Ten years after the Great Recession, nothing’s changed

A decade later, the crisis that threatened to take down the global financial order seems like a bad dream. Now it’s business as usual.

image: Alt-M

In Great Recession, banking institutions creaked and groaned under the weight of flawed investments. Mohamed El-Erian, CEO of a large U.S. investment management firm phoned his wife and asked her to withdraw as much money as she could from an ATM because he feared the banks wouldn’t open the next day. A hedge fund manager sent an email to a journalist during the meltdown saying: “It feels a little like the end of the world.”

But the problems have been fixed, haven’t they?  Yohann Koshy, editor for New Internationalist magazine, is not so sure:

“The world almost did end. And everything stayed the same. Time was borrowed in the form of nationalizations, cash injections and money-printing: space for the financial sector to breathe. But the air is getting thin again (July/August, 2018).”

How we got here.

We went from a stable financial period -one of the longest in centuries- to one designed to fail. The post-war era from the mid-1940s to the early 1970s brought prosperity to everyone: workers and employers alike.

This stable economic period was engineered by the Bretton Woods agreement in 1944 in which a system of monetary rules were applied to the United States, Canada, Western Europe, Australia, and Japan. A key feature of the agreement was a stable U.S. dollar to which many global currencies were pegged. The value of the dollar was linked to a quantity of gold held at Fort Knox.

“This ‘gold standard’ forced discipline on the financial system: it was much harder for banks to create credit out of thin air,” says Koshy.

Under Bretton Woods, money was tied to the value of gold and economies were tied to the goods they manufactured. The U.S., already tooled to produce military equipment, switched to produce the world’s goods.

The U.S. dollar became so popular as a global currency that not enough dollars could be printed. President Nixon ended the gold standard in 1971.

This ushered in the era of financialization. With the dollar having no tangible value, economies also became more abstract. Wall Street made money from the production of goods in other countries.

A recession was avoided in the 2000s by the lowering of interest rates. Financial institutions were awash in money and they invested it in exotic and dubious things like derivatives, credit default swaps and collateralized debt obligations. And banks gave mortgages to people to buy houses that they couldn’t afford.

As the world staggered towards financial calamity in 2008, governments injected massive amounts of money into banks to cover their bad investments. Bailouts were given to the very perpetrators of the dubious investments. The chair of Goldman Saks announced that the biggest beneficiary was “Wall Street itself.”

Nothing has been fixed. What will happen the next time the system teeters towards calamity? “Whatever the answer,” says Koshy, “the blame must not be laid at the feet of the migrants, workers and the marginalized, but on those enabling, creating and profiting from a rapacious and crisis-prone financial system.”

As the air gets a little thin in the stratospheric world of finance, we can only hope that the wizards of exotic investments remember 2008.


Is Monsanto evil?

Yes. Are genetically modified foods dangerous? Possibly. Could science find out if they are? Yes.


Monsanto’s practices run contrary to science, which is ironic when the corporation depends on science for its profits. Claire Robinson puts it this way: “Is Monsanto on the side of science? The answer appears to be: ‘Only if they can control and profit from it.’ That runs contrary to the spirit of scientific inquiry, which must be free to go wherever the data leads — however inconvenient it may prove to a company’s bottom line (New Internationalist, April 2015).”

Monsanto uses false pretenses to promote genetically modified foods. Sure, looming climate change seeks drought resistant crops; increasing populations hunger for productive harvests. But to suggest that, therefore, GM foods are the only solution is misleading. That would be like the supporters of an open pit copper mine near a city justifying the mine based on the need for copper. Yes, we need better crops. Yes, we depend on copper too but these are non sequiturs: justifications not connected in a logical way to the argument being made.

If Monsanto has nothing to worry about, they would allow independent scientists to test their claims in the time-tested way –give scientists GM seeds and the non-GM (isogenic) parent seeds and conduct a double-blinded, controlled experiment. Compare the results of both for toxicity, nutritional value, drought and pest resistance, environmental risk.

An editorial in Scientific American wonders why Monsanto and others are operating in such a anti-science way. “Unfortunately, it is impossible to verify that genetically modified crops perform as advertised. That is because agritech companies have given themselves veto power over the work of independent researchers (August, 2009).”

Look at what happened to Australian scientist Judy Carman who decided to carry out an animal feeding study with GM crops. She asks three GMO corporations to supply seeds. One didn’t reply, another wanted details of her study first, and Monsanto sent her a legal document to sign stating that she would give Monsanto the results of her study before publication. Carman was astonished at the blatant censorship of her study:

“We would have been legally bound to do that whether they gave us the seeds or not. No sensible scientist would agree to such conditions, and we didn’t,” she told New Internationalist magazine.

That doesn’t mean that there isn’t any research on GM seeds published. But the only studies that see the light of day have been approved by the seed companies before they make it peer-reviewed journal. “In a number of cases, experiments that had the implicit go-ahead from the seed company were later blocked from publication because the results were not flattering,” says Scientific American.

The editorial also quotes entomologist Elson J. Shields in his letter to the Environmental Protection Agency, the agency tasked with regulating the consequences of genetically modified crops. “It is important to understand that it is not always simply a matter of blanket denial of all research requests, which is bad enough,” he wrote, “but selective denials and permissions based on industry perceptions of how ‘friendly’ or ‘hostile’ a particular scientist may be toward the technology.”

Is this characterization of Monsanto not flattering?