Learning from our mistakes

Edited in French in the Quebequois Newspaper Le Devoir (Section Libre Opinion – Points of view), Edition of Wednesday October 15, 2008

No one can read in a crystal ball and can plan with precision what will be the consequences of the financial and economic crisis we are going through. Yet we can already see its distressing effects: in the United States only, millions of people have no more houses and have lost the money they carefully saved for their own retirement, whereas the immense majority of the citizens will have to compensate through taxes the fortunes granted to the banks to repair their mistakes. And it is not too risky to say that this crisis will lead to a recession in the world, to an increase of unemployment and a lot of extreme poverty. A real disaster, therefore, that could easily have been avoided.

Facing this crisis, the experts propose many solutions. For example, nationalizing the banks, before the most fragile disappear with the savings of their clients. Regulating, putting an end to this mad market fearing neither God nor man, which, as all human activity, must finally be submitted to strict rules to work decently. Some others, more audacious, propose a tax on the financial transactions that would reduce speculation and allow extracting immense incomes for the citizens and the public goods.

The extent of the crisis requires thinking the very essence of capitalism. Are we going through a difficult and tumultuous episode which will let important damages, but that will disappear naturally, as the good weather comes inevitably after the storm? Or are we witnessing the end of capitalism, as the sociologist Immanuel Wallerstein says in Le Monde of October 10: "The situation becomes chaotic, uncontrollable for the strengths that so far dominated it, and we can see the emergence of a fight, not anymore between the holders and the adversaries of the system, but between all actors to determine what will replace it. I reserve the use of the word "crisis" to this type of period. Well, we are in crisis. Capitalism is reaching its end."

Optimism and pessimism

It goes without saying that such a crisis does not require temporary solutions, but a major transformation of the economic system that was set up these last years. Such a change is very difficult. It requires to challenge the firmly acquired paradigms, and to reverse an ideology, the fundamentalism of market, as one would overthrow a government that didn’t fulfil its duty. But ideology doesn’t answer the rules of democracy and encrusts deeply in mentalities. It is not easily overthrown.

A careful observer might have as many reasons to be optimistic as pessimist when facing the possible major changes in the management of the economy. Pessimism seems to prevail first. During the last 25 years, dramatic falls happened one after the other: crisis in Mexico, in Southeast Asia, in Russia, in Argentina, stock crises, crisis of the new economy. Yet, none of these has brought any serious self-examination among the important treasurers who continued to take up the same policies and to accumulate similar mistakes.

In the universities, no counter-model is really offered to the so-called "classic" economy, whose principles conducted to the present stagnation, to such an extent that a Quebecois economist group, defending another vision of the economy, declared that "Only a large, pluralistic and contradictory consideration can allow us to overcome the present dead end and to open to as many options as possible for a social change". Nothing is harder to get rid of than a learning acquired after long years of study, even if this learning doesn’t correspond to the reality anymore. All the more when it serves the interests of a powerful minority.

On the other hand, the size of the crisis is such, its consequences are so serious, that it requires radical recovery measures. The quasi-totality of the diagnoses converge: the problem we face is directly linked to the basic principles taught in the departments of economy, according to which we must let the open market, deregulate excessively and believe in a utopian auto-regulation. No one can say anymore that these principles work. What we don’t know is if we will now be able to learn the lessons from it. All the more as in a long-term, a second crisis stands out: the foreseeable reduction of oil will put an end to an economy based on the perpetual growth, the excessive waste and the mad circulation of the goods.

Democratizing the economy management

It won’t be easy to set up sustainable solutions to avoid the crises, if only because of the deep collusion between the heads of state, the ministers and the financial elite, whose interests converge. These people won’t find themselves the determination to make the required changes. This leaves us in front of a curious dilemma raising an ethical questioning difficult to solve. On the one hand, it seems that only a serious crisis, with terrifying consequences, will lead the decision-makers to take really efficient measures to consolidate the long-term economy. On the other hand, this crisis is not desirable, since it will bring an important part of the population to poverty and extreme poverty.
[…]
The best would have been to apply a strong regulation of the financial markets long before their present decline, as several economists considered to be "subjective" — because they take into account, among other things, factors as imponderable as geopolitics! — had suggested. The present disorders have been caused by the flagrant inability of the financial class to learn from its mistakes, taken away in its race to profit and by a cupidity that is beyond belief.

The important thing would therefore be to make the economy transparent and open to all. How many people have discovered, with the present crisis, the complexity of the financial schemes, the deep overlapping of the markets and the existence of exploding products concocted without informing the immense majority of the population? Who can claim that the principle of deregulation was discussed on the public arena and has received a broad approval? Would it be possible to dream of a vast democratization of the management of the economy, enabling to set up strong barriers to protect the populations of the irresponsibility of the financial class and its experts?

Author: Claude Vaillancourt, Writer, General Secretary of ATTAC-Quebec, Montreal.

[Translation, original in French]