What happens now?
The Eurozone is in crisis, the American debt is crippling, where can help come from?
Cold War, fall of the Berlin Wall, US ascension, prosperity, easy credit, growing bubble. Neo-liberalism x welfare state, improving life quality, certainty, mortgages, affordable shelters, bigger bubble. 9/11, Afghan and Iraqi invasion, “democracy”, oil, safe suppliers, flourishing, massive bubble. Enjoying the bubble, thriving, Lehmann Brothers goes bust, bubble bursts. Chaos, uncertainty, gloom, shrinking. How is history going to be written 2011 onwards?
The first time I heard the acronym Piigs, which stands for Portugal, Italy, Ireland, Greece and Spain, I was flicking a Brazilian magazine in 2009. It was said that those countries were at some risk of going bankrupt, but that was only a distant concern. The current year is drawing to the end and we all know what is going on: the acronym Piigs could encompass the whole Eurozone and the USA. First Iceland, then Greece, Portugal and one by one the rich countries seem to collapse due to the worst financial crisis ever.
Even though I’d love to stick to the main theme, some flashbacks are necessary. Looking at the European case will shed some light on the American situation. Established on the first day of 1999, the Euro was a breakthrough towards a complete European integration started in the distant year of 1952. However, knowing that, if used ruthlessly, a common currency can be a double-edged sword because it rules out the short-term monetary policy, the European leaders had to set some fiscal restrictions. On the other hand, the European Union demands that every country accomplishes some parameters in infra-structure and life quality. The poorer countries were found at a crossroads. What to do? They had to invest because of the EU demands, though; they shouldn’t thanks to the Euro. The solution was to get indebted. The moment was perfect: the world was dauntingly growing; investors would buy anything, and these governments needed the money. Well, when the bubble in the USA burst, the world was draped with uncertainty and everybody who had bought these countries’ bonds would claim them back! Needless to say, that those countries didn’t have the money and, for being in recession times, their revenues weren’t meeting their expenses anymore. Can you guess which countries those were? Congratulations, if you’ve said the Piigs. Iceland, Ireland, Portugal and Greece can be bailed out by Germany hands down, but when it comes to Italy and Spain, the third and fourth largest economies of the Eurozone, there seems to be no light at the end of the tunnel. Who could they resort to? Do I hear the USA? England? Nahh!!
Those two countries’ situations is not worse, but as being the largest and the sixth largest economies their plight is what is going to usher us to a “new world order(?)”. The USA is now struggling for having got heavily indebted in the last few years with wars and imperialist actions. The UK is more leveraged by debts than the Spanish government, but they are not totally choked due to monetary policies. Not delving into this theme, but one of the outcomes of these policies is inflation, so no worry bills for gas and electricity in the UK have risen by 18.3% in the year and transport by 12.8% in the same period.
The bottomline is: the Eurozone, England and the USA are falling apart and nobody seems able to rescue them from falling off the cliff. They are now mired in a tailspin which starts to show its first effects on the population: Spain has more than a fifth of its workforce unemployed, 9.1% of the Americans are in the same situation and so does 21.3% of 16-24 years-old British. These governments have their hands tied up and cannot keep on investing as they used to do. What is worse, in order to try and overcome this crisis, governments have to slash some expenses in health programs, education and infra-structure. Great example of it is the cutbacks that David Cameron wants to put in place in fourth largest employer in the world, the NHS with around 1.5 million employees.
Thereby, people are getting outraged as Stéphane Hessel proposed in his book Indignez-vous! (Time for Outrage!), which, by the way, I highly recommend for further information. In his manifesto to protests, he entices people from all over the world to rise against all the reductions in expenses education, health and other rights that his generation fought for. His main argument underlies on the fact that, if at the very moment after the II World War, the European governments could afford providing these services to the population, though being totally destroyed and having a whole continent to rebuild, they now cannot deprive their people from these rights. People bought that and, as Juan Sebastian Bastidas impartially exposed in his article Recession: a soil for political changes, are going to the streets utterly outraged exactly as Hessel teased them to.
Nevertheless, Hessel didn’t open his eyes to a crucial point. That is, all the social services that he claims to have fought for wouldn’t be implemented without the Marshal Plan. Thus, this is not going to happen now because the USA of back then is not the USA of nowadays. So, that brings us to a main question: which country is currently the USA of back then? What is the only country able to bail all the big superpowers out? You might not know that, but this country already exists and if it wasn’t for them the world would be much worse off.
Yes, I am definitely talking about the People’s Republic of China, but let me prove my arguments with facts. The American debt is now near their GDP, that is, around US$ 14 trillion, 4.5 of which belongs to foreigner governments, whereby China owns 1.2. Put that into perspective and you will realize that this amount is three times as big as Obama’s job bill recently launched to reduce unemployment. Moreover, the huge mess caused by the USA in the Middle East in recent years was watched by China on the sidelines. Some reports, still in little quantity, show that as American is withdrawing its military basis overseas due to austerity measures, these countries are now being wooed by China. Although an unnoticeable move, this makes all sense and only depicts that this Asian country is slowly taking advantage of the same tools used by the USA to overtake the world: loans and military investments.
It’s now time for the developed world wait for the “whole-hearted” China rescue them out of this tailspin. At this point, either I’m wrong and China is not able to carry out such a coup or there is going to be a shift of power. Based on the world history, there is definitely going to be a shift, when or to who is quite hard to determine, let alone whether we are going to survive the global warming.