New Internationalist

Meltdown - The FACTS

Issue 421

How free-market fundamentalism brought the world to its knees

THE BANKS
BANKRUPTING THE WORLD

In 2007 big financial corporations posted record profits – more than $70 billion in Britain alone – along with record complaints about bad service.1

By the end of January 2009 huge losses accompanied a public ‘bail-out’ of bankrupt private banks that had reached, by some estimates, a staggering $15 trillion ($15,000 billion) worldwide – and was still growing.2

In the rich world, governments (via central banks) poured trillions more dollars into providing ‘liquidity’ for private banks – and incurred virtually unlimited liabilities by offering guarantees on bank deposits and business loans.

$15 trillion is equivalent to a quarter of the world’s annual income, or over $2,200 for each of its 6.7 billion people.3

The average annual income of the 1.3 billion people living in the world’s poorest countries is $573.

Iceland, with a population of 311,000, an income per head of $34,000 (in 2007) and borrowings from the IMF that work out at roughly $33,000 per head, is effectively bankrupt already.

Government bail-outs gathered pace after the collapse of Lehman Brothers in October 2008 and the G20 ‘crisis’ meeting in Washington DC on 15 November 2008.

Government bail-outs and ‘stimulus packages’, October 2008 to January 20094
(*IMF ‘crisis’ funding)

——-

CLIMATE CHANGE
THE GROWING DEBT TO NATURE

Despite innumerable conferences, emissions of carbon dioxide continue to grow, and at an accelerating rate.

As a result, the accumulation of carbon dioxide in the atmosphere, and therefore the pace of climate change, is  still accelerating as well.

——-

GREEN JOBS
THE GREAT POTENTIAL

A comprehensive greening of the world’s economy (including energy, construction, transport, manufacturing, materials management, retail, agriculture and forestry) would generate millions of decent, secure and sustainable jobs – in developed and developing countries alike.

In recent years, 2.3 million people worldwide have found new jobs in renewable energy alone. There could be a further 2.1 million in wind power and 6.3 million in solar power by 2030.

Renewable energy generates more jobs than fossil fuels; an investment of $630 billion by 2030 would translate into 20 million additional jobs.

A transition to energy-efficient buildings and construction techniques would ensure employment for the 111 million people once working in the construction sector, but now rapidly losing their jobs.

——-

UNEMPLOYMENT
THE RISING TIDE

From the end of 2007 to the last months of 2008, average unemployment rates in the rich G7 countries rose from 5.4% to 6.3% – the sharpest rise for a generation.

During 2009 between 40 and 80 million people are expected to join the 190 million already registered as unemployed worldwide by the end of 2008.

The rise is sharpest in the most free-market-friendly economies – Ireland, Spain, Britain and the US. In more regulated economies, like France and Germany, unemployment rates (though higher to begin with) have actually fallen – thus far.

Developing countries do not always keep accurate or up-to-date unemployment figures; combined with ‘underemployment’ they are reckoned to be at least 30%.

Some 1.3 billion people (43% of the global workforce) who are counted as ‘employed’ earn less than the poverty wage of $2 a day.

Almost 80% (5.3 billion) of the world’s people have no social security coverage of any kind.

Unemployment in rich countries5
Selected members of the Organization for Economic Co-operation and Development (OECD)

——-

INEQUALITY
THE SPREADING PLAGUE

The share of wages in global income has been falling sharply for more than a decade.

In the US, between 2003 and 2007, CEO ‘compensation’ increased from 369 times employee wages to 521 times. The pay of executives increased five times faster than the pay of employees.

General measures of inequality (the ‘Gini Index’) have increased in every region of the world except Africa.

Ratio of top 10% of earners to bottom 10%, selected countries, 1990-20068

——-

  1. ‘Bank profits soar – along with complaints’, in The Evening Standard, 16 February 2007.
  2. See, for example, figure quoted by Polly Toynbee, ‘Not all of finance is in ruins’, The Guardian, 24 January 2009.
  3. Population and income figures (2007) from World Bank, World Development Report 2009.
  4. Announced or proposed figures from The Economist, The Financial Times and The Wall Street Journal, October 2008 to January 2009.
  5. Harmonized unemployment rates (HUR), OECD.
  6. Worldwatch Institute, State of the World 2009, Norton, New York, 2009.
  7. Green Jobs: towards decent work in a sustainable, low-carbon world, UNEP, ILO, ITUC, IOE, 2008.
  8. The World of Work, ILO, 2008.

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This article was originally published in issue 421

New Internationalist Magazine issue 421
Issue 421

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New Internationalist Magazine Issue 436

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