The news this past week has made me pretty angry. As the Bank of England publishes its gloomy bi-annual financial stability report, our prime minister pleads with China and oil-rich countries to help the International Monetary Fund prop up the countries worst hit by the economic downturn. Presumably the IMF will then take these new funds and serve up its medicine in the form of demands for suffering countries to introduce the very economic policies that are failing us today.
I won't delay you with the back story as I think it is safe to say we are all feeling the credit crunch in our lives, as pension funds are slashed and food and energy prices rise. The BBC reported that global taxpayers like me and you have been presented with a £5 trillion bill to help bail out the world's banks as panic sets in and once rich pickings for credit dry up. According to the BBC's business editor £600 billion of tax money has so far gone towards helping British banks. These sums become meaningful when you put them against, say, the NHS budget for 2007 which was around £90 billion.
Bank of England governor Mervyn King is, not surprisingly calling for "a little more boredom" in the banking sector and a major rethink about how we manage financial risk. He is a day late and a dollar short though, the damage has been done. We need a radical alternative. We are now seeing the repercussions in the oil-rich markets that Gordon Brown is seeking help from. At the beginning of last week the Wall Street Journal reported that the Kuwaiti Central Bank had to put together a deal to bail out one of Kuwait's largest banks. Gulf financial markets in Saudi, Qatar, Kuwait and Dubai have also have suffered a drop in share values and the Emirates is seeing signs of a down turn in the real estate market in Dubai and Abu Dhabi.
Huge injections from oil revenues have helped the Gulf countries to weather the storm now and to continue with major investments projects, such as the UAE-Saudi highway. But, economic diversification to meet the challenge of peak oil has meant tying themselves more into the international markets that are now suffering from the credit crunch.
As BP announces record profits for the last quarter of this year it doesn't seem too worried by the global crisis upon us, with its chief executive announcing that he thinks the "current turmoil may in fact create opportunities for us". This attitude is all part of the wider problem of 'business as usual' despite the very real and painful impacts that our economic system can have on ordinary people. It really is not enough if we see a recovery in the stock markets as was recently reported. What about the damage that has been done as we mortgage finite resources up to the hilt to fuel lifestyles that are unsustainable? We need to have an alternative that is sustainable and pro-poor. Al-Jazeera English just reported the latest UN figures about the levels of poverty and inequality around the globe, including some of America's poorest neighbourhoods.
The New Economics Foundation appears to be one of the few think tanks that are coming up with urgently needed new thinking. One of their goals is "to expose the problems with the international finance and economic systems and create appropriate remedies". One of the remedies it has already set out seeks to meet the current global crisis we are facing:
- "The global economy is facing a 'triple crunch': a combination of a credit-fuelled financial crisis, accelerating climate change and soaring energy prices underpinned by encroaching peak oil".