The three crises
By
Ignacio Ramonet Read Spanish Version
Le
Monde Diplomatique
It
has never happened before. For the first time in modern economic
times, three major crises — affecting finances, energy and food —
are coinciding, coming together and merging. Each interacts with the
others, exponentially worsening the deterioration of the real
economy. As much as the authorities try to minimize the seriousness
of the moment, the truth is that we’re facing an economic cataclysm
of unprecedented magnitude, whose social effects are just beginning
to be felt and will explode with total brutality in the next several
months. Disaster is never certain and numerology is not an exact
science, but the year 2009 could very well turn out like the grim
1929.
As feared, the financial crisis continues to worsen. To
the problems suffered by prestigious U.S. banks — such as Bear
Stearns, Merrill Lynch and the giant Citigroup — add the recent
disaster afflicting Lehman Brothers, the world’s fourth-largest bank,
which on June 9 announced a loss of 1.7 billion euros. Because this
is Lehman’s first deficit since being listed in the Exchange in 1994,
the loss had the effect of an earthquake in a financial America that
was already violently traumatized.
Every day there are new
reports of banks going under. So far, the most affected entities have
admitted losses totaling almost 250 billion euros. And the
International Monetary Fund estimates that, to emerge from the
disaster, the system will need about 610 billion euros — the
equivalent of twice the French budget!
The crisis began in
the United States in August 2007 with subprime mortgages falling in
arrears and has extended throughout the world. The crisis’ ability to
transform and spread, through the proliferation of complex financial
mechanisms, likens it to a lightning epidemic that’s impossible to
stop.
Banking
entities no longer lend money. They all mistrust the financial health
of their rivals. Despite the massive injections of liquidity made by
the major central banks, the drought of money in the markets has been
unprecedented. And what some people fear most is a systemic crisis,
in other words, a collapse of the world’s entire economic system.
From
the financial sphere, the crisis has moved to the whole of the
economic activity. Suddenly, the economies of the developed countries
have cooled. Europe (particularly Spain) is in full deceleration and
the United States is on the brink of recession.
The harshness
of this adjustment is most noticeable in the real-estate sector.
During the first quarter of 2008, home sales in Spain dropped 29
percent! Nearly 2 million apartments and homes could not find a
buyer. The price of land continues to fall. And the rise in mortgage
interests and the fears of recession plunge the sector into an
infernal spiral, with ferocious effects on all fronts of the huge
construction industry. All the construction businesses are now in the
eye of the hurricane and witness with impotence the destruction of
tens of thousands of jobs.
From financial crisis we have gone
on to a social crisis. And the authoritarian policies emerge again.
The European Parliament on June 18 approved the infamous "directive
of return," and the Spanish authorities have announced their
willingness to arrange for the eviction from Spain of one million
foreign workers.
On top of this awful situation comes the
third oil shock, as the price of a barrel of crude rises to about
US$140. That’s an irrational increase (in 1998, a barrel cost less
than US$10), due not only to an excessive demand but, above all, to
the action of many speculators who are betting on the continuing rise
of a fuel on its way to extinction. Investors flee the real-estate
bubble and shift colossal sums of money because they are now betting
on the price of oil rising to US$200 a barrel. Oil is now
financialized, with the consequences we see: a formidable rise in the
prices at the pumps and explosions of anger on the part of fishermen,
truckers, farmers, taxi drivers and all the professionals who are
most affected. In many countries, by staging demonstrations and
confrontations, those professionals demand help, subsidies or tax
breaks from their governments.
As
if this whole context weren’t gloomy enough, the food crisis has
suddenly worsened, reminding us that the specter of hunger continues
to threaten almost 1 billion people. In about 40 countries, the high
cost of food has provoked uprisings and general revolts. The summit
of the United Nations Food and Agriculture Organization (FAO), held
June 5 in Rome to consider alimentary security, could not reach an
agreement to relaunch worldwide food production. Here, too,
speculators fleeing from the financial disaster are partly
responsible, because they’re betting on a high price of future
harvests. So even agriculture is being financialized.
This
is the deplorable balance left by a quarter-century of neoliberalism:
three venomous intertwined crises. The time has come for the citizens
to say "Enough!"
