparities are likely to continue. Such development will, in turn, create the conditions for Occupy Wall Street-type of social protests and allegations of class warfare, a political term many thought was forever extinct with the end of the Cold War and the demise of orthodox communism in the 1990s.
A little fact that escapes almost everyone is that the GDP (Gross Domestic Product) of the developed world’s economies, in absolute terms, is less than what is reported by the IMF or these countries’ Central Banks. If these economies were using currencies other than their own, as the developing and less developed countries are obligated to do under the current global financial system, the actual value of their GDP will depreciate by at least 1/3, if not more. Moreover under the current system most of the world’s mineral resources practically belong to the US and, to a lesser extent, Europe as international trade must be conducted in dollars or euros, the dominant global currencies. This is why China, which has accumulated an enormous reserve of dollars, is gobbling up the remaining mineral resources of the Third World, which had escaped the attention or interest of the Big US and European multinationals.
Like the past political and economic systems that straddled human civilizations but were eventually replaced by others, the present system’s collapse is as inevitable as the ones that preceded it. The inability of the US and the EU to maneuver their way out of this recession (2008-?) is emblematic of the present economic climate that is slowly but irreversibly altering the status quo in place since the end of WWII. Yet, its keepers are acting as though there is no alternative to it by refusing to enact the necessary structural reforms that could extend a lifeline to the otherwise doomed system. Declining or ageing populations, another antithesis to growth in the EU, and aversion to immigration in the US, which will help sustain growth but inevitably alter the ethnic, cultural and social fabric of this nation, are compounding the problem.
As was the case with slavery and colonialism, the custodians of the Bretton Woods-based economic system cannot conceive a world without it, even though the arrangement is crumbling under the combined weight of political inaction and willful ignorance of the lessons of history. Also absent in the search for a solution to the crisis and noticeably so are the economists, many of them Nobel Prize laureates, who never saw it coming. Maybe, just maybe, the next economic system will do better without economists.
ddjougan@gmail.com
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