More than just a banking crisis

A lot of the current crisis is down to lack of confidence.  Banks don’t want to lend money because they fear tough times ahead.  The people they lend to today may not have a job tomorrow.  Property for example is only an asset if people have money to buy it should the bank have to foreclose. 

So with a bit of luck, once shares have fallen a bit further, people with money will snap up bargains, the tide will turn and gradually confidence will return and everything will be back to “normal”. 

But I fear the problem is much deeper than that. 

For a long time we’ve been shutting down factories and moving the jobs to developing nations where human rights are not respected and where people are desperate enough to work for criminally low wages.  In recent times we’ve been doing the same with office based jobs such as IT and call centres. 

To plug the employment gap, people have been given cheap and easy credit to go out and buy stuff they can’t afford and don’t need, to secure jobs in retail, warehousing, logistics and so on.  So far, no mass unemployment.   

But of course all these jobs do is move money around the country, it doesn’t bring any in to pay for all the stuff we have to import.  Hence our massive trade deficit. 

But now that easy credit is coming to an end, and people have to try and live within their means again, the whole system could start to unravel. 

And the problem is that the people who work so cheaply in the developing world can’t afford to buy the goods they produce, and the huge populations mean that there is never going to be a shortage of labour in order to push wages up, so if the west can’t buy from the developing nations, and the developing nations can’t afford to buy the stuff they produce, then we have a meltdown situation. 

Of course the environmental impact of everyone in the world being able to consume as much as we do in the west would be enormous. 

Instead of patching up a failed economic system, I think we should get back to basics and get back to principals of fariness, e.g. a fair days work for a fair days pay, and not have large parts of the world enslaved working hours that we would not work in the west, for a tiny amount of money.  And we all need to look at our lifestyles and start making real changes, not just token changes like reusing carrier bags. 

Will I be looking back on this post in 12-18 months time and realise I was just being alarmist?  I hope so…