SYDNEY and KUALA LUMPUR, April 5 (IPS) – The world is entering a perfect storm as key leaders appear intent on threatening more war, albeit while declaring intentions. most sublime. By doing so, they prevent international cooperation to facilitate lasting peace and common prosperity for all.
Monetarists want tighter monetary policies to combat inflation. It is imperative to contain rising prices, even though it will increase unemployment. They advocate abandoning expansionary fiscal measures for more growth and jobs. But U.S. Federal Reserve Bank President Arthur Burns still consider Ensuring full employment is its top priority. For Burns, dealing with ‘confrontational’ inflation – at the urging of his detractors – is too costly for the economy and people’s lives.
However, the ascent of monetarism was confirmed when the Employment Act of 1946 was superseded. The successor to the Full Employment and Balanced Growth Act of 1978 is better known as The Humphrey-Hawkins . Act to its sponsors, including the 1968 Democratic presidential nomination.
In the early 1980s, Burns’ successor as Fed chairman, Paul Volcker emphasize“Y basic philosophy is that over time we have no choice but to deal with inflation because inflation over time and unemployment go hand in hand. … It’s not Is it the lesson of the 1970s?”
By Western standards after the 1950s, the 1980s saw very high unemployment. Unemployment in the rich developed OECD countries averaged 7.3% between 1980-1989, compared with just under 5% between 1974-1979 and less than 3% in the 1960s.
Debt crises, lost decades
The sudden increase in US interest rates caused debt crises in Poland, Latin America, and elsewhere in the early 1980s. Before that, American commercial banks had profited after two waves of prices. Oil spiked in the 1970s.
The US government has long provided low-interest concessional loans to allies to secure support during the Cold War. With deposits from Organization of the Petroleum Exporting Countries (OPEC) members in the 1970s, they pushed loans to borrowing governments, many in Latin America.
With the spike in interest rates, the borrowing countries suddenly faced a liquidity crisis, creating systemic risk for their US and UK banks. The successors of the United States Secretary of the Treasury, James Baker and Nicholas Brady, introduced various debt restructuring programs to solve the problem, with the following adopted.
Meanwhile, the International Monetary Fund (IMF) and the World Bank’s financial support are tied to short-term stabilization programs and medium-term liberalization reforms, packaged as structural adjustment program (SAP) with clear policy conditions.
The liquidity crisis is caused by a sudden increase in interest rates. But instead, these crises have been described as solvency crises stemming from weak ‘economic fundamentals’, attributed to ‘overregulation’ and protectionism. .
Although African countries generally do not have much debt capacity, they also face problems when commodity prices fall along with slowing growth. Many were forced to seek financial support from the IMF and World Bank, and thus were forced to implement SAPs.
Inflation in Europe
Inflation in our time is thought to be initially the most severe in Europe. This has been caricatured as fighting for Ukraine until the ‘last European country’ as it bears the brunt of NATO’s imposition of sanctions on Russia. Besides oil and gas, they will have to pay more for imports of Russian wheat, fertilizer and other exports.
But other economic trends are likely to make things worse. First, some rich economies – especially the UK and US – are weaker now, having lost many of their manufacturing advantages. Others have gone through refuse in increase productivity since the mid-1970s.
Second, low wages – due to deregulation of the labor market and ‘off-shoring‘, that is, moving production overseas – meaning less productive operations already exist. Very low interest rates – due to ‘abnormal‘monetary policies since the 2008-09 global financial crisis – have allowed ‘zombie’ business to continue living.
Tuesday, The decrease in the share of labor income has increased income inequality, reducing aggregate demand. But demand has been sustained by rising household debt. Low, if not negative, real interest rates have also encouraged the company to take on more debt, but use it less for productive new investments.
Fourth, the pandemic has increase all types of debt – households, companies and governments – to record levels. Fifth, countries, especially smaller ones, are more international now – through trade and finance – than they were in the 1970s.
As a result, a small interest rate increase can have a large impact on household, corporate and government finances. As a result, advanced countries are likely to witness a severe economic slowdown and rising unemployment rates.
Meanwhile, more racism and intolerance in recent decades shows little sign of abating. Worse, these could worsen as political elites compete in nationalist populist coalitions to blame Others for their problems. Recently Europe decides on privileges for Ukrainian refugees is a poignant reminder of what’s in store.
However, the effects on developing countries could be much worse due to capital outflows, declining development aid and financing, and a slowdown in world trade after decades of globalisation. globalization. Rising inequality since the 1980s and slowing growth since 2014 – now made worse by the pandemic – won’t help.
Thus, instead of working to ensure lasting peace, which is needed to improve conditions for all, the world seems to be set on protracted conflict. This easily leads to punitive measures, namely war by economic siege, to the detriment of all. We are therefore all at risk of mutual destruction instead of common prosperity for all.
IPS UN Office
© Inter Press Service (2022) – All rights reservedOrigin: Inter Press Service