Incredulous assurances

By Salama A Salama

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The financial hurricanes that have raged through the bastions of the international banking and financial sectors in Europe, the US and Asia have left no one unscathed. Nor have they had their final word. Their detrimental effects will continue to ricochet throughout the worlds of trade, finance, investment, aid and loans, wreaking havoc on exchange rates and savings and causing the prices of food and raw materials to soar.

One does not have to be an economic expert to realise that all this fallout will hit developing nations with fragile economies the hardest and, as the president of the World Bank pointed out, Egypt falls into this category.

We have certainly heard our fill of official statements reassuring us that Egyptians will not be affected by the crisis, that our banks have a liquidity surplus and do not have large enough investments abroad to make us worry about their loss, and that we, therefore, have no cause to fear for the safety of our bank deposits. The suspicious complacency behind these reassurances is disturbing. We may not feel the immediate repercussions of the crisis, but it will not be long before we feel the shockwaves.

While the activity on the stock exchange may not offer sufficient proof, there are other indicators that tell us to be on guard. Among these are the decline in petroleum revenues due to the drop in oil prices, the decline in Suez Canal revenues that we can expect as a consequence, and the decline in revenues from tourism.

Instead of merely trying to lull us into calm, the government should also put the facts and figures clearly before the public so as to keep us from being taken by surprise by unexpected developments.

The recent crisis brings to mind the stock market crash of 1929 that precipitated the Great Depression of the 1930s, a period of intense social and political tensions that led to the rise of fascism and Nazism, sharp ideological conflict between capitalism and communism, and the outbreak of World War II. A very similar situation is playing out today.

Global tensions are rife as a consequence of unjust wars and a sharp conflict between the forces of globalisation led by rampant capitalism and the belts of criticism levelled primarily from those areas characterised by widespread poverty, hunger and exploitation by the major international power centres and their military industrial complexes.

The decision-making centres in industrial nations are now struggling to identify the causes behind the resounding crash of a global order that had been commonly believed to offer the solution to the questions of economic growth, political development and social prosperity. The order was regarded as the finest product of Western civilisation, in spite of its inherent flaw of encouraging the values of greed, quick profit and personal gain over collective welfare, and in spite of the fact that privatisation and artificial liquidity were the trusted mechanisms for generating enormous profits for a small and powerful economic elite at the peak.

Amidst the shock of the current crisis, most European governments reverted to the long-interred principle of nationalisation in order to rescue their major banks and financial institutions from bankruptcy. Such emergency measures have paved the way for widespread debate over capitalism and the free market and the need for an international banking system that will put a cap on the type of behaviour that led to the current crisis and that will allow governments to step in when needed. In the course of this debate, some critics have urged a reconsideration of the incredible salaries received by the directors of banks and major companies. They have also demanded that the financial officials responsible for triggering the current crisis be brought to account. As the debate and its consequences continue to unfold, we will learn much. Hopefully the lessons will prove useful, considering that the crisis is still far from over.