Vive ~ Global financial crisis: an opportunity!?
... > continued from home page
Over the past decades the amounts borrowed (and hence lent) by countries have increased dramatically. For decades now the so-called developed world has been living way beyond its means. Meanwhile the so-called developing countries like China and the oil states have been saving and making themselves the indispensable lenders to the US and Europe who keep wanting more money to spend on consumables and speculative investments. Sooner or later that kind of imbalance has to work itself out.
The northern hemisphere banks have played the major part in the current crisis.
A number of US banks had grown too big and unstable to carry on. One of these banks, Lehmans, was carrying $billions of debt. That was bad enough, but Lehmans had multiplied those debts into $trillions of commitments through writing future financial promises. Basically, they speculated for profits based on capacities they did not have. The whole scenario was totally out of proportion. Worse, the interconnectedness of the world’s banks meant that one big crash would be felt everywhere.
The crash started in the USA which holds approximately 25% of the world’s wealth. The failure of this one US bank spread to others. It turned out that many other banks had made the same gamble. They simply had become too large. At the same time, governments and consumers in the developing world were taking every opportunity to borrow more and so when the system stopped they were left with historically high borrowings.
So why did the system crash?
The biggest reasons are probably the simplest and most human: greed, ignorance, and short-sightedness. First, everyone wanted more. Second, the system was so complicated no one understood the interconnectedness of the whole thing. Third, banks, governments and consumers across the USA, UK and Europe had unknowingly conspired to tip the system over, not realising the consequences.
Banks lent for poor purposes. Weak, even corrupt, incentive schemes for executives probably contributed to poor bank performance. Executives received large immediate rewards for growing the banks with no consequence for exposing the banks to catastrophic failure. Greed pure and simple.
Governments and other regulators relaxed the rules, promoting speculation and raking in the ever-growing tax revenues.
Consumers like you and me borrowed to buy things that lost value, or to get now what our parents would have saved for. Many (especially in the US) couldn’t afford the repayments. Personal discipline and common sense was lost in the frenzy. Then there were the credit rating agencies, the “shadow banking system” of hedge funds, financial product derivatives, private equity and much more. Checks and balances didn’t check or balance. Sophisticated "instruments" propped up big financial businesses that ended up looking like houses of cards. A few experts warned about unsustainable greed and complexity; fewer listened.
Banking is based on trust and confidence. When one fails, trust and confidence is shaken. When many fail, it is a crisis with its own life. It spreads like a virus. From bank to bank, country to country.
Eventually this loss of trust flowed through to the person in the street. Everybody started to feel less well off, more uncertain about their future. What does anyone do when in debt and feeling less confident? We stop spending. We save what we can. We pay off our debt as quickly as possible. We hunker down. Now multiply the effect across a nation or the world. As we stopped buying, factories started closing and jobs started going.
Governments try to show confidence and do what they think will turn things around. They are borrowing massively in various ways and effectively passing on those debts to future generations to repay. We will see cuts in government spending and more government in our lives. These are bold but traditional responses.
But are the levers governments pull connected to the right things? Will they make things better or worse?
It is those on the edge that are most affected. We must wonder at the astronomical amounts governments have recently paid out to banks, companies and executives and their almost complete silence about, let alone regard for, the poorest who are becoming even poorer.
The St Paul’s Report is produced by a group of Christians who believe things can change. We have hope. But we know hope requires knowledge as well as faith.
The Judeo-Christian story has much to offer now as always. But the story is not always well known, or known well.
The story of the Bible starts in a creation (however its origins are understood) that is precious and never to be exploited. Humanity is magnificent and bears responsibility to care for creation well. The problems of life are not ontological (not of the stuff of life), but relational (distortions in the ways people see and treat one another and consequently the non-human world also). The story ends with creation restored. The traditional folklore about harps and clouds and a disappearing world owe more to classical philosophy, religion and homespun yarns. At the centre of the real story is the extraordinary person of Jesus of Nazareth and his crucifixion and resurrection to deal with our relational chaos and to reconcile and restore the entire world. For a brief account of the story we believe, see the brilliant summary by Tom Wright, one of the world’s foremost historians and theologians, in Antony Flew, There is No A God HarperOne; 1 Reprint edition (2007) ISBN-10: 0061335290 (http://www.amazon.com/There-God-Notorious-Atheist-Changed/dp/0061335290 )
We acknowledge that not every Christian, whether theologian or layperson, has understood their own story, nor the truth, beauty and goodness inherent in this heritage. Worse, some people have distorted the story to justify unspeakable injustices.
But this is not how many people have lived out the story of Jesus. Consider not only William Wilberforce and the extraordinary humanitarianism of the Clapham group, but virtually every humanitarian initiative in and from the western world until the mid 20th century. At its best, the story and people of Jesus have fired realism and enquiry, hope and care, in the face of every crisis.
This is the spirit of the St Paul’s Report. It is a commitment to real enquiry and conversation. A choice for hope in the face of despair. A source for humble, reasonable and responsible dialogue in the face of arrogance, ignorance and self-interest. A voice for those without, in a world where so few have so much.
Much of the material in the St Paul’s Report may seem on the pessimistic side – that simply reflects the weight of commentary. But look deeper. Here and there are links to voices and stories of hope with eyes wide open.
