“Bloodbath in share prices”, “the dark 1970s”, “panic and desperation” – just some of the headlines littering newspaper pages and websites in response to the turmoil in the financial markets. While yesterday’s dramatic rate cut by the US Federal Reserve gave shares a small boost, nothing is resolved. Far from it.
The Fed’s rate cut decision – said to be made by a “very, very very worried” institution – was made in an emergency telephone conversation on Monday night, during a US national holiday. Many see this move as a panic measure, which cannot bring back stability or prevent the looming recession in the United States. Nor will the dark mood be lifted by Gordon Brown’s push for a meeting of European leaders at Downing Street after he returns from the Davos Economic Forum in Switzerland.
Few can now deny the severity of the financial crisis and its economic consequences. Even Sir Howard Davies, former director of the Financial Services Authority and now director of the London School of Economics, for example, believes that “the chances of avoiding recession here [in the UK] are pretty slight, because we do have many of the same features of the US economy”. And top officials like Mervyn King, governor of the Bank of England are warning of soaring fuel and food prices and a sudden slowdown of economic growth in the UK.
The inability of leaders and governments to tackle the implosion of the banking system and its consequences is becoming clearer and clearer. One crucial market indicator, the price of gold, tells an irrefutable story about confidence in the capitalist system of commodity production and its attendant financial structures. It is currently moving towards $1,000 an ounce, more than 200% up from the year 2000. When savers see paper money, shares and other financial products as increasingly volatile, and switch to precious metals, then it is surely time to consider the viability of the system as a whole – and, in particular, how to challenge and replace it.
The move into gold tells the story of an increasingly universal lack of trust in existing authorities and institutions, above all the state. Bush’s economic rescue package last week only led to further convulsions on the global markets while Brown’s government is struggling to rescue Northern Rock. Trust in what is called “democracy” will continue to fall away as the crisis deepens.
There are alternatives. People can rule over themselves, without the representatives of big money and big corporations. History has shown time and again that human beings do act collectively to defend their interests, often both for selfish and altruistic reasons. A bold initiative is needed. A World to Win seeks to develop concrete alternative strategies about how to use all the resources at humankind’s disposal to found a not-for-profit, ecologically-sustainable economy and democratic political system. You are invited to come to our discussion tomorrow evening to take part in this great challenge.