Antonio Navalón
In just forty days, the world is changing as never before. It used to be very difficult, if not impossible, to maintain a situation in which different conflicts were developing simultaneously and in parallel worldwide. Today the world is searching for its identity amid circumstances such as the war in Ukraine, China’s problems with Taiwan, the semiconductor problem, and the inflationary crisis. The significant political turmoil currently affecting the European Union must also be added to this list.
The United States is in a position where it is oscillating between humility and arrogance based on its ability to reproduce, build and establish an economic hegemony that has several fundamental bases. The most important of these is to know how to take advantage of the moment – I do not know whether to call it post-pandemic – but to take advantage of the global stagnation brought about by the Covid-19 crisis. On the one hand, the United States has a particular advantage in international trade in how it distributes and places its products worldwide. On the other hand, the responsibility of the Americans to promote and secure peace, beyond seeking to maximize the potential gains that war inherently brings, remains a fundamental factor and element to be able to continue to boast its role as one of the world’s leaders.
We live in an unparalleled time. A time in which we inevitably have to remember that September 15, 2008. A day that has remained in the world economy’s memory and is more relevant today than ever. On that day, the American company founded in 1850, Lehman Brothers, declared bankruptcy, one of the causes of the 2008 financial crisis. Lehman Brothers was the fourth largest investment bank in the United States at the time, and a series of bad decisions were enough to provoke one of the most profound financial crises in living memory. The failure of this bank led to the emergence of the “too big to fail” doctrine, which is an economic concept that describes when the failure of a banking or financial institution would have disastrous consequences for the economy. Hence, in the wake of the biggest financial crisis since 1929, the decision was taken to adopt this doctrine whereby – in the event of a risk of bankruptcy – the public authorities would come to the rescue of the institution to avoid its consequences.
Seven years before the 2008 crisis, there was an event that brought about a global change: the attack of September 11, 2001. After that event, a series of events were triggered, such as the invasion of Iraq and Afghanistan, to eradicate the latent terror and threatened nations’ tranquility. When President George W. Bush was asked how the U.S. citizenry could support the conflict in Iraq, he replied that the best way to be patriotic in the midst of a major war was to go shopping. It was clear that under no circumstances were they going to allow a situation of a certain euphoria, from a consumerist point of view, not to occur or be experienced. From that point on – and it is essential to reread the history of those days – we must remember when Condoleezza Rice and Colin Powell had to try to get the British government to authorize the purchase of Lehman Brothers.
Lehman Brothers was not sold. And with it came the most extraordinary collapse of financial speculation we had experienced since the great global economic depression hallowed times. And in the midst of that, having been elected or being clearly on the starting line and being just over three months away from Barack Obama becoming the first African-American President – in addition to the achievement of having displaced the Republicans from the White House – happened what no one thought could happen.
The Democratic administration of Barack Obama and Timothy Geithner – who was in charge of mitigating the consequences of the 2008 crisis – decided that even though more than eight million Americans lost their homes and their assets were reduced to ashes, no one would pay for the speculation, the cheating, the abuses and the lies that took place in the world economy.
What happened in 2008 remains a shameful episode for the world economy. How speculation and the creation of bubbles were reproduced is unheard of. When recalling this episode in history, it is inevitable to bring to mind the New Deal promoted by Franklin Delano Roosevelt. It is necessary to remember that during 1929 and the years that followed the outbreak of the notorious Great Depression, those who cheated, defrauded, and speculated…paid. Considering all the effects they caused with the crisis they unleashed, indeed, their condemnation could be regarded as insufficient. But what is a fact is that they paid. In that sense, it is vital to understand how it was possible that Barack Obama, Timothy Geithner, and all those who governed the United States – including Joe Biden – in 2008 were able to leave unpunished those responsible for the economic tragedy that was unfolding before their eyes. What was going through their minds not to bring the guilty to justice while millions of Americans lost their properties?
Contrary to the actions and response made by Franklin Delano Roosevelt when – after having issued the New Deal – he published in 1933 the Glass-Steagall legislation separating commercial banking from investment banking, in 2009, there was no act or series of specific actions to counteract what had happened. It was simply decided to go ahead, burn things down, reduce the ability to grow, and create a real generational leap in what was meant by the ability to create wealth, starting with something as important as home ownership.
Today, we are once again heading towards an unprecedented crisis. In this sense, one does not need to be very imaginative to know that the adjustments to prevent the economic crisis from having much more savage effects will require three types of action. First, redefining the capacity to create economic, technological, and financial strengths is necessary. Second, the world economy needs rearranging, starting with China, the supremacy of crises, and energy values. And thirdly, we need to build a world that bases its economic development on the possibility of being able to grow and work, with the hope that we will have an increasingly better quality of life.
The great tragedy of this era is that each generation that passes is condemned to live much more intensely and with more significant difficulties than the generation that precedes it.
In the meantime, we must be very vigilant because, in six months or a year, the maps of economic strength will have changed completely.
In short, we need to prepare for the worst. Endlessly rising interest rates, the fight against inflation, and economic redefinition are events mixed with the existing economic, political, and military crises – creating a unique and unprecedented set of conditions. At this point, it seems that the United States of America is the only nation capable of doing all it can to try to mitigate the severe consequences of inflation. However, there is still much to be done.
The European Union has revealed its most outstanding defects and weaknesses in managing and distributing energy resources. To prove it, it is enough to look at the situation in which European nations are currently immersed and, particularly, the challenge facing countries such as Germany. Europe’s dependence on Russian oil and gas in this respect can no longer be hidden, and the effects of this crisis are becoming apparent with each passing day.
The Chinese are redefining their economic policy amid a situation where, for the first time, the limits of their system are becoming apparent. As has been seen and is being revealed, Covid-19 and the pandemic is already one of the biggest problems facing the Chinese economy. Couple that with the situation of ghost cities and deserts full of skyscrapers, which were initially erected to mark technological and economic development and supremacy, and one can see a crisis in which it is necessary to redefine and set the limits of Chinese growth.
The other nations, Russia, the United States, and the British, are in a situation where it is becoming increasingly difficult to build alliances that will allow them to secure benefits, development, and growth. Meanwhile, unemployment rates and the fumigation of small and medium-sized companies are multiplying in Mexico. In addition, the terrible dependence and slavery we have on energy sources and fossil fuels are becoming more noticeable every day.
Now the moment of truth has arrived. Amid the need to return to fossil fuels as a primary energy source, what will be the consequences that this context will have on the world? Will we be able to combat climate change? Will there come the point in which the economic crisis will limit energy consumption and allow a lightening of the climate crisis? All this remains to be seen. For the moment, what is clear is that the conditions under which this era is unfolding are creating an increasingly unsustainable scenario.
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