Wednesday, April 30, 2008

Marie-Beatrice Baudet | Six Crises That Jostle the World

t r u t h o u t | 04.30

Six Crises That Jostle the World
By Marie-Béatrice Baudet
Le Monde

Monday 28 April 2008

Where will history situate the global crisis - the symptoms of which are simultaneously financial, monetary, economic, environmental, and food- and energy-related - which the planet has been undergoing since mid-2007 and which has accelerated this first half of 2008? What will its amplitude on the Richter scale of economic and social earthquakes be? Stronger than that of the Great Depression of 1929? Similar to that of the 1970s, when, just before the first oil shock of 1973 and the second-half-1974 recession, the scientists, industrialists and economists who founded the Club of Rome in 1968 called for an end to growth in the 1972 Meadows Report in order to avoid the exhaustion of the planet's resources between now and the end of the twenty-first century?

Caution is in order. If you doubt it, reread the Conseil d'analyse économique [Economic Analysis Council] (CAE) report, "Financial Crises," published in 2004, the three authors of which - Robert Boyer, Mario Dehove and Dominique Plihon - remind us at every possible opportunity that "financial crises punctuate the history of capitalism," often taking the form of "twin" (banking and exchange rate), even multiple, crises when stock market and economic activity indices collapse. They also highlight the long-standing interdependent character of markets. On top of that, as they explain, crises have been more numerous since the desertion of the Bretton-Woods accords in 1971, which concluded the end of the fixed-rate exchange system begun at the end of the Second World War. Then, as Pierre-Cyrille Hautcoeur, associate professor at the Ecole d'économie de Paris, insists, "when one tries to quantify the scale of a crisis, one must be careful to distinguish which mechanisms are at work and which adjustments will ultimately occur." With respect to the present crisis' landing, in spite of the downward revisions performed by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD), global growth will mark a 3.5 to 4 percent progression, thanks to the Chinese and Indian engines, as long as they also don't slow down too much. "So, for the moment, we are not confronting a radical economic crisis," Mr. Hautcoeur resumes. An opinion shared by Philippe Chalmin, professor at Paris-Dauphine University , specializing in raw materials: "It's necessary to take a broader view and to put things into perspective. The present intensity is great, but remember the 1970s crisis: then we were all announcing the advent of a new international economic order."

On the other hand, the manifold nature of the current crisis tests economists and historians, who eagerly describe it as exceptional. Not necessarily for the same reasons, but exceptional nonetheless. So Mr. Chalmin confirms never having seen "such volatility on the exchange and raw materials markets." Also, "The habitual reference to the 1974 crisis seems altogether out-dated," he observes. "January 2, oil cost $100 a barrel - which was greeted as an unbelievable record - and April 25, it's already at $117.60!" For Jean-Paul Betbèze, chief economist for the Crédit agricole group, even though there was the bursting of the Internet bubble in 2000, "we are confronting the first big crisis of the twenty-first century." According to Betbèze, this crisis is not on the classic pattern of an American (or some other region of the globe) crisis that then goes on to contaminate such and such other part of the planet. "We are dealing with an unprecedented pattern, that is, the conjunction of differentiated and interdependent crises. In the United States, it's the crisis of an over-indebted country; in Europe, it's the crisis of a region where the member states have still not resolved their political governance, which prevents them from conducting a concerted economic strategy; and, in emerging countries, we are witnessing, or will witness, a classic crisis of overheating and growth."

On top of that, insists Mr. Betbèze, "the present game between all the actors in all these crises is non-cooperative. So the fall of the dollar doesn't help the Europeans, who see their exports becoming more expensive. As for the Chinese, they refuse to revalue their currency, the yuan, which would allow Western countries to regain a competitive edge."

Pierre Bezbakh, lecturer at Paris-Dauphine University, part of whose work relates to the history of crises, confirms this more-complicated-than-ever interdependency: "The countries of the South are no longer in the position of the dominated; they are now integrated into global competition. As for the former countries of the East, they too have converted to market rules. So you have a multiplicity of actors whose interests are far from convergent." Along the lines of Patrick Artus, chief economist for Natixis, and journalist Marie-Paule Virard, who published "Le capitalisme est en train de s'autodétruire [Capitalism Is In the Process of Self-destructing]," with La Découverte in 2005, Mr. Bezbakh thinks that the present crisis represents "a complete rupture of society. Capitalism is no longer on the path to development, but on the path to liquidation. The Western powers can no longer make others pay the costs of the crisis, as they did in 1929 with the drop in raw material prices. We're witnessing a process of self-destruction, either of the system itself or of its operation." And the present crisis will be the strongest signature event in that process.

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