I recently attended a conference at the Aspen Institute in Prague entitled, “What Did We Learn from the Economic Crisis?” There were three highly reputable speakers; Lord Meghnad Desai, Professor at the London School of Economics; Jacek Rostowski, former Minister of Finance in Poland; and William White, Chairman of the Economic Development and Review Committee at the Organization for Economic Cooperation and Development (OECD) and the former Deputy Governor of the Bank of Canada. It was an interesting and lively discussion and debate on what they think we have learned.
White presented arguments invoking Edward Lorenz’s “butterfly effect” from chaos theory wherein small changes in the initial conditions of a so-called nonlinear system can cause huge changes elsewhere. Thus, if a butterfly in Tokyo flaps his wings under the right set of non-equilibrium conditions, it can cause a tornado in Kansas. Similarly, the impact of certain financial changes under the influence of globalization can be significant, and this liability will not go away in the foreseeable future, if ever. Financial hiccups in Japan may send negative forces to Brazil, to Europe, to North America and beyond as the dominoes increasingly fall. Not surprising, consider Greece, Spain, Portugal, Italy and now France. Their financial tribulations have had more than a limited impact the rest of the world.
But what was surprising to me, is how much blame for the crisis was place by these scholars on bankers around the world for “adhering to their well-entrenched beliefs” concerning monetary policy, government financial stimuli and other old-hat economic strategies. It was argued that these methods and policies were not in the interest of our global economy, and that high-level banking powers did so out of their commitment to and a belief in these archaic remedies.
To my way of thinking, adherence to these old “beliefs” was just an easy way for well-placed bankers to maintain their power base, protect their fortunes and in many cases make even greater fortunes at the expense of many. Sure, some of the “Wall Street Gang” in this country and abroad were caught and reprimanded. A few even went to jail. However, there are many more in even higher places that still sit comfortably with their fortunes.
These same methods of monetary policy such as printing more money and injecting it into a broken system are picking up steam again. We either have not learned from the immediate past, or we have a short memory, only to be taken advantage of again and again by the Madoffs of this world. Read The Lords of Finance by Liaquat Ahamed, and you will get a clear picture of what has happened.
For example, Ahamed points out that the crash of 1929 was actually not that complicated. It was caused by a small number of well-placed central bankers whose decisions set the stage for World War II. The same is true of the current economic crisis, and in my opinion it’s not over by a long shot. Lord Desai concluded that the “Good Times” are gone, maybe never to return. Maybe they were not authentic “Good Times,” but actually “Unrealistic Times,” and untenable for any extended period. Cheap energy and water for most of the developed world, access to materials, minerals and food at prices that do not reflect the environmental damage to the planet and its ecological impact on all species, including we Homo sapiens. Ironically, the word “sapiens” is the Latin word for wise.
Maybe those of us who have “plenty” should contemplate the possibility that we need to begin sharing and recognizing that we must learn to make do with less. A tough lesson to learn after such easy access to the things we want. It’s difficult to take the child out of the candy store after we have promised him sweets that make his mouth water.
Instead of measuring “progress” by increasing Gross Domestic Product (GDP) and all of the challenges that go with this strategy, why not financially reward those who increase our quality of life. The country of Bhutan has for more than years had a Gross Happiness Product (GHP) and it works well. Most people there are happy with their lives. We don’t have to imitate the same methodology, but it’s certainly in the right direction if we want to guide humanity to a more stable state of wellness and a realizable sustainable future.
James A. Cusumano, Ph.D., is a former rock and roll crooner, movie producer, pharmaceutical CEO, and author of BALANCE, who now owns and operates Chateau Mcely, an award-winning castle hotel and spa in the Czech Republic.