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The absurdity of global financial reform

By Op Rana (China Daily)
Updated: 2009-09-18 08:37

One year on, one expected the world of economics and the economists, who set its paradigm, to have learnt a lesson from the worst global financial crisis since the Great Depression (though some perceptive analysts say the present crisis is worse). What we see instead is "more of the same".

Trillions of dollars have been spent to revive the global (mainly the US) economy, but all that money has failed to solve any of the problems that led to global recession in the first place. The capitalist world has not pulled up any of those responsible for causing the crisis. In fact, it has been using the same methods that led to the economic crash to revive the global economy. The result: governments in capitalist states have accepted the unbearable burden of the huge debts and "toxic assets" of financial institutions.

But a debt has to be paid back. So how do governments do that? By rendering more workers jobless, creating fewer jobs and stealing the few rightful social benefits that some workers still have access to. We'll come to that later.

Almost all the promises Barack Obama made during his campaign to win the White House, except the bailout package, have hit a stonewall. Have the pays and bonuses paid to executives of big firms reduced? No. Has healthcare for the underprivileged improved? No. Has retrenchment of workers stopped? No.

True, US Federal Reserve Chairman Ben Bernanke has said the financial crisis in all probability is over. But for whom? For the banks and financial institutions, of course. The equity markets have risen, stabilizing, to a certain extent, the financial system and increasing the profits of banks. But what about the majority, the working class? They still face an uncertain future, with close to 10 percent of them unemployed even in the most economically advanced country, that is, the US. Their situation is no better in the European Union or Japan.

Related readings:  Global financial instability expected to continue  World nations jointly tackle financial crisis  Financial reform may fail to avert another Lehman  Boost to IMF reform  Experts urge more backing for China on IMF stake

We can only hope the bailout packages will help the rich, as well as the poor. But how can they when, as former IMF chief economist Simon Johnson says, there has been very little "reform" of the financial system. To quote Johnson, "Our banks and their 'financial innovation' have not been defanged. In fact, they are becoming more dangerous We have lived through a tremendous crisis - and learned how close we came to a second Great Depression - yet nothing is now happening to prevent a repeat of something similar in the future."

Instead of really reforming the financial system, this is what the present IMF managing director, Dominique Strauss-Kahn, has to say: "The most important step is to contain pension and healthcare costs." Is this how governments in developed countries will shed the burden of debts they have gladly taken upon themselves from the financial institutions? Isn't this a typical example of stealing from the poor to pay the rich?

If what novelist and critic John Berger writes in his latest work, From A to X, is to be believed, "the sky is a reminder of what may be temporarily forgotten, e.g. the private equity funds available for financial speculation are today 20 times more than the sum total of the world's gross national product".

Financial institutions already have enough paper money to play with, but they want more. And they seem to have the backing of economists who cannot think outside the box. Not for nothing has someone suggested "a deficit of economists" as a collective noun for those who juggle with figures and charts.

If still in doubt, we just have to look at the sky to remind us of the absurdity of the ongoing financial reform.

E-mail:oprana@hotmail.com