Who Says Global Meltdown Is All Bad News?

If we agree that Joseph Schumpeter was right that capitalism’s survival
is dependent on what he called “creative destruction”- from time to time
capitalism undergoes a self-bathe – then, we’ll agree that creative
destruction is what is happening today to capitalism that is now
popularized as global economic meltdown. Capitalism’s creative
destruction is today replacing its knocked engine – as a result of
overuse – with newer and more efficiently designed engine that can take
us at least to 2050. So being that the case, why are we not asking the
very important question: If every great depression is always bad, how
come it has always ushered in a better capitalism than the one it
destroyed? Closer to our memory is the 1929 Great Depression, which
ushered in what remains the greatest and longest economic prosperity and
social stability ever witnessed in history. In other words, how could it
be said to be so bad, when it democratized capitalism? Or how could
capitalism have defeated communism if not its power of creative
destruction that constantly redefines and replaces its obsolete parts
with newer and more efficient parts? Or how would capitalism have
survived this long, if not constantly guaranteeing and reinforcing a
level playing field based on free choice, free flow of information, and
the rule of law – where both winners and losers are in ceaselessly
battle, with earlier winners ending up as later losers?

Even if we could so easily forget what capitalism used to look like
before the last Great Depression of 1929, should we also easily forget
how it brought some industrial and labor democracy, empowering labor
unions more than corporate leaders? Should it have escaped our minds so
easily how one of the outcomes was the state’s willingness and readiness
to protect weaker citizens, citizens unable to compete in the fierce
game of capitalism? What about how it eventually ushered in more humane
ways of looking after the old, the retirees, and the physically
challenged members of the society who in need of social justice were
provided social safety packages? If not the Great Depression of 1929,
what would have made western societies to come to the true realization
that the society would only become economically more prosperous and
socially more stable, if and only if the state could take from its
better offs to lift up its worse offs – the New Deal?

How could the dangerously widened gap between the haves and the haves
not have been narrowed in such a short period of time in the west? Could
such an economic boom have increased all citizens’ purchasing power and
have millions of citizens joined the middle class economy effortlessly?
Could cheap consumer financing have been made easily available to
citizens if not that the last Great Depression proved that spreading
consumer credits to citizens is essential in boosting citizens’
purchasing power and their ability to consume what ordinarily they
couldn’t since consumer credits make payment be paid later or spread
over a long period of time? These and others wouldn’t have been so
possible if not because the last Great Depression made them possible.

So if all these are the benefits of the last Great Crash – as some
economists prefer to call the 1929 Great Depression – why are we so
frightened by what is increasingly becoming another great depression?
Why didn’t we see it coming given how we have for the past two and half
decades transformed capitalism into a system of survival of the fittest
with Wild West kinds of rule? Why shouldn’t we agree that it was the
same dangerous wind that blew capitalism between 1919 and 1929 that has
blown global free market capitalism during the past decade? How come we
expected something different from the last great depression if like
then, it was all about seeking high growth in worker productivity while
suppressing wages and salaries that could have given the highly
productive worker enough to meeting his economic and social needs? What
else would we have expected if the post 1929 sought-after gains –
including the popular Fordist mass production/mass consumption
capitalist philosophy – were thrown away during the 25 years because of
sheer corporate greed? In other words, shouldn’t we concur that what is
happening today is bound to happen with years of the kind of high
profits and the unsustainable spending spree on the part of superrich?
If it wasn’t the unprecedented booming stock markets throughout the
1920s that drove everyone blindly into the stock market gambling, would
the capital markets have melted down so suddenly 1929; which was exactly
what happened recently when everyone seemed determined to believe in
stock markets’ indefinite rise?

Like the 1929 great crash, shouldn’t everything that could have gone
wrong with our economic fundamentals gone wrong already in 2008? Like a
decade before the 1929 great crash, wasn’t it the same unjustly milking
of the poor by a brutal capitalist system to further enrich the already
superrich, we witnessed for years in our global free market capitalism?
What else would have been expected from such highly unequal income
distribution other than the recent overinvestment on luxury consumer
spending, that locked out and drove the middle-class consumers virtually
to extinction? If it’s true that during the 1920s distribution of
national income was increasingly skewed, lowering the economy’s overall
propensity to consume, what will be call what happened during the 2000s?
Wasn’t it equally true that like the same kind of unethical corporate
practices that for decades channeled resources toward meeting
shareholders’ insatiable dividend expectations that too triggered
today’s meltdown? With socialism dead and buried, capitalism without
virtually any serious challenger hasn’t it been running wild with no
checks and balance, and with overseers acting like sightless sheriffs?

So here we are with our untamed global free market capitalism,
virtually reversing all the gains of the post-1929 crash. So here we are
with global corporations stampeding one another in combing the entire
world in search of cheaper labor, as well as tax, social and
environmental sanctuaries. So here we are not only with manufacturing
businesses constantly on the move, but also banks, accounting firms,
airlines, and high-tech companies joining in this mad race to the
bottom. So here we are with millions and millions of people driven out
of middle-class, as they lost their jobs or as their pay could no longer
guarantee them their once middle-class purchasing power. So here we are
with corporate profits bloating while more and more consumers forced to
live on credit life support machine – permitting predatory lenders go on
a havoc mission with impunity. In the meantime, infectiously greedy
shareholders and their executive gatekeepers were fattened themselves at
the expense of everyone else. Seem as the only game changer, corporate
executives and investors around the world joined their American peers
not only in pursuit of bogus corporate earnings, but also in pursuit of
the Potemkin Economy’ – displaying highly misleading corporate veneers
that hardly bear any reality to what lies behind them.

Shouldn’t it be self-deceiving not to recognize that the present credit
fizz is the direct outcome of the crude capitalism we have practiced
during the past two and half decades? Isn’t it naïve not to be aware of
the fact that it is in the effort to boost profit margins that turned
global free market capitalism against itself? Should we have difficulty
in discovering that it was the failure of free market capitalism to
protect the interest of the worker that led

to the worker’s rise in
debt, which in turn gave way to today’s disruptive subprime mortgage
crisis, a crisis analysts have falsely attributed to weak regulatory
oversight? What else should we have expected of consumers living on
credits? Isn’t it obvious that such credit bubbles should eventually end
up in a burst?

As it is today, no one knows for sure how it is going to play out. One
thing increasingly visible today is that in this mad rush of many
losers, countries like China have become the big winners, with over $2
trillion in their vault, excluding nearly $2 trillion strategically in
the US Treasury bonds. If we understand what the China is up to, we can
easily understand why America’s decry that China frees the dollar by
allowing renminbi to appreciate seemed to be falling on deaf ears. But
are the Chinese really hiding their long-term goal from the west, going
by the recent comments by Chinese Premier, Wen Jiabao? Not at all,
especially when the Chinese can no longer wait to see the day renminbi
replaces the dollar as a universal reserve currency. This, they are
certain will happen before this global crisis is over. Here is how
Premier Wen Jiabao recently put it: “We will take into account China’s
own needs to maintain the safety and good value of our foreign exchange

So making sure they are never caught unawares, most countries have
started silently moving away from the dollar, diversifying their
reserves in many other currencies. For the fear that it is not if but
when China will release those trillions of dollars in its vault into the
market to cause global stampede from the dollar, countries like Russia,
Brazil, Switzerland, and many fast emerging economies have diversifying
their reserves by moving a chunk of their foreign reserves to euro
currency. In a world where there are no permanent friends, but permanent
interests, no one should blame countries like Kuwait – all known as
America’s closest allies – for dropping their currencies’ tie to the
dollar. Even as tightly close as Saudi Arabia is with the US, the Saudis
too are quietly distancing themselves from the dollar as they now peg
Saudi Riyal against a basket of reserves currencies.

So what should countries like ours do given the hopelessness of today’s
global economy? Should we ignore the wind and continue keeping all the
country’s reserves in one basket; or should we do what others are doing
by moving reasonable part of the reserve to other reserve currencies
like the euro? What about our financial house that is still standing on
a shaky foundation, with our so-called consolidated banks operating in a
Wild West fashion? Because no economy can function well if its banks and
financial firms are not aligned to support its bigger picture goal,
rigorous efforts should be made to forcefully align them, should that be
the extent to go. This too will require the reformation of the Central
Bank of Nigeria. What about the country’s stock market that has been
invaded by some questionable characters and managed by a gang operating
in a zombie kind of style, making our stock market the most opaque in
the world? Can we hope to witness the enshrining of democracy and
transparency into them without this administration taking the bold step
to completely overhauling them? To make Nigeria truly a capitalist
economy, vast cleanup of the system done without partisanship has become

First, it is important that we undertake some holistic assessment of
what is going on globally and how we will be affected. Not by the same
people who have run down our economy but by those who we can be seen to
be somehow new with the gift and the zeal to do a good job. Second,
there is an urgent need to overhaul our kind of fire-brigade approaches
to developing Nigeria’s economy given that the economy has without our
knowing it become more sophisticated that it now requires more
sophisticated hands to manage it. While I have no problem with the
ongoing call for the bailout the country’s financial institutions,
looking out how to strengthen these institutions, I will have a problem
with it if the bailout will be mere handover of taxpayers’ money to them
without serious strings attached. In other words, should we have to bail
them out, they should be ready to hand us majority voting power in
running their affairs, including their nationalization. This is the only
way they will know that there is no free lunch with public money.

Besides thinking bailing out those currently holding our economy
hostage, efforts should now be made to think about how to bailout the
entire economy. Here I mean making our decades-long depressed economy
modern, dynamic, and truly efficient capitalist economy that is more
inclusive and more protective of its weaker members. A prosperous
middle-class economy that enshrines welfare into the system, including
unemployment and disability benefits for unemployed and disabled; a
democratic capitalist system that hands out monthly poverty cheques and
food stamps to Nigeria’s very poor citizens and families; a modern
economic system that makes sure that affordable health care, housing,
and education are citizens’ rights; a post 2008 depression economy built
on strong and humane minimum wage that is set high enough to guarantee
working citizens a decent living.

Emerging from today’s meltdown, Nigeria should reframe and democratize
its capitalist economy in a way that reinforces genuine risk-taking
handsomely without keeping a blind eye on those trying to undermine or
operate outside the set rules of the game. To be strongly rooted
capitalist economy, vibrantly just and fair as well as competitively
healthy system, the country should work extremely hard on making sure
that level playing field for all is nonnegotiable, including sending
people to jail for any slightest effort to scuffle our capitalist
institutions. But in making ours a just capitalist society, we have to
do a lot of more work not only on how best to make the purchasing power
of most citizens, middle-class purchasing power. But in addition, our
capitalist system must be built in a way that makes that – even though
there is no permanent seat in our middle-class economy – those who have
successfully joined this good living economic club have their genuine
rights always well protected. As a modern consumer and producer
capitalist economy, the existence and survival of the system must be
built on easier and cheaper access to credits. It must also protect
genuine corporate interests, particularly those of investors and
shareholders. The long survival of our post-2008 meltdown will only
depend on the fully protection of all players, while making sure that
all the players play according to the rules for the game in overall
interest of the commonwealth.

Written by
Odilim Enwegbara
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