It is frequently asked whether it was possible to avoid the present crisis which is still shaking the Western economies, yet it has a negative influence upon a number emancipating and developing economies, including China. Such a general question cannot be answered correctly, since it is necessary to define the time frame it refers to, that is from which ex ante time perspective it would have been possible to avoid the current crisis. In other words, that is a complex question: not really “when”, but “how” was it possible to avoid the crisis of 2008-2013?
The answer to this question will be different if one asked about such a possibility three years ago, if we were to analyse the period thirteen years ago, and yet again different if we looked at the future, which has already become the present, from the perspective of thirty years ago. And such a threefold approach of three, thirteen and thirty years’ periods emphasizes the essence of the current crisis by revealing its causes, mechanisms and consequences. Above all, it is extremely illuminating from the point of view of conclusions related to the future and proposals for actions to prevent similar disturbances in the future – in three, thirteen and thirty years. It is worth remembering that the present is nothing more than the future of the past.
It is obvious that three years ago the world crisis was not possible to avoid. The scale of detachment of the speculative financial sector from the productive real economy, which provides all goods and services necessary for life, as well as for further production, was so great that the required adjustment to level the size of such detachment could occur only through crisis shock. What politics could not fix ex ante, was achieved ex post by crisis. It is an extremely expensive way of making adjustments.
Three years ago
Three years ago, the values related to good economic practice were already devastated; even if it was not the case everywhere, it affected many segments of the economically inter-related world, and particularly its epicentre, which still is in the United States, although year after year the distance between USA and China is shrinking. In 2010 the financial and economic devastation was so advanced, that there were no political powers, which within the existing institutions would have been able to re-direct the economy to the path of non-crisis development. The imbalance in the world economy was also too large. The world as such is in fact the only truly closed economy (at least as long as we do not establish extra-terrestrial economic links, definitely not in this millennium…). However, despite well-advanced globalisation, the planet’s economy is still divided into almost two hundred national economies rather than into several large integrating structures such as the advanced European Union or the institutionally backward sub-Saharan African countries.
The characteristic feature of all economies is the lack of external balance, which is expressed in the deficit (more often) or surplus (rarely) of the current account balance. If we pass over any accounting errors and omissions or extraordinary losses, in the planetary scale the surpluses and deficits balance each other and the final result is zero. However, if we sum up the values of all deficits and all surpluses of current accounts and then if we refer such an aggregate to the GWP, then in 2008 it oscillated around 6 per cent! And how is it possible not to fall at this scale of structural imbalances?
Thirteen years ago
And thirteen years ago? Was it possible then, in the late 1990., at the turn of century, to avoid the present crisis? In this case the answer is more complicated. Some attempts had been made. There was contentious debate between monetarism (which is the basis of neoliberalism) and neo-Keynesianism, which seems to be enjoying rejuvenation in many circles but as such it is not a panacea for contemporary complaints. In particular, there was a major battle between the advocates of far reaching uncontrolled de-regulation on the one hand, and the advocates of justified intervention of the government on the other hand; between the apologists of unbridled market and supporters of the active role of government. In numerous countries it was possible to resist the neoliberal attack in total – for example, in large China, or in tiny Slovenia.
In other countries it was only possible periodically, for example in India or in the largest post-socialist country of Eastern Europe during the implementation of “The Strategy for Poland” from 1994 to 1997. In several Latin American countries, which as an act of goodwill trusted the Washington Consensus or allowed its imposition upon them, unorthodox actions were taken and they dominated later on, and not only in Brazil and Argentina. In the USA, attempts were made to create a different concept of development. So was the case in the Great Britain. However, neither the “Clintonism” – after former American president, Bill Clinton, inspired by the Democrats in US, nor the Labourite “Blairism”, after the former British prime minister, Tony Blair, could manage the neoliberal storm. Hence, at the turn of the century neoliberalism won the mainstream position in economics as well as in economic policies. The flight of the moth to the flame was not stopped…
Thirty years ago
What about thirty years ago? Was then the present multi-layer crisis possible to avoid? The answer is of course positive. In the conditions of increasing globalisation, it was enough – bagatelle! – not to follow the ruts of neoliberalism, which were quite shallow then, but instead to go forward towards the future along the path marked out by the model of the social market economy. The characteristic features of the social market economy include the imperative of social cohesion and economic institutionalisation, which allow for the development of private entrepreneurship while maintaining the State’s supervision over the balanced division of results coming from increased work productivity and improvement of capital efficiency. It also takes genuine care of the natural environment and cultural aspects of development.
However, the world went along a different track – due to aggressive greed and spreading short-sightedness, due to the relatively weak position of the Scandinavian countries on the international arena, who enjoyed a social market economy that functioned well, due to the fact that Germany (united) and Japan (during structural crisis) were busy with their own challenges, due to the gullibility of intellectual and political elites in the countries of the so-called emerging markets (more in the countries of post-socialist transformation than in other parts of the world). It is necessary to be able to draw conclusions for future. “To be able,” means the intellectual skill and political will. One does not have the guarantee that it is going to happen. It calls for a great intellectual and political effort. Yet there is a chance that the lesson will be learned. It the USA and in China, in the European Union and Russia, in Japan and in India.