Credit crisis should lead to discussion of alternatives

The international credit crisis is leading some financial commentators in New Zealand and overseas, to ask whether we should be having a wider debate about our financial system rather than just considering short term measures to fix current problems.

In a column in the Christchurch Press this week John Minto shares the statistic that in 1980, the value of US financial assets (bank deposits, government and private sector securities and shareholdings) was 120 percent of gross domestic product (GDP), and by 2007 this had grown to 356% of GDP. He says “thus the value of financial assets had bubbled far beyond the real value of goods and services produced by wage and salary earners. It was value based on financial hot air but like an insane pyramid-selling scheme the value grew as speculation and greed were fuelled by US government- sanctioned stupidity.”

Minto goes on to say that it is working people who will pay the cost of the current disasters, but that the prevailing mood is that the current economic structure will remain essentially unchanged. He calls for greater debate on economic alternatives.

There is similar debate on the British Trade Union Council blog on policy issues, http://www.touchstoneblog.org.uk.  As Nigel Stanley, the TUC’s head of Campaigns and Communications says, “it is clear that the roots of the financial crisis lie in a strategic lack of regulation.” He goes on to say that what has yet to become clear is how much the crisis will impact on the lives of ordinary people, or what its impact on politics will be.

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