UNCTAD on the global recession
Ashley Seagar had a great column in yesterday’s newly one pound Guardian asking “Have we learned nothing from the financial crisis?”.
Much of it refers to the new Trade and Development report from UNCTAD (the United Nations Conference on Trade and Development) that was published yesterday. PDF overview here and the gateway to the full version here.
Those searching for green shoots will need to look elsewhere. It does not see an easy recovery – particularly in developing countries now suffering hard from the fall out of a made-in-the-rich-west financial crash. And it’s very clear how it came about and what needs to be done:
“In analysing the causes of the crisis, the Trade and Development Report 2009 focuses on the role of excessive risk-taking made possible by financial deregulation and innovation in obscure financial instruments. It highlights the problem of the predominance of financial markets over the fundamentals of the real economy. The experience with this crisis proves that free financial markets do not lead to optimal social and macroeconomic outcomes, and suggests that the relationship between the State and market forces needs to be fundamentally reviewed.”
And Ashley got this quote from Heiner Flassbeck, UNCTAD’s chief economist:
“All these rises in markets are said to reflect economic recovery but it is just another bubble. These markets are reflecting a recovery that is not there. Wage deflation is a huge danger everywhere and this is not being recognised.“ (my emphasis)
“Banks have been rescued by the taxpayer and are just returning to casino-style speculation that brought us trouble in the first place. We need to focus banking on supporting investment in productive businesses.”
This focus on wage deflation is welcome. Of course unions have negotiated pay freezes and short-time working in companies hit hard by the recession, but it would be disastrous if that became the norm across the economy. It might be in the interests of a single company to hold down the wages of its staff – especially if rising unemployment makes it hard for them to move elsewhere. But it is absolutely not in any company’s interest for the wages of its customers to be held down by their employers.