Erenlai - Items filtered by date: Wednesday, 05 November 2008
Thursday, 06 November 2008 01:53

Do not let the crisis take all the gains away

During the last month the economic crisis has deepened its roots: the economy in the US fell 0.3% in the third quarter, the general indexes of stock markets have fallen all around the world from the developed countries to the emerging markets, consumer confidence is hitting record lows and articles about the financial crisis and the end of this period of capitalism are abundant. Critics on how the incentives system has deteriorated the world wealth distribution in favor of bankers and managers are leading the political debates in several countries.

The crisis exists and it is imperative to have a close look on how governments react locally and in concert with multilateral institutions. But this is also the right moment to check our definitions of social justice before launching ourselves into the criticism wave. Economic growth has been widespread during the last decade and, although there can be some improvements in the way the wealth is distributed, few periods of history have distributed it as successfully as the economic growth in the first decade of this century. Since 2002, East Asia – not including Japan - has grown at an outstanding 8% yearly; Central Asia has an average of 9.33%; Latam has an average of 4.22%; and even Africa has kept a growing trend with 5.1% yearly in average (Source: Swivel Preview. GDP Growth rates by country and region 2007).

If we combine the economic growth with the trends in employment growth on emerging markets we can tell how the reallocation of resources has reached the most remote people. In most of the emerging economies, unemployment has fallen or has remained steady during the last 5 years to climb recently as the credit crunch let these economies feel its effects.

Despite the absence of any proper estimate, we can say that we are now living the period of history when people have left poverty at the fastest rate. This rate might be even faster than in England during the Industrial Revolution. Some estimates mention that in China 50-70million people escape poverty yearly, and their estimations are not taking into account economic growth in other places.

Those facts are hard to admit when media is bombing with gloomy news, and the feeling of slowdown is overspread. In fact, we do not pretend to deny the crisis, but we would like to be advocates for a system that has allowed improved living standards in a vast population despite its many imperfections.

The harshest critics come from sectors that are heavily exposed to the changes globalization is causing in their societies. The noisiest examples are in the unions of the developed world, which face strong competitions from labor forces in other countries. They talk about a depletion of jobs in their countries as “sweat-shops” have mushroomed. Such a depletion of jobs proves false as the unemployment rates of the first world have kept low during most of the last 5Y period and only have started to climb along with the downturn trumpets. In the US, unemployment was 6% in 2003, and it was 6.1% in August, 2008. Germany reached 9% in 2003 and stands at 7.5% currently. I still ask myself: where did all the unemployed go?

I would like to close this article with asking ourselves to establish longer links than those the media suggests. Regulation is needed, but we should be jealous of the extent of the governmental intervention regardless of the country, and especially if the country has a corrupt record. Globalization might cause unemployment but it is not fully proved in the short term, and no link exists in the longer term; on the other hand, opportunities have been opened for millions of people that had never even dreamt about them. To keep them opened might be our responsibility.

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