Sinéad Pentony: In The Guardian, Larry Elliott argues that “only a new way of managing the global economy can prevent more mayhem in the market and on the streets”.
He identifies a number of ingredients that have contributed to the crisis, namely the US decision to break-up the Bretton Wood system and abandon the ‘gold standard’. While this system wasn’t perfect, it acted as an anchor for the global economy. Its demise paved the way for the liberalisation of financial markets in the 1970’s.
He describes the currency system as “an utter mess”, particularly since almost every country in the world is now trying to manipulate its currency downwards in order to make exports cheaper and imports more expensive. The role of sub-prime mortgage scandal in the current crisis is well documented – the conditions for which were created through the liberalisation of financial markets.
Finally, Elliott points to the breakdown of the social contract under which the individual was guaranteed a job, with decent pay that rose as the economy grew. Over the last 40 years, the benefits from growth have been disproportionately accruing to companies and the wealthy.
This point is reinforced by research recently published by the Resolution Foundation (UK think tank), which found that workers in the bottom half of the earnings scale received £12 out of every £100 rise in national income in 2010, compared with £16 in 1977, while the top 10 per cent received £14 out of every £100 in 2010, up from £12 in 1977.
Elliott says that growing inequality, global imbalances, manic-depressive stock markets, high unemployment, naked consumerism and the riots are telling us something – that the system is in deep trouble and it is waiting to blow.
While we haven’t had any riots in Ireland, we are part of the same system, which is displaying many of the same symptoms. Policies to address these symptoms domestically and globally remain in short support.