By CHRIS GRAEME
A SERIOUS economic and financial collapse, so history tells us, happens on average once in a lifetime.
The 20th century was marked by the Great Depression between 1929 and 1939 sparked by falling agricultural prices, overproduction and a slump in demand.
There can be no doubt, as British Ambassador Alex Ellis pointed out to the Lisbon International Club last week, that we “live in a time of uncertainty and transition which lowers trust, and trust in capitalism is essential because it depends absolutely on it.”
In other words, open societies and open economies are still the best bet when measured against heavy state intervention, isolationism and protectionism.
Once again, a breakdown in trust has happened, this time sparked by the financial markets in the United States, and lack of trust undermines markets, breeds fear and fear brings retreat.
Unlike the Great Depression which followed the Wall Street Crash in 1929, which was largely a European and United States problem, the world is so connected and global today by an international media, particularly television, that when a bank collapses everyone knows about it at the same time. “No one escapes the crisis,” he explained.
These fears and uncertainties lead us to ask questions that we don’t usually ask, such as ‘can we trust bankers?’ Trust that your bank doesn’t go under, trust that you will get paid or trust that the person you are doing business with isn’t lying to you…
“Politicians love to say ‘this is a crisis moment’. Usually it isn’t, but this time it really is and a decision taken now will have an effect for the next 20 or more years,” he said.
And when there is fear and uncertainty, immigration becomes unpopular with 70 per cent of the Portuguese of the opinion that there is too much or enough immigration. There is a fear of invasion.
“Since 1990, world trade has doubled bringing growth, peace and wealth yet many a man in the street fears China or India,” Alex Ellis pointed out.
But with unemployment looming and recession biting, that doesn’t stop ordinary people in the UK and Portugal worrying about being swamped by cheap Chinese imports and low-paid immigrants.
How can these problems be addressed and who takes the decisions? Global problems require global solutions, which include solutions from Russia, China, India and Brazil.
And while the United States will still continue to be the most powerful nation on earth and the European Union the most important single market, a changing world needs new players using a multilateral approach in decision making.
“Self-centred behaviour can’t and mustn’t be allowed to prevail; openness is still the best course of action if we are not condemned to repeat the mistakes of the past”, the ambassador said.
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