Since the earlier Recovery e-discussion group was wound up over a year ago events have predictably only confirmed that there is no prospect, in the foreseeable future, of recovery from the Global Financial Crisis through application of conventional economic means (fiscal and monetary policy). As I attempted to point out in my earlier contributions this is because no such conventional strategy could deal with the central obstacle of the crippling burden of debt (public and
private) that is paralysing the world's major economies. Equally, any substantial write-off of this debt, such as would be needed in order to permit an eventual return to sustained economic expansion, will entail a massive
collapse of asset values and destruction of capital, with dire economic consequences in the short / medium term.
As explained in the latest installment of my blog - http://harryshutt.com/#/blog/4558256536/Last-days-in-the-bunker/5060934
- any such debt write-off would result in huge loss of wealth by the ruling elite. Hence their reluctance to embrace any policies (e.g. as a rise in interest rates) which would precipitate such a market meltdown, as well as a world-wide global depression. Yet since such a crash is ultimately unavoidable in any event - as persistent stagnation brings only ever higher levels of public debt - we must recognise that a) it is going to occur sooner rather than later and b) in that event total economic and social collapse will only be
averted by establishing a command economy regime to impose tight controls in the immediate aftermath (see also my blog).
If this scenario is realistic it has obvious major implications for any proposals we might advance for such inherently desirable measures as a Global Fund for Social Protection -
as proposed by Olivier de Schutter et al. For if the type of command economy I envisage were established it would need to be in place for several years at least and would have to be set up on a national rather than a transnational
basis in the first instance. Hence cross-border transfers of resources to poorer countries would need to take place bilaterally for the most part. Furthermore, the certainty that there would be little or no GDP growth for the indefinite
future - if not permanently - implies the need for a quite different ideological basis for resource allocation (much more egalitarian) than under the present order.
It is obviously difficult to envisage how such proposals
as the GFSP might be implemented under conditions of such profound change as now confront us. But I would respectfully suggest that we cannot make any realistic
contribution to solving the plight of the world's poorest unless we take account of them.