Envío Digital
Central American University - UCA  
  Number 329 | Diciembre 2008



Four Different Crises Add Up to One Real Planetary Crisis

¡§My name comes from the Greek word krisis: to discern, choose, distinguish¡K I¡¦m also related to the verb refine or purify. Contrary to what common sense might presume, I am not, in myself, negative. I form part of Nature¡¦s evolution¡K Every time I interrupt history I bring a message: it¡¦s time to start again¡K¡¨ This is how the Dominican friar Frei Betto talks about the current planetary crisis. And how Belgian economist Eric Toussaint talks about it. Now its our turn to talk about this crisis and give it a name.

Eric Toussaint

The whole world is passing through various related crises. Born in the North, they are dragging the countries of the South down with them.

Financial crisisƒn--> economic crisis

The current world crisis was triggered in the North as a consequence of the sub prime mortgage crisis in the United States in 2007, which in turn originated with private US debts. The banks and mortgage lending agencies had created a monstrous edifice of debts that finally collapsed, starting the financial crisis whose after-shocks are still reverberating. The bail-out of European banks is one of its obvious consequences. The shockwave of the 2007 crisis and its ripples continue to be felt.

This crisis is not only financial; it¡¦s also economic, which means that it directly affects production, the real economy. There is a crisis in the construction sector in the United States, Spain, Great Britain and Ireland and it will extend to other countries. Many of this sector¡¦s jobs are in danger, particularly those held by immigrant workers, most particularly by Latin Americans (Ecuadorians, Bolivians, Mexicans, Central Americans¡K) in the United States and Spain. With the numerous job losses in this sector, the money sent home by the emigrants will drop off, severely affecting their families.

Although this economic crisis blew up in the North, its fallout will be in the South. As consumption decreases, the North¡¦s industries will have to cut production, which will mean less demand for oil, gas and raw materials such as minerals. The chain reaction will lead to a fall in the price of primary products, which already began happening in mid-September 2008. Unfortunately these price cuts will cause a drop in the income of developing countries.

Food crisis -->ƒnstarvation

In addition to this financial and economic crisis there is also a food crisis that is directly affecting people in the South, where food prices have gone up 100%, even 300% in the case of rice. As 80% of the population in many countries in the South (I¡¦m referring in particular to the poorest, especially in Saharan Africa) assign 95% of their income to buying food, the consequences of the crisis are tragic. These people can no longer get enough to eat and the number of people going hungry is increasingly significantly.

Tens of millions of people are swelling the ranks of the hungry. Before this crisis erupted there were already 820 million hungry people on the planet. The number of undernourished people is increasing too. With this crisis the number of people trapped by food insecurity has increased by more than 140 million.

Who¡¦s responsible for the hunger?

Once again the origins of the food crisis lie in the North. The agribusiness manufacturers of the North convinced governments in Washington, the European Union and other European states to subsidize the production of biofuel based on maize, wheat, rape, soy or sugar beet. A huge amount of food products today are diverted into biofuel production, causing a significant drop in the world market¡¦s supply of grain and other foodstuffs and a consequent huge rise in prices.

These prices also shot up because big institutional investors (banks, insurance companies, pension funds), once again in the North, began to speculate in a financial market sector they had previously left alone: the so-called ¡§grain futures market.¡¨ They did the same in the oil and gas markets.

It¡¦s important to remember that three stock markets in the world determine food prices, particularly the price of grain in the futures market. These are the Chicago, Kansas City and Minneapolis stock markets. The future prices of grain negotiated in these stock markets have an effect worldwide and not just on futures prices but also on the current cash prices. In sum, the production of biofuels on the one hand and speculation in the food futures market on the other, caused the food crisis humanity is suffering.

Climate crisis ƒnƒ×ƒndisasters

The fourth crisis is the climate crisis. It risks being forgotten now that the financial crisis is the center of attention in the North and the food crisis is squeezing the stomachs of tens of millions of people in the South and mobilizing the energies of hundreds of thousands more every day. It could be forgotten because there haven¡¦t been any impressive environmental catastrophes in the past few months and people have stopped talking about climate change. But it¡¦s here; it¡¦s on the move and in time will have unavoidable consequences.

They aren¡¦t necessarily perceived as quick and disastrous but they¡¦re here. The rise in the average sea level will affect the population of the whole river area in a country like Bangladesh, where 150 million people live. More than half this country¡¦s population lives at sea level or slightly below it, thanks to contention dykes. In the next ten years the consequences will be terrible. I mention Bangladesh but I could be talking about other regions in the South.

Who¡¦s responsible for climate change?

Yet again this crisis originated in the North. It¡¦s the responsibility of the capitalist model of production. Of course, this model also exists in the South, but it¡¦s the North that has produced a phenomenal quantity of atmospheric pollution since the start of the industrial revolution. People hear talk about greenhouse gas emission and only think about current emissions, but it must be remembered that the gasses resulting from industrial activity have been accumulating in the atmosphere for the past two centuries. It¡¦s this long accumulation that weighs so heavily on our atmosphere, not just the gasses emitted today which, of course, it¡¦s vital to reduce.

For this reason, although China emits ever greater quantities of greenhouse gasses, it would be a mistake to say that their current rate of development makes the Chinese or the Indians just as responsible as the United States or Europe for climate change because they¡¦re applying a production-based development model. Those more responsible are the countries that were the cradle of the industrial revolution which has dedicated itself to multiplying individual vehicles and squandering fossil fuels with their insane consumption.

The model is responsible

Humanity is faced with four crises: financial, economic, food and climate change. They affect the whole planet but trace their beginnings to the countries of the North. It isn¡¦t only these crises that the South and North have in common; they also share an economic model, capitalism, which dominates the whole of the planet. Up until some thirty years ago there was also a socialist or communist camp to talk about, but since the Soviet bloc of Russia, the Central Asian and Eastern European countries rejoined the capitalist system, together with China and Vietnam, it has become a global model.

These four crises I¡¦ve analyzed schematically must be considered direct consequences of the globalized capitalist system that historically originated in the North.

Of course, the most savage variant is still that of the more industrialized countries in the North. The economies of the United States, Europe and Japan represent 60% of the world economy, but only 15% of the world¡¦s population lives in these countries and they occupy a rather small surface area on the planetary scale. Nevertheless, when things go wrong in the countries of the North, repercussions are always felt by countries in the South.

Can the South protect itself?

Will the South unfailingly pay for the damage caused by these crises? Actually, it already is, but will it pay for all of it or do the crises offer the South an opportunity to protect itself? I think the South must and can protect itself from some of the consequences of these crises, though maybe not all of them.

With respect to the financial crisis, countries in the South need to take measures against freedom of movement by capital, in particular against capital flight to the North. Countries in the North have an enormous need for cash and companies there would repatriate a significant amount of capital back to their countries to balance the accounts of banks and insurance companies.

In order to prepare for this flight, countries in the South must block cash flows and establish strict controls over capital movement and currency-trading operations, just like Venezuela has done since 2003. This would also protect their currency and prevent them from becoming victims of speculation.

Countries in the South shouldn¡¦t follow the example of the United States and European governments, injecting enormous quantities of public money into private banks to save them, giving gifts to corrupt and thieving bankers, sharing out the losses whilst the bankers privatize the gains.

What answers can the South give?

Countries in the South must take other alternative courses of action. They must install public controls over the banking sector, nationalize it and refuse to bail out private bankers. They should put money into funds to protect savings, as countries in the North should have done. In addition, they must recover the cost of protecting savings and the banking system by deducting a sum equivalent to the assets of the big bank shareholders and administrators.

Obviously, with big shareholders it¡¦s not necessary to stop at requisitioning what¡¦s left in their banks given that they¡¦ve usually emptied their accounts before calling on the state for help. This makes it essential to establish a register of the fortunes of the big shareholders in all sectors of the economy so as to recover the costs entailed in saving the banking system.

Countries in the South should equip themselves with a Bank of the South in which to deposit exchange reserves and finance their human development without having to continually ask the financial markets of the North for loans, without having to beg one dollar more from the World Bank or the IMF or other financial institutions completely controlled by countries in the North.

A Bank of the South could finance reforms that are of no interest to private capital, such as agrarian reform or the implementation of food sovereignty policies. It could also use public money to profoundly renovate the existing habitat or create a new one adapted to the living conditions of the interested populations. These initiatives would create a lot of jobs and improve many people¡¦s living standards. It¡¦s about funding projects that are really worthwhile; for example, establishing a pharmaceutical industry for generic medicines, among other things.

Countries in the South should conduct an audit of both domestic and foreign public debt and make a sovereign declaration by suspending payment of illegitimate debts. It¡¦s the right moment in the South to form a group of countries against debt payment. It¡¦s also essential to abandon the World Bank and IMF.

Organize South-South interchanges

A lot could be done in the countries of the South. For example, they could set up a group for South-South sharing and exchange. We have a possible example in West Africa. Countries such as Mali, Niger and Burkina don¡¦t have access to the sea or to oil but they produce cotton and gold (Mali) and uranium (Niger). Nigeria, which does have access to the sea, produces oil and exports all its crude to the United States or Europe which then re-export refined oil derivatives to Nigeria, Mali, Burkina and Niger.

Obviously it would be much more sensible to set up an exchange between Nigeria, which could refine and transform its own oil into different derivatives and Mali, Burkina and Niger, which could develop a textile industry based on their cotton. That way Nigerian oiol-derived products would be exchanged for textile products from that region of West Africa, without passing through the world market. It¡¦s an absolutely reasonable proposal. All that¡¦s missing is the political will to put it into practice.

Organize people

It¡¦s essential, too, that leaders in the South, under popular pressure, break with the neoliberal scheme and even the capitalist model. The problem, however, is that the majority of these leaders are perfectly happy to live with the capitalist system and accept recommendations from Washington and Brussels, the World Bank and the IMF.

It¡¦s vital that people get organized and get those leaders off their backs, if necessary replacing them with democratically elected leaders who will commit themselves to implementing a development model suitable to their people¡¦s needs. They need leaders who are familiar with their countries¡¦ weak points and those of the institutions in the North bogged down in the current crisis, and know how to exploit them as an opportunity to bolster the strength of their peoples, the peoples of the South.

Eric Toussaint, an economist, is president of the Committee for the Abolition of Third World Debt (CADTM)

Print text   

Send text

<< Previous   Next >>


Three New Year Scenarios


These Elections Were Won by Both Fraud and Theft

Brief Notes on Foreign Cooperation At This Time of Uncertainty

DR-CAFTA, ALBA and the Sustainable Development Trinity

On the Track of Political Gangs: Has Mara 19 Been Born in Nicaragua?

Who Do the Coast Lands Belong to And Who Will Get Them?

Reflections of a Nomad

Four Different Crises Add Up to One Real Planetary Crisis
Envío a monthly magazine of analysis on Central America