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On Kicked Cans, WW3 and Other Alternatives

August 7th, 2011
in Op Ed

can-crushed by Sanjeev Kulkarni

For now it seems the familiar monotonous routine drama of kicking the can down the road is over in US, Europe and India. Or perhaps it has just been suspended for a while. However, the next drama promises to be equally dreary. The unemployment situation continues to be grim. Econintersect authors have been consistently arguing that job creation is the primary criterion for healthy and sustainable economic growth. In that regard, the recent report by the International Labor Organization (ILO) published by the U.N., " The Global Social Crisis," is somber reading.

Follow up:

According to the report, global unemployment rose sharply from 178 million persons in 2007 to 205 million in 2009. Based on its study it says that the full social impacts of economic crises, especially on public health and education, become known only after a long gestation period.

More recently, 2010 has not shown any growth nor does the year 2011 promise to be anything different. Assuming a straight line extrapolation the cumulative job losses from 2007 to 2011 will be 230 million. This estimate is before the world wide austerity measures ranging from budget cuts in US, haircuts in Europe and to merciless successive rate hikes by India kicked in. And then figure provided by China are always suspect. The actual job losses might turn out to be higher than estimated due to long term domino effect of various recent measures.

Sticky rising food prices worldwide have already pushed more than a billion people into hunger in 2009, according to the ILO report. The 2011 figure for hunger is anybody's guess.

The blinding faith of various governments in their measures to fix the world economic order is indeed touching. As we have argued elsewhere the long term trends, namely mismatch between consuming and producing nations, formation of new trade routes, structural employment problems in developed economies and major fiscal and financial systems breakdown in developed economies is causing a massive paradigm shift. This author does not believe that BRIC's will be left untouched and the slowdown trend is already evident.

One thing is certain: no one seems to have the answer. But the throttling of the world economy through deficit cuts, haircuts, aggregate demand cuts or merciless interest hikes, is going to take a toll on employment and the consequential negative social impacts.

Give us poor folks a break, please, and stop kicking the can down the road in Washington DC, Brussels, London, New Delhi, Beijing....[take your pick].

The world got out of depression of 1930's through a massive stimulus package - WW 2. Surely the human race in general and economists in particular are not suggesting WW3 as the stimulus package?

I can only hope the human race in general, and the worldwide politicians-economists teams in particular, run out of the WW3 type of imagination. We sure could use something big that was actually productive.

Otherwise the world seems to be destined to an economic death by billion cuts.

Signing off from India, until the next drama of kicking the can down the road - or the next rebirth - arrives. Or maybe just until I need to vent some more.

References:

The Global Social Crisis (United Nations 2011)

Charting the ripples of the global financial meltdown: Unemployment. (Al Jezeera, May 2011)

Global Economy ‘Stinks,’ So Don’t Make It Worse (CNBC Aug. 3, 2011)

Death by a 1,000 Cuts or an EU Bond? (CNBC Aug. 3, 2011)

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Sanjeev KulkarniSanjeev Kulkarni is an entrepreneur based in Pune, India. He worked for large organizations in board level position before venturing on his own. He is currently involved as an investor in health care software company and as an investor, mentor in an automation company. Very widely traveled, he has experience of working in different geographical areas with people of varying nationalities. He did his BS from Indian Institute of Technology, Delhi.










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2 comments

  1. Frank Li says :

    The world got out of depression of 1930's through a massive stimulus package - WW 2. Surely the human race in general and economists in particular are not suggesting WW3 as the stimulus package?

    A very good point? WW 3 may be the solution to this mess. Who will be the culprit in this case? The U.S.! Not only because it's (or will be) the most deeply in trouble, but also because it has the capability to do so. Worse yet, it might have started already, Iraq 1st ...

  2. Derryl Hermanutz says :

    I share Sanjeev's hope that we won't need WWIII to get out of our current mess. Also remember: WWII government borrowing and spending was only the "stimulus" that got the 'developed world' economies out of Depression and working again at war production and war fighting. It was the "natural" growth engines of the post war era that really restored the world's economy. Rebuilding the bombed out infrastructures of Europe and Japan. Building the interstate highway system and suburbia in the US to house the Baby Boom. Restoration of world trade, again mainly between the 'developed' nations.

    But now all of the OECD nations are "developed". Our physical and institutional infrastructures have been built up and our populations have stopped growing. BRICs already have large populations, but they have growth engines in developing their industrial economic and social infrastructure to wealthy world standards. Once they are developed they will be in the same state we are, "all developed up and no place to grow".

    In, "Principles of Political Economy" (1848), John Stuart Mill advocated a "steady state" economy that didn't depend on unlimited "growth". Really, there are physical limits to economic growth, such as peak resources, so it is not wise to put our faith in a neoclassical economic model whose ongoing functioning depends on unending growth.

    A steady state economy is much more political than a growth economy, because you cannot just believe everybody can be as rich as Midas if only you grow your economy to the moon and beyond. You have to make distributional choices. You can't depend on "the market" to magically solve all your problems of political economy.

    I'm not sure humanity is mature enough to adopt Mill's steady state economy model. It takes the mentality of a Genghis Khan to forge an empire. It takes the much more "civilized" mentality of a Kublai Khan to govern that empire. Our capitalists still want to be Genghis. If they get their way, then our solution will be WWII rather than the kind of political compromise Mill advocated.





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