In 2008, when we were hours away from ATMs running out of money, small businesses being unable to pay their staffs, and schools and hospitals closing down through lack of cash flow, it felt as if the crisis of the century was upon us. But if the world continues on its current path, the historians of the future will say that the great financial collapse of three years ago was simply the trailer for a succession of avoidable crises that eroded popular consent for globalization itself.
Those who believe that the world has learned from the mistakes that led to the crash are mistaken: on the contrary, Prof. David Miles of the Bank of England now predicts not just one further financial crisis but three in the next two decades; and Andrew Haldane, also of the Bank of England, is already charting the volatile and unsustainable wave of speculative capital flows that are still not fully monitored and operate with no early-warning system, no global financial standards, and no consensus on capital and liquidity requirements for banks.
Yet what happens to the world’s economy is not random—it’s about the change we choose. Globalization may have unleashed change of a scale, scope, and speed unprecedented in human history—but it has also given our species an unprecedented opportunity to act in concert in order to master the forces that buffet us.
The truth is that the world has seen a shift in productive power over the last two decades that is more dramatic than any since the Industrial Revolution, with more than 2 billion men and women joining the ranks of industrial producers, trebling the size of the world’s industrial economy. This year—for the first time in industrial history—the combined forces of America and Europe are being outproduced, out-manufactured, out-exported, and out-invested by the rest of the world. The corollary of this change is that the next 20 years will also see another worldwide revolution, this time in consumerism, and it will be dominated by Asian workers, who will treble the world’s middle class. This second wave of change will turn all the old certainties on their head: America, once the biggest consumer in the world, will face an Asian market twice its size. Germany will be just 4 per cent of the world’s consumer spending and the U.K. just 3 per cent—but Asia will be 40 per cent. Asia’s spending potential will be a staggering $25 trillion.
This transition, to a world with multiple poles of growth, will be directly felt on nearly every Main Street, shop floor, and kitchen table. So, too, will the risks associated with a globalized financial system that remains perilously unregulated. The global flows of goods, services, and capital create global problems that can be answered only by global solutions and by a consensus between world leaders to reach binding agreements for the good of all nations.
First, we need to support the growth of the world’s new middle class and foster agreements that allow American and European companies to compete in Asia’s booming consumer markets. The much-talked-about decline of the West is not inevitable, but to avoid it we must be prepared to invest massively in technology, science, and education in order to provide the niche, high-value goods that will be needed in Asian markets. Re-equipping Western workforces for the opportunities presented by Asia will be the preeminent challenge of this decade—and neglecting investment in our human capital base will condemn millions of people in the West to long-term unemployment and poverty.
The world needs to act in concert to tackle the threat of further financial crises, too. When our biggest banks came within hours of meltdown, we started to learn the hard and bitter lessons of a system that had developed beyond the control of individual nations. The crash made clear that vast flows of money had to be monitored across the globe, not merely within nations, that early-warning systems were needed from one continent to another, that banks must be properly capitalised, and that we could not hope to manage with merely local supervision the institutions that had outgrown national borders.
For a brief moment in 2009, during the London G20 summit, the world’s leaders showed an impressive resolve to act together to create a more prosperous and stable world. Their resolve grew out of the banking crisis and the threat of a global depression, but today that resolve has evaporated in a retreat into national shells. “Mini-lateralism” is now the order of the day. A trade deal is unlikely in 2011 or 2012—the first trade-round failure since 1948.
There will be no climate-change agreement either, even though nuclear worries are escalating and the case for low-carbon investment becomes more obvious by the day. Nor will there be sufficient global support for the unemployed of the Middle East, North Africa, and sub-Saharan Africa (who together constitute the fastest growing of the world’s young), with all the problems of immigration and insecurity that such neglect will unleash. Global growth will be far lower than it otherwise needs to be, unless the world begins to understand that there is no solution to financial instability, diminished trade, and mass unemployment without a global deal for jobs and justice.
The IMF showed a few months ago that if the world worked together, up to 50 million new jobs could be created—millions of them in Europe and America—and 100 million people could be taken out of poverty. This November, at the next G20 summit, under the leadership of Presidents Sarkozy and Obama, we have the chance to take control of the huge and historic changes confronting us. It is not our fate to be at the mercy of financial chaos, decline, and recession: there is an alternative. Securing it will not be easy, but, as I have said before, it is in the space between the possible and the perfect that campaigners for justice must always be.