As the world economy started tanking last year, I remember former US Treasury Secretaries Robert Rubin and Lawrence Summers admitting that they had never really understood what all these fancily named financial products, such as credit derivatives, even represented. Ultimately, the experts we counted on were just as intoxicated as the average Joe by the promise of continued growth and feeling good, never questioning the strange edifice all of this was built on.
Psychologically, we and the markets became so dependent on seeing the green upward arrow and the feeling it produced, that we are still having withdrawal symptoms today. We so want to feel good again that any positive news, a few words at the G-20+ summit or the rare glimmers of hope from a handful of economic indicators, that we want to buy into this and ignore the need to question the system that failed us so evidently.
We still believe that we can spend our way out of this crisis, no matter where the money comes from. Let’s just keep pumping it in. When British Prime Minister Gordon Brown announced his £400 billion rescue plan for banks, everybody breathed a sigh of relief, but few wondered where this money would come from. Government bonds and the liquidities of Asian and Gulf countries are viewed as inextinguishable sources. Yet the 0.5 percent return investors would receive is not questioned by experts.
What we are missing are real questions and honest explanations, but nobody is even asking them. Those issues are brushed away today just like Rubin and Summers brushed away the actual meaning of credit derivatives before the crisis. Meanwhile, the real questions and potential answers are actually plain enough for anyone to see. $147 oil last summer was no market anomaly, nor is the buying up of mines, resources and junkyards by the Chinese.
One reality we have tried our best to ignore is the increasing scarcity of the fuels and resources that our economy still depends on. Oil speculators simply took out their calculators and tapped in present consumption, known oil reserves and estimated growth to come up with $147 a barrel. In the steel, copper and agricultural markets they did the same, and came up with the same high numbers. At least these people were doing their jobs, with their common sense, not just wishful thinking.
Those who ponder the limits of growth, the growing scarcity of resources on our planet, or the phenomenon of global warming are invariably contradicted by experts who speak of technological advances and boundless productivity that will make all those concerns irrelevant. But the world is already experiencing strains in population growth, scarcity of resources and the lack of water and staple foods. Experts just want to stay ahead of the curve; they do not care about what is really going on.
I can understand why we are all so reticent to face the real crisis, however obvious it is. Since none of us really understand what is going on, we know even less about where we should be going and what we should build a new economic order on. Others are scared by accusations of bringing back socialist ideas if they question any element of our failed economic orthodoxy. We prefer big words to big ideas, and the vacuous reassurances of economic experts suit us fine.
If we do not wean ourselves off our mistaken faith in financial products that we do not even understand, we will simply repeat the same mistakes over and over again.
It is time for us to introduce some common sense into our daily lives, our economies, and the concept of economic growth in general. Instead of focusing on constant growth and gain, with several cars and seasonal homes per family, we should be thinking about how our system addresses the needs of the poor and manages our finite resources.
As a nonexpert I would also like to introduce another issue where common sense would be required. If we can end the long-running dispute between Arabs and Israelis, I believe that the Middle East could become the region that leads world economic recovery. It could even become a model for a new form of growth, based on environmental principles that are already being tested in the Gulf, and ideas of sustainable growth.
World leaders and economists must reinvent themselves and their approach to our economic lives.
We must start thinking of what we can do to improve the world we live in, and to start teaching it so that we can provide our children with even better opportunities. In any case, we need to start from scratch to build a new culture of knowledge and responsibility, based on common sense, that will help us emerge from the current mess with a lesson learned.
— Hassan Youssef Yassin is a Saudi political commentator based in Riyadh.
