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A sub-prime crisis, or something more?

For long globalisation has been virtually an un-critiqued idea, especially amongst intellectuals, media and the polity -- both, globally and in India.

No wonder, when asked to explain the idea, those who parroted the same several times a day were found to be at their incoherent, inconsistent best.

But the idea that drives the concept of globalisation is definitely not an innocent one. In fact, there have been several waves of globalisation -- read, homogenisation of the world -- attempted in the history of mankind. And at-least, there are three prominent attempts after Jesus Christ.

The first attempt to globalise was in the first millennium after Christ through religious intervention, with the army and commerce playing a distant secondary role.

The second attempt, in the second millennium, was through the army, with religion and commerce playing a supplementary yet purposeful role.

The third wave of globalisation, coinciding with the end of the last millennium and the beginning of the third, has been through commerce, which has emerged as the chief drive of the modern day globalisation.

And in this third wave, both, the army and the religion have played an influential complementary role. Crucially, the thin dividing lines between the three are increasingly getting blurred in this wave of globalisation.

What else would explain the marketing of the same with missionary zeal by the proponents of this idea, all across the world?

What is best for the West is best for the Rest

The experience of the past two decades or so of this latest wave of globalisation indicates that it is premised on the assumption that what is best for the West is assumed to be Best for the Rest. In effect, what we are witnessing is not a globalised West -- read America - but the world that is getting increasingly Americanised.

But that is not all. Even in the case of commerce -- the chief drive of modern day globalisation -- global economy is being confronted by an enormous challenge by what is innocently termed as global imbalance. And this requires no great seer to either explain or understand the issue on hand. In fact, this imbalance is a direct consequence of intense interaction between the profligate and the prudent, between savers and spenders, between interest rates and the index, between exporters and importers, between the reckless and the cautious and between countries that have a strong currency and those who have a weak currency.

Yet we talk of a globalised world, a global order and a global way of doing things. How silly we could get?

Experience of the past decade or so point out to the fact that there is a distinct dichotomy in the approach to economics by the Asian countries on one hand and the Anglo-Saxon world lead by the US on the other.

But what makes economics in Anglo-Saxon world to work, behave or react in contrast to their Asian counterparts is something that is far beyond the radar of any meaningful debate even at the global level.

The fundamental distinction between these two economies is the diminishing family values of the Anglo-Saxon world. Naturally, this has turned everyone in these countries into a reckless consumer. It is this breakdown of the institution of family that has atomised the society leading to this consumption binge that is having a profound impact on both the national as well global economics.

evertheless, it was this mindless consumption that acted as an engine of global growth for the past several years. In the process it ushered in great amount of prosperity at the macro level, never mind the imbalance associated with it.

Consequently, anyone who questioned the intrinsic instability of this model was branded insane. That explains why globalisation remained mostly un-critiqued.

  • This was succinctly put forth by my teacher who brilliantly explained the extant Western economic model as hereunder: Atomised individuals;
  • Which in turn meant socialised women;
  • That in turn caused the collapse of the institution of families;
  • Consequently, reckless individualism leading to gargantuan consumption;
  • Finally that lead to nationalisation of responsibilities of families.

This in turn had the following inevitable consequence:

  • A pauperised State that was unable to carry on the responsibility of family;
  • This, in turn, lead to privatisation of the functions of government;
  • Naturally, that demanded a corporatised approach to economy; and
  • Finally, that necessitated a globalised market for the survival of these corporates.

This is economic globalisation in brief. In the process, the markets mechanism as conceived by Adam Smith was suspended and the invisible hand as conceived by him, chopped. And when corporates too failed as it has happened recently one wonders what's next.

In contrast, Asian countries being rooted in the traditional family values have been parsimonious in their consumption and hence enjoy a far higher rate of savings which fuels their domestic investment. In the ruins of globalisation, this correlation between family and national savings is fast emerging as the latest frontier of economics.

Importantly, economists may now well understand that while Asian countries may not be engines of global growth caused by reckless consumption, they are surely not the cause of global instability either. At best they can be guilty of producing more, saving more and exporting more!

Turning economics on its head

Let me put the entire issue in the present context. The whole of Asia exports goods to the West, notably the United States. But being conservative societies, they are unable to absorb their export surplus -- read, savings. The net result -- they park their export surplus into those very countries that import from them in the first place.

In effect, they finance the West to import from these very Asian countries, which produces them in the first place!

This one-way export of, both, savings as well as goods remains at the core of the imbalance in the present wave of globalisation.

In the process it is capital from the �poor� developing Asian countries that is flowing uphill into the developed �rich� West. Surely, economics has been turned on its head when it is the poor who lend and the rich who borrow.

Yet, those who swear by globalisation failed to demonstrate as to how a model that is created by the West for itself and becomes dysfunctional even in the West can claim it to be a functional success elsewhere. At best it can be an experiment of the West attempted on the Rest.

It may be noted that the internal imbalance within the US economy, thanks to the atomisation of individual as explained above, has lead to the fall in family values that lead to gargantuan internal deficits within the US.

And to fund this deficit the world has been sucked into a vortex called globalisation. Experts are slowly coming to the view that it is the internal imbalance within the US that remains at the root of this global imbalance.

Remember, whenever the US is involved, it is always global, be it terrorism or economics.

Time to rethink is now

Obviously, we need to have a quick rethink on the issues concerning globalisation. Obviously the intent of globalisation -- to homogenise and standardise the world through commerce and finance -- with a view to dominating others has surely fallen flat.

What is interesting here is to note that globalisation, which remained un-critiqued till date and yet served as a model for the rest of the world to emulate, stands cruelly exposed.

Apparently, the recent slide of the West, notably the US, calls for greater introspection. Communism with all its internal contradiction and monstrous manifestation was bound to fail. Reckless capitalism too is taking the Titanic route.

Is there a third way? Is there an alternative the Western model of Communism and Capitalism? Or were all these an aberration with the Asian economic model rooted in family values the only way to sustainable macro-economics?

Economists, unmindful of all these, even to this date assume that the recent sub-prime crisis is merely a credit or a regulatory issue. They are sadly and comprehensively mistaken.

The West has failed to diagnose the cause of its down-turn and continues to treat itself symptomatically rather than diagnostically. Hence, it continues to prescribe superficial financial remedy to a rather comprehensive socio-economic-cultural disorder.

In short, it is a sub-prime crisis caused by a sub-prime financial system caused by a sub-prime economic model caused by a sub-prime habit caused by a sub-prime societal order caused by a sub-prime culture.

The fact of the matter is that all these issues are interlinked and interdependent. Unless all of these are recognised, rectified and reversed, the sub-prime crisis will continue to haunt the Anglo-Saxon world.

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Last modified on Friday, 19 July 2013 17:13

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