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|Blog: The Global Failure of Debt-Based Finance|
The financial turmoil destabilising the European Union bears a stark resemblance to the debt crises of the developing world. The failures of a debt-based global economy are become increasingly apparent, as is the need to find a humane alternative based on the redistribution of power and resources, says Rajesh Makwana.
16th December 2010 - Published by Share The World's Resources
The European Monetary Union seems to be on the verge of collapse. Spain, Portugal and Belgium are on the brink of serious financial turmoil, following similar credit problems that preceded Ireland's bailout. Greece, the first European country to be bailed out, is still reeling from the consequent austerity measures brought in by the government earlier this year - it was at a stand still yesterday, and again this morning, as unions coordinated strikes to disrupt public and private services.
There are also growing fears in the UK about the extent and effect of proposed cuts to the public sector, with particular concerns about the expected rise in unemployment that will inevitably follow. Circumstances suggest the public outcry will continue to escalate as a pan-European reaction to the same basic problem: unsustainable economic policies and bank bailouts that have left entire nations in public debt to private finance companies.
Government borrowing to fund national expenditure is now largely the norm around the world. And the ultimate victory of this globalised debt-based system of finance is the way governments are often forced to make economic decisions that are primarily designed to keep financial markets happy in order to guarantee further borrowing. The situation is more than reminiscent of the widespread indebtedness experienced in the Global South, especially in terms of the economic restructuring that these much poorer debt-ridden nations are also forced to endure, often as a condition to international programs of aid and development ‘assistance'.
Within the current competitive, growth-based economic paradigm, no alternative mechanism to maintain employment and wellbeing is ever considered by policymakers. The orthodox route of prioritising financial markets and debt-based monetary systems leads entire nations into a corporate-friendly ideological abyss. In this paradigm, the market always profits, regardless of the human costs borne by society at large.
This entire process of economic development goes in the opposite direction to one that is underpinned by the principle of sharing. While debt-based economics contracts the public sphere and ignores human values in favour of increasing private profit (through the mechanisms of debt, privatisation, and overconsumption), the economics of sharing expands people-centred systems by promoting socially productive finance, redistributing power and resources and securing broad-based employment opportunities.
The personal reaction of the public to this new era of austerity must eventually be understood in holistic terms and linked to the economic failures that have affected people in the Global South for decades. As this connection becomes clearer, so should the relationship between our unsustainable economic model, the prevalence of poverty and the underlying causes of climate change. Such a realisation should bring into sharp focus the ideological divide between ‘sharing to benefit the many' and ‘privatising to benefit the few' - the true contours of the economic battlefield.
Rajesh Makwana is the director of Share The World's Resources and can be contacted at rajesh [at]
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