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When growth is not good

Zafar Anjum | March 13, 2009
In a world of finite resources, the greed for infinite growth has got us into todays global financial crisis. Its time we asked some tough questions about the nature of the financial systems that control our lives.

Expansionary monetary policies are the wrong medicine to solve current problems, said Dr Doom, Dr Marc Faber, at a dialogue in Singapore in February. They can address the symptoms of excessive credit growth, but not the cause.

Moreover, as the US government is pumping trillions of dollars in the rescuing the banks, does anyone know who will purchase the $1,750 billion of US Treasuries to be offered to the market this year? And in 2010, then 2011? China is already saying that it is worried about the safety of U.S. Treasuries.

During the crisis, governments have to choose between a rock and a hard place, said Nobel Laureate Joseph Stiglitz, in an interview in the Financial Times. But a long term solution has to be found, he emphasised.

Is there a long-term solution then? Yes, there is.

Go for smart growth

For the first time since World War II, global growth is forecast to turn negativeand that's an optimistic forecast, relative to the possibility of a global lost decade, says Umair Haque, director of Havas Media Lab, an innovation advisory company. Today's leaders are plugging dikes, bailing out industries and banks as they fail. Yet, what negative global growth suggests is that the problem is of a different order: that we have reached the boundaries of a kind of growth. Umairs manifesto for smart growth is worth reading.

The economic peace of the past generation is over, says Ram Charan. Were in a war for survival, beset by fear, uncertainty, and doubt.

Obviously, with the changing circumstances, and in the face of the gawking absurdities of our growth model, we ought to respond to the crisis with a paradigmatic shift. Call it smart growth (Haque) or humane capitalism (Sen) or less selfish capitalism (Richard Layard), its time has come. The sooner we set about figuring it out and implementing it the better, for we are running against time.

This is the concluding part of the blog series on the financial crisis. Read the first part here and the second part here.

Zafar Anjum is the online editor of MIS Asia portal.

 

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