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The complex crisis: an elaboration

The complex crisis: an elaboration


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By Oscar Ugarteche

In August 2007, the so-called “poor quality mortgage” crisis began in the United States and finally burst in September 2008, with the bankruptcy of Lehman Brothers and the crash of the stock markets. The nature of the crisis has been in question and there are different views on its complexity. The triple crisis is an entry, where the energy, food and economic crises go hand in hand. Another approach is the long-term crisis as proposed by Arturo Bonilla. Another is a financial crisis that has already passed (2007-2009) and then we are on the verge of another crisis in Europe. This is a very Anglo-Saxon reading and metabolized by the Organization for Economic Cooperation and Development -OECD-. Other longer-range readings allow us to foresee that it is a change of times. In this sense, the position of a civilizing crisis proposed by Aníbal Quijano and Boaventura dos Santos is closer to the observed reality than the previous ones, more oriented to the fact that it is an economic crisis.

The lack of growth in mature economies, imbued with over-indebtedness and high unemployment, opens the question of mature capitalism. Is that the utopian end of what we are all doing in the developing world? The consequences on the planet of that will end in the destruction of life. The European Environmental Agency report of November 2012 warns that the global temperature increase will be around 3.6 to 4 degrees Celsius between 2010 and 2100. At the same time it recognizes that this comes after the 1.3 degree Celsius increase from the industrial revolution to the first decade of the 21st century. The consequences can be seen in the storm that flooded and froze Manhattan in October 2012 as well as in the increase in atmospheric disasters suffered around the world in the last decade.

The question is what are we doing as humanity with our planet? We are destroying it to achieve, as a utopia, that when the entire population is employed and comfortable, the economy does not have the capacity to sustain it either economically or materially. More than transformed, the human being has destroyed nature.

The refuge for crises has always been belief, but this time we have a religious crisis, especially on the American and European continents. Jan de Vos [1] refers to the crisis in the Catholic Church as a schismatic crisis and opens the question about the regenerative capacity it has to recover from the schism in which it is immersed. The church, says Vos, is increasingly removed from its congregation. There are those who propose a return to the original church of the first three centuries. The problems around this are raised by Vega Centeno lucidly by suggesting that in Latin America what is beginning to be observed is a plurality of beliefs.

The economic march for three decades has been oriented towards exports through low wages. The object of the policy is clearly the concentration of income and it has succeeded. Never in history has world income been more concentrated, and never in history has there been such a distance between rich and poor countries. In the colonial world there was a certain balance of wealth. The purpose of colonizing was to transfer wealth from one side of the world to the other. In the neocolonial world, the object is to impoverish one side of the world that is growing to enrich the other that is not growing. The world and its riches are subordinated to what the great powers require. Except this time, other countries that are transforming the global power structure entered the list of great powers.

The dogma of the Market

Two hundred years after revealed truth ended, in the Age of Reason, humanity again faces a new revealed truth: the Market. If before God was the bearer of truth and knowledge was an easily overcome obstacle to guarantee that said truth would be maintained, today the Market is the bearer of truth. The Market is omnipresent and perfect: it knows everything and can do everything, it speaks and listens, throughout the world. Knowledge, on the other hand, does not prevent that truth from continuing to spread as a dogma. That is the function of the neoliberal theories in the economic and neo-conservative in the political that make up the post modernity that dominates the way of understanding at the beginning of the 21st century. In this field, political philosophy is ahead of experience and proposes a non-existent social order based solely on individual relationships. There are no class or national interests. Only individuals who must be attended to immediately. Immediacy is an element of this individualistic postmodernity taken to the extreme: that of the isolated and urgent economic agent.

Foucault in Subject and Power warns that the human subject is immersed in relations of production and meaning and therefore is immersed in very complex relations of power. The question that arises is what legitimizes power? How is the signifier of power constructed? Once with a theory of power, you can approach the analysis of reality. Foucault's search is not Weber's. It does not look for the institutional part of power but rather how it operates in consciences. Look for the submission process, how the norm is defined, and what is outside the norm. Without going too far, how common sense invades and transforms it. It transforms it with the ideas that it wants to use to submit, within a very defined historical context: economic and political.

Fascism and Stalinism are two pathological forms of power within very precise contexts. Power can therefore be transformed to subdue in the way it finds most possible. The whole discussion is about the space that opens up for power and how it invades and subdues the human subject. Despite their inner madness, both forms used the ideas and procedures of our political rationality. In the same way, today the Market has subdued reason and politics with neoconservative political support, closer to fascism than to Stalinism, but far from the democratic spaces under construction since the 18th century. Anything that departs from this interaction is anathema, away from dogma and must be excommunicated: for example Venezuela, Ecuador, Bolivia, the bad left in the words of a Mexican neo-conservative politician who was previously the Mexican Communist Party. [2]

At the same time, the bank collapses rescued by the state because the market did not have the capacity, highlighted the double standard. Too big to fail was what we used to call monopolies, and fiscal coordination was called what used to be called group interests. The state's assault on the banking financial complex distorted the discourse of the Market in the United States. Except for power, everything is illusion, said Mao, and now the bankers in the United States say that they have come to stay at the Treasury Department, where they rotate from time to time in a criminal revolving door, infused with conflicting interests. Simon Johnson and James Kwak put this in black and white on their 13 Bankers. The Market yes, but with the State under control just in case to transfer the savings they need. But only for the monopolies of bank finance capital. The rest of the financial sector that faces the laws of the Market. Thus, 1,500 banks went bankrupt between 2008 and December 2012, but financial monopolies have grown: JP Morgan bought from Chase, Citibank bought Bank of America that had bought from Merril Lynch, etc. For example, Robert Rubin, the last Secretary of the Treasury in the deregulation phase that began in 1980, which benefited Citibank with a law in 1998, received 126 million dollars from Citibank in the years since he left office. This, in US law, is neither corruption nor crime. The consequence for them of the assault on power, for example, is that the crisis that began in 2007, which contracted the GDP of the United States, at the same time had 1% growth of the financial sector of the United States in 2009.

Global governance formerly centered around the IMF, the World Bank and public multilateralism, organized by the United States after the Second War, has lost steam. The crisis since 2008 has shown that states are of little use except transferring resources to the financial market, and that only the G20 is the solution. The G20 brings together the Highly Indebted Rich Countries (HIRC) starting with the United States, Great Britain, some Europeans and Japan, with the world's largest creditors from China to Saudi Arabia. In this way, those responsible for the economic and financial crisis led by the Market are the ones who today try to impose the new rules of the international financial and economic game in the G20 through the B20 and the T20, the B20 being a group of companies, and the T20 a group of think tanks that set the agenda for the G20. Jorge Gaggero's text highlights the way in which the Mercado pastors arbitrarily distribute their word by forcibly suppressing what the apostates are trying to say within the T20 space.

Is a reformed and democratized IMF, which is accountable to the new powers, with a new economic theory, preferable to a private governance that has no way of accounting except to its partners? Or, can regionalization assist? Regionalization has the advantage of bringing institutions closer to their client states and of responding directly to their needs. The European idea of ​​regionalization also contains an aspect of aggregation of bargaining power, in the framework of the cold war. In Latin America, it has the flavor of aggregation of power vis-a-vis the United States, which, as we see even now, continues to intervene in the internal life of countries to further their interests, as if the cold war survived. The governments that desist from the dogmatic discourse in Latin America have sought integration and have been resisted by those who are with the dogmatic discourse. The speech had one of its best expressions in Hugo Chávez. This ideological economic confrontation has its political correlate, however, in the political axes of the hemisphere: Washington and Brasilia.

Population, employment and productivity

Life expectancy has grown in the world in the last two decades visibly. Perhaps with the exception of the countries of the former Soviet Union that saw a significant reduction in their life expectancy in 1990, it is appreciated that there are more people working for more years of useful life. At the same time, the feminist revolution incorporated women into the labor market. Carlos Welti shows how in Asia and Latin America, more than in Europe and the United States, this has had great consequences in terms of youth unemployment and low wages. It has also had an impact in environmental terms because more people have to be fed, and therefore more polluting fertilizers are used and there is more technological waste, with the consequences that this causes on water flows.


The inverse of the financial crisis in the United States and Europe is that it seems to have become a boon for Latin America that receives growing short-term capital flows. What is having an impact is the interest rate differential, with effects on exchange rates and international reserves. What prospects does this prospect open for Latin America and how can it be avoided? Submerged both dogmatic and apostate in the crisis that has the effect that interest rates in the United States, Great Britain, Europe and Japan are negative in real terms, that is, net of inflation, both groups of countries are flooded with short-term capital and therefore reflect booms in the prices of their stock exchanges, their exchange rates and their real estate markets. The exceptions can be Argentina followed by Venezuela and perhaps Ecuador.

The greater the crisis, the less lending capacity within the United States, Great Britain, Europe and Japan and the greater the need to resort to new dynamic markets. At the same time, the lower interest rates, the more capital is injected into equity instruments and the higher the stock market indices, even in critical economies. In this way, it is explained that the New York Stock Exchange indices are above where they were in 2007, at the beginning of the crisis, despite the fact that its GDP has hardly grown since 2009 and the recessionary outlook is strong. That is what is called a bubble in financial terms, it has no real support behind it, it is a pure monetary effect, again a product of the policies of the FED (Federal Reserve), as it was in 2004 to 2007. Europe follows the same course, accompanied of Great Britain and Japan in what in exchange terms is perceived as a currency war.

The problem with the crisis is that the productivity of the leading economies grows at a low rate, consumption at a high rate, and consumer credit at an even higher rate. This stretched to the point that imports derived from high consumption became unmanageable. When jobs are lost, this scheme goes into reverse, consumption contracts, consumer credit contracts and at some point the recovery of productivity begins. However, the policies that are being applied have to do with reducing employment but not with improving productivity, which is sought to improve through exchange rates - competitiveness.

The combination of low wages, as the mother of the economy, coupled with the growth of consumption via credit has effects on the quality of life of the population. Employment has become more precarious and social rights have been lost in favor of concentrating income, the central objective of the policy. When that population protests the loss of employment, it is perceived as a terrorist threat. Undoubtedly that is what the transformation of the laws against social protest into anti-terrorist laws points to. From Chile to the United States, social protest is classified as terrorist, the treatment of the detainee, therefore, is that of a non-citizen. The person has no rights when they are detained for terrorism, which is actually a protest for wages or employment or quality of life. The treatment of Protestants in Madrid, New York, and other capitals in the now-dissolved Occupy Wall Street campaign went in that direction. The deal in Europe is still that way. Saskia Sassen [3] recently wrote that democracy as we have known it is particularly weakened in the United States.

What we face is a profound degradation of the liberal state. Drone killings [4] and illegal incarceration are at one end of that spectrum of degradation, and the rise of power, economic destruction and arbitrariness of the financial sector are at the other extreme.

Susan George has just published The Lugano II Report where she argues that the financial sector has agreed that what is relevant is not democracy but profitability and that everything must be done to guarantee it. This is basically Sassen's idea and it is the idea behind the economic dogma. Suffice it to recall that dogma was introduced to the world in Chile by Pinochet in 1974 with the unforgettable support of the Milton Friedman / Henry Kissinger duo and the financial support of the ITT.

Towards the militarization of social control

The way of applying the FED policy called Quick Easing, in Peru “la maquinita”, consists of injecting liquidity by buying treasury bonds from the investment banks that have them. This is done by all HIRC central banks. This liquidity is then used by investment banks to invest both in their own stock markets and abroad. As commodities have been securitized, that is, they have their own market securities, then investors buy copper, securities that give the right to a certain amount of physical copper. The manipulation of these securities pushes the prices of raw materials above their real price level determined by physical supply and demand. Since 2008 it is very clear how the prices of raw materials are basically determined in the securities market. The effect is very strong growth in the economies led by primary exports from Africa and Latin America. With high growth rates, dogmatic countries are not willing to listen to apostates, who also grow a lot, in the need to grow in another way, or to integrate in another way to the world, favoring the market for industrial goods. Dogmatic countries are closing ranks through treaties and agreements with the United States to ensure that dogma is always respected. The most recent is the Trans-Pacific Treaty -TPP- which apparently gives corporations more rights, analogous to the Multilateral Investment Agreement-MAI- which was suspended in 1999 in Seattle after social protests.

In terms of economic theory, what can be seen is that the dogma oriented to the concentration of income has been gaining positions in Europe as well. The IMF seems to have lost weight there in front of the European Commission, which serves as a spokesperson for this view. The problem of income concentration coupled with overconsumption and over accumulation remain at the center of the crisis. They have not been resolved. At the moment, the “global” crisis is divided in two, one part is in the HIRC, where the continuous deterioration is evident, and the other where short-term capital flows and where the impact of price rises is felt of raw materials for the reasons explained. Undoubtedly, the crisis will become general when prices fall due to interest rate adjustments or the HIRCs are reactivated. The latter is less likely for the foreseeable future. In no case is a reactivation based on technology, in turn driven by fossil energy, the solution because it will precipitate an undesirable outcome. The question is whether there is another way of understanding the economy that is viable and whether designs such as Buen Vivir can have a global projection.

Militarized social control seems to be the new feature of the crisis both in the HIRCs and in the rest of the world. The operation of the banking financial complex in a widespread manner throughout the world is in the process of becoming widespread, thus articulating both the big press and the interests of that big bank, which are finally 30 institutions and are represented in the G20 and guide it. There is no evidence that anything is preventing financials from continuing to function in the same way as before the crisis. The inability to pass regulatory laws in the United States and the removal of Barney Franck from the Senate indicate the weight they carry. The presence of relatives of the Banking Financial Complex in the Securities and Exchange Commission of the United States and the Treasury of that country, as well as that of investment bankers in almost all the governments of Europe, speaks of the assault on power there as well. The counterpower with the ability to question the dogma and the order established behind it are growing in Latin American countries but are in danger. Threats against Argentina, Venezuela, etc., go in this direction.EcoPortal.net

- Oscar Ugarteche, Peruvian economist, is president of ALAI. He is a senior researcher at the Institute for Economic Research at UNAM, Mexico. Member of the SNI / Conacyt. Coordinator of the Economic Observatory of Latin America (OBELA) www.obela.org.

* This text is part of the magazine América Latina en Movimiento No. 483, which in this issue deals with "The complex crisis" (http://www.alainet.org/publica/483.phtml)

[1] Jan de Vos, "A Pope clinging to Neoplatonic metaphysics", La Jornada, Mexico, Sunday March 3, 2013, p. 22.
[2] Taken from the introduction by Ugarteche and Martínez, La gran mutación, Breviarios Series, IIEC-UNAM, 2013, in press.
[3] SaskiaSassen, “Drones over there. Total surveillance over here ”, http://www.aljazeera.com/indepth/opinion/2013/02/2013210114231346318.html
[4] A drone is an aerial warfare team operated at a long distance by remote control. http://dronewarsuk.wordpress.com/aboutdrone/


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Comments:

  1. Seymour

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  2. Elliott

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  3. Herlbert

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