The Economic Crisis: Seven Proposals
EDITORIAL, 17 October 2011
#186 | Johan Galtung, 17 Oct 2011 - TRANSCEND Media Service
Dialogue of Civilizations, Rhodes Forum, Greece, 9 October 2011
I will work in the tradition of the NGO I represent, TRANSCEND (www.transcend.org): diagnosis, prognosis, and therapy.
The basic diagnosis is the pathological inequality growth in societies, and in the world. In the Mother of Crises, Occupy Wall Street is now a local Arab Spring, as protest, not yet proposals. “The bottom 90 percent”–an interesting US category–has annual average family income around $31,000 whereas the top permille has to be measured in millions, and many of them. Consequently, there is not enough buying power available to get the wheels of the real economy running, but more than enough liquidity at the top to get the finance economy overheated. At the bottom people suffer, even starve: in the world, 37,000 per day (it used to be 25,000). At the top, the finance/real economy imbalance destroys the whole economy.
The basic prognosis is that three US bubbles are waiting to burst:
- the contradiction between a galloping finance economy and a stagnant real economy,
- the contradiction between the secret M2, money circulating, fed by printing money far beyond any real value it is supposed to reflect,
- and the contradiction between debt service and people service.
We are only at the beginning; the G20 in 2008 increased the inequality further. An unlikely 50 percent cut in the preposterous US and Greek military budgets might help. But the USA will probably be forced into a major devaluation, and an Argentinean solution.
The basic therapy would be a far better balance between bailout and stimulus; and between elites and civil society. US elites are more responsive to corporations financing their campaigns than to voters electing them. Corporatocracy, not democracy. Obama turns his back to voters and bails out his chief donor, Goldman-Sachs. Better than “too big to fail” would be “too big to exist”: not a few big, but very many small banks. So let us start there.
 The Civil Society should create a maximum of small savings banks that offer investment credit also backed by their capital, but that do not speculate. The Big Banks will counteract; hence, groups need determination, often as cooperatives. Investment is tied to specific companies, speculation is roaming around for profit; the commitment over time is sufficient for production to take off not just for short-term profit; there is a solid equity, not just betting. Learn from muslim banking-sharia limit: 30 percent of capital.
 The civil society should boycott irresponsible, unprofessional banks that offer credit way beyond their own capital. It is necessary to produce a listing of banks by level of irresponsibility, including bonuses as one indicator. The worst ones deserve to sink, paving the way for very many smaller ones. Iceland has emerged from the crisis by letting those banks sink, and the voters have twice refused, in referenda, to make Iceland’s population hostage to credits given to those banks. Those creditors have to pay for their own lack of professionalism when believing in equally unprofessional bankers .
 Moratorium on irresponsible bankers for 3, 10 years, for life.
 Debt relief, bailout, for bona fide debtors–those not in debts beyond any reasonable potential for repayment– rather than non bona fide banks. This would imply the cancellation of many foreclosures, to be protected nonviolently by civil society.
 The focus should be on the suffering at the bottom, often minorities, women, the old and infirm. Alleviation of misery is the first priority, economic growth second. For that purpose, agricultural cooperatives are needed for modern, 3-dimensional, aquatic, labor-intensive food production–not endless furrows destroying a soil poisoned by artificial fertilizer. With sales-points straight to the customer, polyclinics with generic drugs, education run by retired professors. Beat the tuition fees.
 Lift the bottom up by having the needy satisfy basic needs. Lift communities, not individuals, through private, public, civil society and technical sector cooperation, coordinated by some agency (a ministry, an NGO, a church). Make generous credits available for micro-companies in the fields of basic needs–food, affordable housing, health, education–and employ the most needy themselves, in the USA not only the AFL-CIO aristocracy. As they lift themselves up, they will pay back the credit, get increasing buying power, and by their numbers stimulate the domestic demand and economy in general. Learn from the Chinese capi-communism.
 For enlightened governments: forbid short selling (how about short buying?), make the names of buyers-sellers on the market public, sell-buy derivatives only when seller and buyer know what they are doing, contemplate forbidding them as potentially toxic.
Then, in the longer run: Shift the focus of the whole economy from material growth to health-education and basic needs. We have been terrorized by GNP-Gross National Product, a measure of added value through processing and trading; commissions charged by intellectuals, industrialists, merchants and traders, at the expense of nature. However, the purpose is not turnover and profit but rich human lives! Switch from GNP to HDI-Human Development Index, UNDPs-United Nations Development Programs. Promote long lives high on creativity, love and joy, and low on morbidity. And stop putting older people in retirement ghettos, complaining of aging population, cutting out wisdom to balance youth.
In short, lift the bottom up through stimuli, bail-out the worst hit, let incompetent institutions sink. What we are doing is the opposite: not only bailing out but stimulating, rewarding incompetence and greed, letting the bottom sink further. Massive revolts are the optimistic reading. Massive suffering is realistic, and already here. And the most pessimistic reading: the continuation of the same doomed politics.
This article originally appeared on Transcend Media Service (TMS) on 17 October 2011.
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