lördag, oktober 11, 2008

The economic crisis

Right now the industrial countries are experiencing an economic crisis sometime compared to the one in 1929. One can surely find parallels between the two but also differences.

I'm not going to comment on this in detail as I'm not an economist. Even though I've read and listened to economists and politicians discussing similiarities and differences, it would lead to far to far trying to compare these periods.

However one thing we are able to observe - again - is the collective astonishment displayed by the economical and political community. How could this happen?
This question was posed in 1929 and in 1989 and during every other economic crisis throughout history.
One simple answer is of course that when people involved in handling money get obsessed with money as such - as is very common - a situation similar to this is always likely to occur.
I would even claim that people working within the financial sectors (banks and other financial institutes) most often, per definition, are obsessed with money.
They like to see the wealth of their clients, the wealth of their companies or financial institutions and not least their own wealth, increase.
In order to make this happen they are successively willing to take major risks.

Financial problems like this will happen again and again.
This in spite of the promises and commitments uttered by politicians and others.
When the economical development turns around - as it will in mean time - we will see a similar situation occur within 10 or 15 years time, probably sooner.

The interesting thing is that when companies and financial institutions work at an optimal level and the economic development is good, the head of a company, the general manager, always regards him- or herself as the main reason to this development.
This is - among other factors - displayed by the fact that their salaries and bonuses are extremely high and much higher than any other representative of the company.
This of course means that they - and the shareholders - regard themselves as being the most important unit (entity) of the company.
It should however also imply that they are the ones having the foremost responsibilities when it comes to the future success or failure of that same company.
What we can see today as in 1989 (and during the 1990s) is that they are seldom being charged and put to trial because of their failure, at least not in Sweden an many other European countries.
This in spite of the fact that they are the main responsibles for the development in the companies.
Instead they are, continously, being 'rewarded' with enormous bonuses and other advantages.
This is of course totally outrageous, illogical and unfair.

I would personally like to see a scenario where the governments all over the world - or where it's possible - came together, united around a common legislation giving them the right to intervene and confiscate the fortunes, houses, cars and all other assets belonging to the management teams.
After such a move the chief executives should be forced to continue working within the enterprises but for a minimum wage or rather no wage at all, until they have solved the problems.
After this they should be dismissed.
Such a legislation would send a strong signal to the heads of banks and companies around the world:
Take good care of your business or we will see to that you pay the full price for your mistakes.
A legislation of this kind should also be complemented by a more rigorous controle system surveying multinational companies, banks and other economical players.
Unfortunately the business managements all over the world have to strong links to the different governments whereby this of course is unlikely to happen.
They also have lobbying groups influencing and probably bribing politicians to comply with their demands.

The question now: When will the next economical crisis in the economically developed world occur?
Within the next five or ten years?

To call this a crisis seen in a global perspective is of course to ridicule the poor people of the world.
For them the daily life presents different kind of much more severe crisis: Death and violence of all kind, war, sickness, poverty (real poverty) and so on.
How many of the inhabitants in the Western countries will actually die from starvation caused by this so called economic crisis?
Maybe those who earlier - during the 'golden years' - had to live under severe circumstances, e.g. homeless persons or persons suffering from different kinds of illnesses but hardly the ordinary person on the street (whoever this is).