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Global economic recession – A crisis of capitalism?

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In August 2019 the top economists, CEOs and businessmen met in the US and the G7 leaders met in France to discuss ways and means of evading the looming economic recession. They had seen the early signs and were trying to prevent the occurence of yet another downturn which has now become cyclic and almost inevitable. Yet the recession seems to be upon us with a vengence, hurried on by the effects of the Covid pandemic and the war in Ukraine. We are bankrupt thanks to our politicians while the poor people in Europe it seems have to decide between eat and heat this winter.

There had been economic downturns since the early 18th Century but the worst ones have been recorded since1929 when the Great Depression hit the world. An economic recession is defined as a significant decline in the GDP lasting several months and widespread unemployment and negative changes in other vital economic parameters. A depression is more severe in degree and longer in duration. The GDP drop in the Great Depression in 1930 was 26.7% the biggest ever. This depression was followed by rapid growth and full employment but the good times did not last long. Recession recurred in 1937 with a GDP decline of 18.3%. This cycle of boom and crisis continued with recessions occuring in 1945 (GDP drop – 12.7%), 1949, 1975, 1982, 1991, 2009 and 2021.

The main cause for the Great Depression in 1929 is said to be a reduction in spending resulting in a decline in production and rise in unemployment. The share market had also crashed. The global financial link that was in operation due to the Gold Standard had caused the depression to spread world wide. What caused the initial reduction in spending is not clearly explained. Similar theories were put forward to explain the subsequent crises but seldom were they convincing. External circumstances like pandemics, droughts and wars had sometimes been contributary factors but robust economies should not show such vulnerability.

John Maynard Keynes proposed that governments must intervene to control the ups and downs of the economy, going against the then prevalent idea that the free market should be allowed to drive the economy along its naturally advancing path. According to him the main driving force of the economy is the agregate demand which is measured as the sum of spending by households, business and government. During recession the agregate demand is reduced resulting in decreased output and unemployment. By increasing spending, both public and private, production could be stimulated and the economy would recover. This is where the government could intervene by increasing public spending and increasing the availability of money for private spending and also introducing fiscal measures. Keynes would advocate deficit spending on labour intensive infrastructure projects to stimulate employment and stabilize wages during economic downturn.

However, the Austrian School of Economics took a different stand, and they said recession and booms were a part of the natural order of capital development and government intervention could worsen the crisis. Keynesian policies dominated till about the 1970s when many advanced economies suffered inflation and slow growth. Keynesian economists had no answer to this crisis. They believed that fiscal measures could solve the crisis while the Monetarist economists advocated that judiciary use of monetary measures would aleviate the crisis. A New Generation of Keynesian economists arose in the 1970 to 1980 period who strengthened the argument that fiscal policies could be effective against economic downturn.

The global financial crisis in 2007-08 caused a resurgence in Keynesian thought and many governments including the US and the UK adopted these policies. However this crisis also showed that Keynesian theory must come to terms with the monetary aspect of the problem too and presently the Keynesians it seems are trying to address the monetary issues. It is seen that no economist seems to have an effective solution or a clear explanation for the recurrent economic recessions that had affected the world since the 18th Century.

Sri Lankan government in 2019-20 was caught in the initial stages of the recession before it was overwhelmed by the Covid pandemic. The then government’s decision to reduce taxes and stimulate spending in a crisis situation resonate with Keynesian fiscal policy but proved to be disasterous in a country where poor people depend on state welfarism for survival. Now Sri Lanka seems to have gone in the opposite direction after consultations with IMF and has introduced high taxation while keeping the interest rates also high. The two together may discourage investment in industry and service which may worsen the economic decline. The interest rates may have to be brought down sooner than later if industries are to survive. However, all these are kneejerk reactions for nobody knows the real cause of global economic recession.

Did Karl Marx know? He said “The real barrier of capitalist production is capital itself” (Capital, Vol 111). According to him the accumulation of surplus capital due to profits adding on to the real value of a product over and above the cost of production which is determined mainly by labour, introduces a contradiction into the system. This is the cause of all the woes of capitalism. The causes are not accidental or natural in origin but arise from systemic elements of capitalism as a mode of production and basic social order. It is consequent to the profit motive as described by Marx as a two-faced law with the same cause for decrease in the rate of profits and a simultaneous increase of the mass of profits. In other words the development of productivity of labour causes on the one hand a decrease in the rate of profit (net profit expressed as a pecentage of the intial total investment) and on the other hand an increase in the absolute mass of the appropriated surplus value or prifit. This is the chaotic system that the profit motive creates which attempts to cut cost of production including labour costs with the use of machinery that replaces humans (eg. use of self-driven trucks have caused loss of employment for thousands of drivers in the US) or finding cheaper labour (in poor countries) and such other methods.

Marx may be correct in his analysis of the inherent contradiction in capitalism. If we are to explain this problem in simple words, let us imagine that the world has a population of hundred people and they have to produce an item essential for life and the owner of production pays them Rs.10 as wages and expects to sell the item at Rs.11 , such a system is not possible. The problem is of course much more complex but the system may have lasted due to its complexity although it is crisis laden and bound to collapse.

Buddhists could look at this problem from a different angle that Marx did not see though he spoke about the profit mortive. Marx had not taken into consideration the psychology of greed which is a very strong, inherent and primary character of human nature. Buddha in his endevour to find a solution to human suffering realized that greed was the cause of suffering. We may say that all ills of the world, related to economy, wars, climate etc are caused by greed. Buddha’s analysis of the psychology of greed has not been equalled by modern psychologists who seems to have omitted to delve deep into the phenomenon. According to Buddha greed could occupy the human mind at three states; a dormant state, an active state and a manifested state. Buddha had recommended measures to be taken to control all three states. The practise of “Dana, Seela, Bhavana” are the measures that could be taken to control greed in all its three states. Buddhist civilisations of yore which practised these good deeds had developed a detached attitude which restrained the acquisitive human nature. Now of course all that seems to have changed. Sri Lanka and the whole world is engulfed in greed and are doomed unless corrective measures to control greed are taken.

N.A.de S. Amaratunga



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Opinion

Science vs religion – II

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Of course, there are many shortcomings and limitations of the scientific method. Scientific knowledge alone is certainly not enough to make humans attain their full potential. The human values we live by, and questions of meaning and purpose, morality or ethics. are not amenable to hypotheses, modelling, and mathematical equations. They rely on methods that are interpretive, speculative, and philosophical.

By GOVIND BHATTACHARJEE

(The first part of this article reproduced from our Asia News Network partner in India, The Statesman, appeared on 25 Nov.)

“The known is finite, the unknown infinite”, the British biologist Thomas Huxley wrote in 1887, “Intellectually we stand on an islet in the midst of an illimitable ocean of inexplicability. Our business in every generation is to reclaim a little more land.”

Before the last century, the vast unknown territory of inexplicability was ruled by religion.But the last century has seen a tremendous explosion of scientific knowledge, and ever since, science has been reclaiming more and more territory from religion so that scholars started predicting a diminishing relevance and eventual disappearance of religion from human society.

While it is true that religion’s stranglehold has been remarkably weakened in most countries during the last half-century, except in the diehard Islamic states which stubbornly refuse to reform Islam, the resurgence of religion in our contemporary socio-political life negates the prediction of religion’s demise.

There is too much religion on the streets now that is increasingly intruding unto our lives. It is not the spirituality that Sagan had talked about, it is religion in its crudest original form – bloodthirsty, demanding total and unquestioning allegiance from its followers who would not shy away from spilling the blood of non-believers. While science continues to conquer ever newer frontiers and invents technologies that are revolutionising our society, a full transition to a scientific society is not possible without the complete displacement of religion.

From medicine to biotech, from electronics to telecommunication, from AI to nanoscience, the progress of science during the last 50 years has completely transformed the way we organize society, conduct business, and connect with people for ideation.

The paradox is that while we are exploring the frontiers of science and technology driven by limitless human yearning and thirst for knowledge, we are also reinforcing the prejudices, bigotry, and intolerance of contrary ideas and beliefs in our social and public life with renewed vigour and pride. Of course, there are many shortcomings and limitations of the scientific method.Scientific knowledge alone is certainly not enough to make humans attain their full potential. The German philosopher Edmund Husserl argued against recurrent tendencies of applying the methods of natural science in the research of human affairs, which are essentially outside empirical scientific approaches.

The human values we live by, and questions of meaning and purpose, morality or ethics, etc. are not amenable to hypotheses, modelling, and mathematical equations. They rely on methods that are interpretive, speculative, and philosophical. This is always an epistemological problem in social sciences, and this is where religion is supposed to supplement the techno-scientific worldview of science to understand how Nature works her laws in the universe and in human society.

But Nature also includes her children and us humans, and her well-being depends on their activities. No one knows that better than us, especially at this juncture of time when the world is precariously poised between sustainability and irreversible devastation from uncontrolled human greed.

Religion was supposed to impart and promote morality, ethics, love, and compassion among humans to make them understand their symbiotic relationships with nature, with fellow beings, and with animals. Religion was supposed to teach humans to limit their greed, increase empathy towards others, and strike a harmonious balance with nature to make the world a better place for all to live. What it has done and the moral blindness it has promoted instead is for all to see and judge.

Religion today is relentlessly marching to colonize every aspect of our socio-economic and political life with increasing aggressiveness. Suffering has been trivialised by it, the pain has been glorified by it, killing has been sanctified by it and the tattered social fabric that has resulted is being flaunted with egotistical pleasure and pride.

Though it will be unfair to blame religion alone, it has to take a large share of the blame for this sorry state of affairs. It is propelling us energetically to forget our humanity and respect for those who do not share our faith and driving us towards an Orwellian world where intercultural understanding, the richness of culture and diversity, and the ideal of an inclusive and pluralistic society are strongly denounced in favour of a blind pursuance of faith as dictated by its self-proclaimed guardians and their bigoted followers.

The ideal of peace and harmony are receding at the speed of light as religion strives to regain the territory it has lost to science and is countering science with what can best be described as a pseudoscience that is carving out a niche for itself – and a wide one at that.To quote Huxley again, “The question of all questions for humanity is that of the determination of man’s place in nature and his relation to the Cosmos.”

Religion derived sustenance from the concept that humanity was positioned proudly at the centre of God’s magnificent creation, the Earth, around which revolved everything, and humanity – the crowning achievement of God’s creation in his own image, the pinnacle of his divine handiwork, occupied the centre-stage on this earth.Science would shatter the concept, but not before thousands of Giordano Brunos were burned at the stake for holding a contrary view.

In The Structure of Scientific Revolutions (1962), Thomas Kuhn convincingly explained how paradigm shifts take place in the history of science when one dominant worldview is replaced by another. He showed that scientific progress is like Darwinian evolution – a process of selection of one amongst all the competing theories that have the most predictive power puzzle-solving ability, a concept that was later supported by Bas van Fraassen in The Scientific Image (1980).

But each such major paradigm shift has shaken the edifice of religion from which it could never recover. Thus, when the geocentric Ptolemaic worldview was replaced by the Copernican worldview, man lost his centrality in the scheme of things. Till then, heaven was in the sky, hell was underground and God in heaven ruled all three while religion regulated the entry to heaven or hell.

Copernicus banished the earth from the centre of the Universe, and later Hubble displaced the entire Milky way from the centre of the universe, giving us instead an expanding universe of billions of galaxies in which neither is humanity at the centre of creation nor is the earth at the centre of the universe; in fact, the universe itself is one tiny dot in a multiverse of many universes.

Thus, God’s magnificent creation has been relegated to the position of a second-rate planet attached to a third-rate star, discarding religion’s medieval fancies. Today we are humbled by the immensity of the universe and mesmerized by the eternal silence of infinite space.

But for religion, the determination of man’s place in nature and his relation to the cosmos was not a question, it was an irrefutable truth questioning which meant inviting risk. Copernicus wrote De Revolutionibus Orbium Coelesticum on his deathbed in 1543, beyond the morbid reach of the Inquisition.

Galileo and Bruno were not that fortunate. Science established that neither does life enjoy any special privilege – countless worlds exist in deep space devoid of life, and countless species have become extinct in the course of evolution. We may be one someday, and going by our misdeeds on this planet, that day even may not be too far.

Darwin would finally dislodge humanity from the centre of the biological universe, giving it a lowly ancestor that was too humble compared to an almighty God to be a creator of such intelligence as possessed by man. Thankfully, the inquisition was dead, but prejudiced minds that shun logic were not. They are again back at the centre stage in force, flaunting scriptures, dictating how we should conduct ourselves, threatening to push us into a hell of ignominy and violence if we disobey.

Creationism is still being taught in many US public schools, despite the Supreme Court ruling to the contrary. Half the people in the USA still don’t believe in evolution, their share in India is unknown. But here, vigorous attempts are now on somehow bringing God inside the classroom in any guise, be it a hijab, or anything else.

Worship only makes you a slave. A slave forgets his reason, and his purpose for existence, and ultimately becomes an automaton to serve the master – Religion – and obey its commands without thinking.Religion is not the source of spirituality, peace, morality, virtue, and ethics any longer. Its principles may be eternal, but its methods are gross. It has now become the source of violence, hatred, unconcealed greed, corruption, and a road to power.

Instead of breaking barriers, it is building them afresh, destroying the very roots upon which mankind has built civilizations through the millennia. Don’t expect the State to control religion and the street will always celebrate it with ever-ostentatious pomp and splendour. It is therefore for us citizens to shield our children from the corrupting influences of religion. It has no place in the fabric of the mind of civilized men and women, just as God has no place in the fabric of the space-time that science tries to untangle. We don’t need the ancient wisdom of the spirit to guide us, because religion which was supposed to imbibe it has lost its divinity. It is now for science to redeem religion.

(Concluded)

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Opinion

A dreamer’s dream

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Last night as usual I watched the local news, leaving aside the World News and the FIFA matches on TV, looking for some encour-aging news about the financial situation in our country. On all TV Channels The daily scenes in Parliament are always the same very chaotic and a waste of time to listen. The arguments in Parliament resembles the Maria Kade fish market between some women, accusing one another in filth.

Rather disappointed I fell asleep. I dreamt I was at the Aragalaya on the Galle Face Green packed with jolly enthusiastic people seemed on holiday-spirit singing and enjoying the music, and some drowning the noise with speeches through loudspeakers. Walking around I noticed there was a bus with a full load of passengers stuck and surrounded by a mob who was trying to topple it.

Finally the bus toppled and they all clapped and cheered not caring for the poor frightened passengers in the bus. One of the mob leaders gave a speeh and then got the bus upright, and tried to start it, but couldn’t. Then they pushed and it wouldn’t start as the tank was empty . The wounded passengers came out crying some wounded with fractures and bleeding. Someone phoned for ambulances but none came. To my horror the Aragalaya then attacked that mob who toppled the bus and in the utter choas I woke up in a cold swept.

Recollecting my dream I wondered whether this dream is similar to what would happen to our country.

D. L. Sirimanne,
Kohuwela

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Opinion

How many people can the Earth sustain?

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=On Nov 15 November 2022, we became a world of 8 billion people. 

It’s a milestone we can celebrate, and an occasion to reflect: How can we create a world in which all 8 billion of us can thrive? The growth of our population is a testament to humanity’s achievements, including reductions in poverty and gender inequality, advancements in health care, and expanded access to education. These have resulted in more women surviving childbirth, more children surviving their early years, and longer, healthier lifespans, decade after decade.

Looking beyond the averages, at the populations of countries and regions, the picture is much more nuanced – and quickly takes us beyond the numbers themselves. Stark disparities in life expectancy point to unequal access to health care, opportunities and resources, and unequal burdens of violence, conflict, poverty and ill health.

Birth rates vary from country to country, with some populations still growing fast, others beginning to shrink. But underlying these trends, whichever way they point, is a widespread lack of choice. Discrimination, poverty and crisis – as well as coercive policies that violate the reproductive rights of women and girls – put sexual and reproductive health care and information, including contraception and sex education, out of reach for far too many people.

We face serious challenges as a global community, including the mounting impacts of climate change, ongoing conflicts and forced displacement. To meet them, we need resilient countries and communities. And that means investing in people and making our societies inclusive, so that everyone is afforded a quality of life that allows them to thrive in our changing world.

To build demographic resilience, we need to invest in better infrastructure, education and health care, and ensure access to sexual and reproductive health and rights. We need to systematically remove the barriers – based on gender, race, disability, sexual orientation or migration status – that prevent people from accessing the services and opportunities they need to thrive.

We need to rethink models of economic growth and development that have led to overconsumption and fuelled violence, exploitation, environmental degradation and climate change, and we need to ensure that the poorest countries – which did not create these problems, yet bear the brunt of their impacts – have the resources to build the resilience and well-being of their growing populations.

We need to understand and anticipate demographic trends, so that governments can make informed policies and resource allocations to equip their populations with the right skills, tools and opportunities.

But while demographic trends can help guide the policy choices we make as societies, there are other choices – including if and when to have children – that policy cannot dictate, because they belong to each individual. This right to bodily autonomy underlies the full range of our human rights, forming a foundation for resilient, inclusive and thriving societies that can meet the challenges of our world. When our bodies and futures are our own, we are #8BillionStrong.

(UNFPA)

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