Ross's Blog

I came back from the UN Rio+20 environmental conference with very much the same feeling as most of the NGO participants—an immense frustration with the total lack of global political leadership at this critical time. The gap between "The Future the Politicians Want" and "The Future the People Want" has never been greater.  It sometimes seems as if we live on different planets. There were no commitments by governments, only weak, unenforceable declarations of intention. The major difference is that NGOs generally take the multiple threats facing humanity seriously, particularly global warming and unsustainable over-consumption of our natural capital. The political leadership is in a state of denial with no solutions whatsoever, as it continues to promote more economic growth, the very factor that NGOs identify as the major problem rather than the solution. Even the most logical and modest proposal from civil society: "cease all subsidies for burning fossil fuels" —currently $775 billion per annum—was rejected. All we got from the UN document in this area was a weak suggestion that governments might take a look at that—a depressing example of moral bankruptcy.

The only new twist to the growth mantra was the latest buzz word from the corporate-infested UN: "green growth", which is intended to suggest that we can go on with "business as usual" if we just add a few green feathers. But this newest buzzword is just another excuse for doing nothing. If the political leadership truly wants to promote a "green future" then a necessary first step is to replace the dysfunctional and destructive neoliberal economic system with ecological economics, which prioritizes ecological sustainability above all else, including economic growth and jobs. Anything less is not serious about our collective survival.

Consider for a moment the logic that drives the current focus on economic growth in the USA. The implicit assumption is that greater economic growth leads to greater average income, which in turn leads to greater happiness and greater health. In a frontal attack on this deeply ingrained assumption, two British sociologists, Richard Wilkinson and Kate Pickett show in a recent publication that the assumption is completely wrong¹.  When industrialized countries are compared, it turns out that happiness and longevity are unrelated to average income. Contrary to traditional economic thinking, increasing income does not produce happier or healthier people. What does explain differences in health—and with great statistical significance—is the degree of income inequality in a given country. Figure 1 illustrates that, among the industrialized countries, those with the greatest income inequality score worst on the authors’ “Index of Health and Social Problems,” with the USA performing worst of all.

To paraphrase Winston Churchill: the Greek bailout is not the end of the euro crisis. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. This crisis is not going to go away. It will be with us for several more years. And it is going to get ugly when the costs of the neoliberal austerity policies forced upon them are fully realized by the very angry citizens of southern Europe. The plan is to force them—in the classical neoliberal “structural adjustment” style usually reserved for financially colonized developing countries—to pay the price of failed EU policy and financial speculation, in practice a wage freeze, welfare cuts, privatization of public facilities and high unemployment as far into the future as the eye can see.
   The whole structure of the euro was a design failure from the beginning, as this author and several other economists pointed out over ten years ago. The euro project was a top-down effort of European bureaucrats and politicians to establish through the back door what was not possible through the front door—a United States of Europe, which they knew would have been rejected by EU citizens if they were ever asked their opinion. They hoped that the formation of a single currency zone: would be the first step toward a “eurostate”, but they neglected the fact that there was no central government and it was made up of members with an enormous disparity in culture and fiscal discipline. With no possibility to issue their own currencies, or to devalue their currency to compensate for higher inflation rates, and no procedure for exiting the euro, it was only a question of time before a full-fledged crisis erupted as the southern members’ economies became uncompetitive in a vicious circle of inflation, trade and budget deficits, enormous debts and high unemployment.

The recently adopted EU Financial Pact’s insistence on debt reduction and austerity at a time of economic downturn is a throwback to 19th century thinking—to the era of the gold standard—before John Maynard Keynes. It did not work then and it will not work now. Government debt reduction is a growth killer par excellence, almost guaranteed to create a depression. The United States, for example, has experienced six periods of depression: 1819, 1837, 1857, 1873, 1893, and 1929. In every single case, the depression was preceded by a significant reduction of government debt, which removed money from the economy at a time when what was needed was more money to create jobs and stimulate demand. It took the genius of Keynes to realize that active countercyclical intervention by government was the solution to the inevitable swings in the business cycle. But to create new jobs with government spending at a time when the there is no demand for new investment by industry, and the private sector is overburdened with debt, requires a central government that is not revenue constrained, i.e. it can spend its own currency and can always pay debts denominated in that currency.

Suppose we were to ask ourselves the question: what would an ideal world order look like if it were based on ecological sustainability and human rights as the overarching principles, while allowing a maximum of democracy and freedom to all world citizens? I am sure we would get many different answers.

The Failure to Act

“If we don't change our direction we're likely to end up where we're headed.” This ancient Chinese saying is simple but very profound, and is especially relevant to our time.

Setting a New Course

In Occupy World Street, I have put forward not only the outline of a new, sustainable and just world order, but, more importantly, have proposed a strategy to get it underway.

As a former foreign exchange adviser and currency fund manager, I would like to contribute a slightly different slant on the ongoing EU crisis than what has been written to date, including its causes and the best long-term solution. 

Occupy World Street is a vision for co-creating a new future and pointing the arrow of our collective efforts in a new direction. Hopefully, this site will become a meeting place for all those who wish to discuss the issue of how we can change the ruinous course that our global civilization is following.