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
4 - Profit-Led Costs
The collapse
in Northern export markets that followed the recession brought that
process to a halt, and recent moves towards more protectionist
strategies in the US and elsewhere, as well as the persistent
mercantilist approach of surplus-producing countries like Germany,
have made it more difficult since then. In any case, such a strategy
is unsustainable beyond a point, especially when a number of
relatively large economies use it at the same time.
In this
boom, domestic demand tended to be profit-led, based on high and
growing profit shares in the economy and significant increases in the
income and consumption of newly-globalised middle classes, which led
to bullish investment in non-tradeable sectors such as financial
assets and real estate as well as in luxury goods and services.
The patterns
of production and consumption that emerged meant that growth also
involved rapacious and ultimately destructive exploitation of nature
and the environment. The costs – in terms of excessive congestion,
environmental pollution and ecological degradation – are already
being felt, quite apart from the implications such expansion has on
climate change.
There have
been other negative impacts. Within developing Asia, for example, it
led to an internal ‘brain drain’ with adverse implications for
the future. The skewed structure of incentives generated by the
explosive growth of finance directed the best young minds towards
careers that promised quick rewards and large material gains rather
than painstaking but socially necessary research and basic science.
The impact
of relocation of certain industries and the associated requirement
for skilled and semi-skilled labour led to increased opportunities
for educated employment, but it also led bright young people to enter
work that is typically mechanical and does not require much
originality or creativity, with little opportunity to develop their
intellectual capacities.
At the same
time, crucial activities were inadequately rewarded. Farming in
particular became increasingly fraught with risk and subject to
growing volatility and declining financial viability, while non-farm
work did not increase rapidly enough to absorb the labour force even
in the fastest growing economies of the region.
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