The UK’s drab weather and recession have possibly led to our most depressed generation in decades, now after the October Indian summer, will the economy ever give us a few sunny money spells?
These have been worrying times across the financial sector as confidence slips dramatically and another recession dip seems all but inevitable. The news has become a mixture of bleak forecasts when, instead of talking about the state of the economy, newsreaders have mostly sought refuge in the old stalwart of British conversation; weather. Being an entertaining and merry topic, we need not talk about the dreary prospects of another global recession. I thought I’d take some time away from the sunshine to discuss the global economy and what it means for the UK, without the distractions of an ice cream van.
No matter how much our opinions may differ, I’m sure we can all agree on our frustration with a global economy that has recently shown misgivings like never before. Having already ravaged our university with stringent cuts and restructure, recession based austerity has affected all walks of life. The problems lie in an interdependent Capitalist model, where the control continues to elude governments. It has reached the point where they have lost the ability to affect markets and emotions have been spreading on a global scale, affecting both trade and economical confidence. Sometimes known as ‘deindividuation’ – the loosening of social norms in groups – it has placed the fate of nations in the hands of governments, transnational corporations, market traders and global agencies, which were initially all put in place to help stabilise the markets.
In line with history, Greece is at the epicentre of political issues. If Plato were descending the proverbial Piraeus today, he would probably find a pitched battle between a disaffected youth and the police. So much for the wisdom of the philosopher kings – clearly they weren’t briefed in running a globalised economy (either that or the concept is fundamentally flawed). In the news, some key figures have been trying to calm the public by attempting to get Greece back in order. This has been done by suggesting continued austerity measures on an already beleaguered country, resulting in large scale pessimism in the middle and working classes. The bonds that hold their society together are breaking and if Greece defaults as expected, its ongoing membership of the Euro will be called into question, setting a dangerous precedent for the collapse of the currency.
A collapse of the Euro was unimaginable, but is now looking more like a possibility. This would escalate into a global depression, inevitably leading to more unemployment for graduates. In the Euro-zone, succession would initially cost around €10,000 per person, with the years following adding further costs of around half that annually. Global bank UBS also points out that there would be a massive devaluation of currencies and a fall in trade volume of around 50 percent. Even for Germany, the EU’s leading economy, the banking sector would be at risk of collapsing, causing a complete loss of export competitiveness. When we see Angela Merkel running to the aid of Greece, it’s not a hugely generous gesture, but a necessary contingency measure to keep the Euro afloat. This means more immediate austerity for Greece, which the International Monetary Fund demands if it is to continue to help the Greek government.
Often we hear about meetings in Greece that frequently occur with social unrest, mainly in Athens. As this crisis continues to deepen, we will become familiarised with the head of IMF. The role of the IMF is based on Keynesian economics (the circular flow of money) and is always concerned with the banking and private sectors. Their analysis is that austerity measures lead to a balancing of the books.
However, many of the radical analyses show that where the IMF has been involved, poverty has increased and that the IMF is not interested in reducing poverty but in imposing the western principles of the Keynesian school onto its client countries. The political PG rated analysis says that this isn’t ‘particularly democratic’. However, I’m sure the people of Greece could express their opinions using stronger terminology than I can.
Managing director of IMF, Christine Lagarde states “You first have a period [after making cuts] where growth takes a hit and goes negative.” What about the people who have no prospects at the time of the austerity? Her message is that “It takes courage.’’ Well, it’s like an apology I suppose, and the IMF have a job on proving its legitimacy to the Greeks. Although nobody voted for these people, their impact exceeds the influence of most developed countries.
To their credit, the world’s leaders and transnational organisations have begun to place focus where it is needed. Their plan of action centres on boosting Europe’s banks and trying to prevent problems in Greece spreading to other countries. They hope to have this
plan-to-make-a-plan by November, but they will need to iron out their financial situation before any major decisions are put in place. After years of idiotic speculative economics, we must now scrutinise those running the economy much, much more. I am sure I’m not the only one that wants to get a job when I finish university. Well, unless the main players start making a difference, the outlook is pretty depressing regarding employability.
We have enjoyed our Indian summer but as we look towards the future, the winter might become fairly turbulent. The austerity and speed in which these plans are being implemented is an unhealthy obsession that our government has, and it is beginning to hurt. Economists are starting to apportion some of the blame for this renewed crisis to those policies. In spite of this, politicians are beginning to look rather trivial and insignificant, proving what has to change if we are to avert this crisis. The hope comes from the conviction of Europeans to stay in the Euro-zone. They shouldn’t let go of the Euro lightly.
Note: Apologies to the author of this piece as due to template issues in this month’s publication an error was made and ‘Paddy Besiris’ was incorrectly titled as the assumed contributor.