Global recession! Two seemingly innocuous words that should strike fear into the hearts of all humanity. For some, these words are the rantings of overpaid economists and consultants who don’t get it right 90% of the time. They tell us that unemployment will reach unfathomable levels that will leave economies in a quagmire of despair and impotence. South Africa has had high unemployment for the last 40 years nothing new to us. They tell us that rampant inflation will push millions of people into debilitating poverty. I am not sure these professionals have left their suburban environs and plush workplaces for the other side’ of town.
Seriously though, the recession has the potential to have a profound affect on the life experience of large number of the inhabitants of this planet and that probably includes you too. Some, of course, will become unimaginably richer; most will be left fighting for their survival. Some economists have even rubber stamped the idea that the global recession has the potential to progress into a global depression, an economic phenomenon that has not been seen since the 1920s. This would surely be the greatest economic event of living memory.
South Africans to an extent have thus far been exempt from the punishment being meted out to our first world brothers and sisters. This may have lulled us into a false sense of security, perhaps based on the premise that our financial system is not as underlyingly flawed. However, we have been assured by the number crunchers and academics that all and sundry on the planet will have their turn; we just have to be patient.
But who is to blame for this catastrophe? Fingers are quickly pointed at our American friends who have committed the most blatant acts of greed, negligence and stupidity over the past several years. They are under world scrutiny for their imaginative creation of wealth through the indiscriminate lending of money to people who could not, in the long run, afford to pay it back. If you have ever lent money to an unreliable relative or a reckless friend’ then the madness of this business venture should be obvious. Not to our American friends. No. This was too much of a good opportunity to live the American dream.
But, you may ask, what triggered this massive financial system failure? Sure, the business models being employed by the US financial sector would have eventually toppled over as any good pyramid scheme does in the end. However, the American economy could simply not withstand the heat caused by rising global prices. The BRIC (Brazil, Russia, India & China) countries have been at the forefront of aggressive economic development policies, amongst other developing countries, over the last few years, which have driven the global demand and price of goods, translating into rapid global inflation. The progress of developing nations, among a range of other factors, has had an enormous impact on the US economy exposing the cracks in its foundation and catapulting it into economic trouble.
And now here we are, watching the drama unfold in front of us as politicians all over the world run around trying to save us from the brink of economic disaster. Somehow I get the feeling that I am watching the equivalent of a hostage negotiator trying to put out a raging forest fire it all just does not fit. The uncertainty of our futures should certainly increase the business of fortune tellers and sangomas alike. There is now a very thin line between paranoia and omnipotent wisdom when interpreting the direction the economy will take. Your guess is as good as mine. Or an economist’s for that matter. The silver-lining is that humanity always seems to come out the other end a little stronger, and perhaps a little wiser.
Jeremy West is a Cape Town-based business analyst. This opinion piece debates a topical issue – start a conversation and have your say by sharing your comments here.
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