By Raffique Shah
Sunday, January 11, 2009
IF ever the world needed an economic recession, this is the time. Maybe there is some superior entity that is both omniscient and omnipotent, that saw the excesses man was capable of, left to his devices. And just maybe, that entity decided to call halt to the madness that gripped mankind, from Iceland to Antarctica. Almost the entire world, except for the one billion living in poverty that we can pretend do not exist, engaged in wanton, wasteful consumerism. It was as if we were re-enacting the lavishness of the pharaohs of ancient Egypt, or the Court of the Roman Empire in its halcyon days.
Any ordinary but informed person could tell the good times would not last forever. Indeed, those who kept abreast of global trends, who looked at the world’s biggest economy, the USA, sinking deep into debt, knew there was big trouble ahead.
Still, the economic conmen and con-agencies that pretend they are the fountains of infinite wisdom kept fuelling a dream that was sure to turn into a nightmare. How, we may ask, “ratings” agencies like the IMF, Moody’s, Standard and Poor’s and Fitch-IBCA, to name a few, got their numbers and projections all wrong? What of the wizards of financial services-Morgan Stanley, Merrill Lynch and Lehman Brothers, not only got it all wrong, but also themselves landed in deep trouble?
The wild fluctuations of commodities’ prices that occurred between 2007 and 2008 were predictable. Oil at US$100 a barrel was not overpriced, based on adjustments for inflation. But $147? That was sheer madness. Grains that form staples for much of the world’s population rose to price levels that triggered shortages and starvation. Base metals, critical to infrastructure and other construction activities, shot into the prices-stratosphere, not to add into the bulging bank accounts of industrialists, speculators and bankers.
Here in Trinidad and Tobago, Prime Minister Patrick Manning, his Government wallowing in energy-generated billions, took on the posture of an emperor. Grandiose projects took precedence over the basic needs of a properly functioning country. Anyone who voiced disagreement with his vision of the capital city’s skyline instead of focusing on its basic amenities, was deemed a detractor. Some primary schools remain relics of our colonial past, complete with bats defecating on staff and students. Health institutions are woefully short of modern equipment, of life-saving medications, of qualified personnel and sanitary toilet facilities. I can go on about what citizens of a supposedly prosperous nation need, as distinct from what Government wants.
The global economy had to fall flat on its backside for human beings to realise we have morphed into modern day locusts, consuming everything in our paths. When, in the early days of the crisis, Americans cut their usage of oil by 1.5 million barrels per day (bpd), I applauded them.
For as long as we care to remember, that country has consumed 20 million bpd, a quarter of global production. Next in line is China, with a population four times that of America. It consumes around seven million bpd. In the wake of the mainly OECD countries’ housing crisis, while many people lost their homes, and later their jobs, spending on High Street, as they dub it, fell to their lowest levels in decades. Again, hooray for those who curbed their spending.
People across the world must learn a basic lesson Trinis of my generation did when we were children. It is this: you never spend more than you earn, or than you can afford to repay. Personal debt must be a last resort, not a first choice. True, economic activities in the modern world revolve around trade-producing goods to be sold to others, and buying what others produce. But we must never overreach ourselves in a bid to “keep up with the Joneses”, or at the global level, attain unrealistic American standards of living.
This recession will drive these values forcefully into our thick skulls. Government must rethink its notion of what really is developed country status. Let me add that while I accept we shall experience some fallout from the global economic crisis, I am not among those who swear that we shall end up the way we did after the two previous oil booms-massive job cuts, huge foreign debt, negative growth. Once Government and the people act responsibly, we can emerge with a few bruises, but ready to fight back.
For starters, with industry chugging along slowly, this is an opportunity for us to focus more on producing as much food as we can. It also challenges the Caribbean Basin to cooperate in a bid to end our dependence on OECD countries for most of our staples.
Out of the ashes of this recession, a new world economic order will emerge. We must be part of that paradigm shift. Latin America will rise as an economic powerhouse, as a major food basket. It’s where our government, our business sector and our people should focus attention even as we battle the recession.
In the meantime, people must resort to discretionary spending. And Government must match that with eliminating its unnecessary and prohibitively expensiveprojects that would lead us into the valley of debt and maybe death.