It is almost incredible how the perfect storm is coming together from so many sources at the same time. The near-bankruptcy of the Italian economy could bring down the Eurozone. Today’s official down-grading of growth in the EU to no more than 0.5% a year, and even of Germany to only 1% a year, heralds entry into a deep European recession over the next 2 years. The contagion from the Euro sovereign debt crisis plus the paralysis in the US economy with its still bombed-out housing and job markets signals the end of Western economic supremacy in the face of the continuing relentless rise of Asia. The likelihood of nil growth in this year’s 4th quarter in the UK will confirm again how counter-productive it is to reduce the budget deficit exclusively by expenditure and benefit cuts without regard for declining aggregate demand. And, though hardly anybody will give this adequate attention so immediately drastic are the current crises, the world is very near a tipping point where devastating climate change becomes irreversible. Yet it need not be like this.
It is possible to envisage short-term solutions to each of these crises. The ECB could be made lender of last resort for the bond markets of each of the Eurozone’s weaker economies. The Eurozone could split into a 2-tier framework with Germany, Austria, Netherlands and Finland dominating a high-speed inner group, and Italy, Greece, Portugal and Spain consigned to a slower-speed southern grouping. The transfer of economic power eastwards could be slowed and halted over time if there were a fundamental reconfiguration of Western economies away from consumption and imports complacency (illustrated by today’s UK trade deficit in goods the worst since records began) towards industry, investment and exports. And the looming climate change disaster could still be tackled if the turbo obsession with fossil fuel extraction were steadily shifted towards long-term reliance on renewables.
But all of these radical solutions to global fundamental problems are snagged on one underlying issue – the dominance of market fundamentalism. As long as the current power structure and culture of neoliberal capitalism remains as widespread and deeply entrenched as it is, there will be no more than a temporary short-term patchwork to a bust economic model. But what is most depressing is that the resistance to this broken model is coming, not from any political parties, but from the street across the world. Nothing could illustrate more starkly the disconnect of today’s politics from the reality out there.