The
crisis consists precisely in the fact that the old is dying and the
new cannot be born; in this interregnum a great variety of morbid
symptoms appear. (Antonio Gramsci)
by
Jayati Ghosh
Part
3 - Global Transfers
The
financial bubble in the US attracted savings from across the world,
including from the poorest developing countries, so that for at least
five years the global South transferred financial resources to the
North.
Developing
country governments opened their markets to trade and finance, gave
up on monetary policy and pursued fiscally ‘correct’ deflationary
policies that reduced public spending. Development projects remained
incomplete and citizens were deprived of the most essential
socio-economic rights.
A net
transfer of jobs from North to South did not take place. In fact,
industrial employment in the South barely increased in the past
decade, even in the ‘factory of the world’, China.
Instead,
technological change in manufacturing and new services meant that
fewer workers could generate more output. Old jobs in the South were
lost or became precarious and the majority of new jobs were fragile,
insecure and low-paying, even in fast-growing China and India.
The
persistent agrarian crisis in the developing world hurt peasant
livelihoods and generated global food problems. Rising inequality
meant that the much-hyped growth in emerging markets did not benefit
most people, as profits soared but wage shares of national income
declined sharply.
Almost all
developing countries adopted an export-led growth model, which in
turn suppressed wage costs and domestic consumption in order to
remain internationally competitive and achieve growing shares of
world markets. This led to the peculiar situation of rising savings
rates and falling investment rates (especially in several Asian
countries) and to the holding of international reserves that were
then placed in ‘safe’ assets abroad.
This is why
the boom that ended in 2007/8 was associated with the South
(especially in developing Asia) subsidising the North: through
cheaper exports of goods and services, through net capital flows from
developing countries to the US in particular, through flows of cheap
labour in the form of short-term migration.
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