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The International Writers Magazine
- Globalisation Part One - An essay

James Skinner

A layman's guide to global finance

‘To start with, I’m not an economist. I don’t know the first thing about extrapolating the percentages of the Gross Domestic Product to include the inversion factor of a Central Bank’s base rate. I haven’t a clue why Mr Greenspan didn’t retire at 65 and become yet another old age pensioner, nor who invented the phrase ‘when the USA sneezes the rest of the world catches pneumonia’. I therefore consider myself a normal John Doe who had some sort of a professional life, read a few books, newspapers and magazines and by and large always tried to figure our what makes the world go round. I do feel, however like millions of other fellow humans on this planet that regardless of whether we understand the reasons why, by God we’re all in this same economic rat race. That’s why I thought I’d have a stab at trying to piece together in my own layman’s language what I think of today’s global economic scenario and what is blatantly wrong or right but above all, what could possible happen in the future.

Let’s get some basics down. Three quarters of the population can barely rub two sticks together to feed themselves. That’s right, we have a few extravagantly rich and the rest are starving, from Nike sneakers in France to shoeless kids in Rwanda. Then we have politicians and multinationals, both are the masters and rulers of our destiny. The former lay down the rules of the game either by force or democracy for the latter to side step regardless and make bags of money. From hence we move onto the base of subsistence, food and oil. Nobody, repeat nobody could survive if they didn’t at least have a bowl of rice, or a stove to keep warm, and yet many are dying of starvation and freezing to death in winter. Others couldn’t care less as they stock up with champagne and fill the tanks of their gas-guzzlers with that black muck from the Middle East before their ski trip to the Alps. Unfortunately, that has always been the way of the world and seems as if it is continuing down the same path. But can it change? The key may lie in understanding the evolution so far, and the rapid pace of today’s globalisation.

When we talk about evolution we naturally refer to the advancement of civilisation and technology over the past centuries. As man learned more about his environment he also devised the tools to conquer it. Education, science and communication moved from simple sign languages and smoke signals to a plethora of academic and scientific achievements and networks of global telecommunications. He learned to control and elevate himself above his fellow animals. He also believed in the 'everafter' and felt that a divine inspiration drove him forward in the name of God. The trouble is that his religious differences have created eternal wars. But there is one area that he didn’t have control of and that was pace. Today’s goodies are in tomorrow’s history books. This is why the future economy of the world is so unstable. It is going too fast and is out of control for the normal life span of humanity. We live longer but die shorter!

Man had created institutions to control financial developments. Two fundamental ones were banks and stock markets. Most people understand how they work, or do they? Originally, banks were ‘invented’ so that people who had a lot of money to spare could hand it over to an ‘intermediary’ for safekeeping and earn a little bit on the side called ‘interest’. The bank in turn would dole out most of it to those who needed money and would cash in (pardon the pun again!) on it by ‘charging’ a fee, also called ‘interest’. The difference in the ‘interest’ was the bank’s profit. Everyone was happy. Then came evolution. Banks began to do far more with money that just loan it out. They invested. They became national and international businesses in their own right.

The other animals, stock markets, also emerged as a simple mechanism for humans to help each other. If someone wanted to start a business but had no cash, he would ask a group of friends to ‘lend’ him the money. In turn he would give them a ‘share’ in the business as well as a percentage of the profits should the venture develop. If it grew, the owner and his lenders benefited. If it went under, well, tough luck and ‘lets have another go Joe!’

However, they too decided to go national and international and before long banks and stock markets were branching out in all directions to the extent that the original concept disappeared. Banks are involved in moving money around the world, manipulating governments and nations whilst stock markets allow masses of companies to lure yours and my odd shekels for their own kind of manipulation of the world’s economy. What then does all this mean to the man on the street?

Consumerism! The west has learned to spend, thanks to banks and consume (more than it needs) thanks to multinationals and is rapidly teaching the rest of the world how to do it. Consumerism is also the key to rapid evolution. Whereas the citizens of the developed world during the turn of the nineteenth century cherished their earned possessions, today’s wealthy population cannot wait to get rid of what they have for the new stuff on the market shelves. Be it cars, washing machines or diet foods, multinationals spend a great deal of their time inventing new products as fast as they can. Banks, specially governmental ones, are also in on the game and just sit back and watch the cash come in and out; manipulating the interest rates accordingly to make sure everyone benefits, so they think!

The cliché statements of the ‘poor are getting poorer’ and the ‘rich richer’ are right on track. Simple examples of these extremes are the HIV/Aids epidemic in Africa. On the one hand the poor are dying of the disease and cannot afford the medication, whilst on the other, today’s wealthy kids are swapping Game Boy annihilation programs by the dozen. Condoms in some shantytowns of Latin America are considered a luxury, the same as Viagra pills are in central Portugal, if you get the gist! But back to the pace of evolution, what is the real threat? Global Saturation.

I’ve said it before and will say it again; our rich world is saturated with consumer goods, whereas our poor ones are screaming for help. We are going so fast that even our kids’ education is obsolete by the time they obtain their degree. Start a factory today in Europe and either the product is no longer needed within a decade or cheap labour in another part of the world will shut it down and move it overseas. A blockbusting film hits the top of the list, wins an Oscar and dies three years later. I’ve already written about my views on music! But the real indicator is reflected in the original institutions. Bank interest rates are so negligible in the West that they have killed the original business and stock markets are just not growing because listed companies are sprouting and dying far to rapidly for investors to keep up. But wiat up, where is all this leading?

Strife! Without diverting this whole essay to the monumental political and ecological mess that this planet is suffering from at the moment, the future survival of our global economy depends on two things, the massive reduction of world conflicts and the slowdown of indiscriminate wealth concentratged on the few. Poor countries unalbe to do research and development and or invest in education and industry will just grow poorer (or reach that level where Sony or Ford relocate to build a factory there to exploit their low wage infrastructure. It’s the fable of the turtle and the hare all over again!’

© James Skinner January 2004.
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Part Two: Global Linkage here

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