Background to the Global Financial Crisis

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Background to the Global Financial Crisis

John Cavanagh
September 1998
On the day that this paper was initially drafted, September 11, 1998, media soundbites trumpeted crashing commodity prices, the collapse of Brazil's currency, and the growing crisis in leadership in the United States, Japan, and Russia. That day's financial pages revealed that in the preceding 24 hours, stock prices plunged 15% in Brazil, 10% in Mexico, 7% in Spain, 5% in Italy, the Netherlands and the Philippines, 4% in Germany and France and 3% in the United States and United Kingdom: a typical day in the new volatile world economy. [pic]

Headlines the world over announce what has long been obvious to ordinary people: the global economy is in deep crisis. The major current manifestation of the crisis is financial. Capital is racing in and out of countries at lightening speed - fueling false dreams as it enters and ruining lives and ecosystems as it exits. What can only honestly be labeled a global financial casino is reaping rewards for the few at a devastating cost to the many. An economic, social, political, and ecological crisis which, in this century, rivals only the Great Depression in its impact, is engulfing the planet.

As the crisis gathers
speed, thousands of individuals and groups that have been the victims and critics of corporate-led globalization, including the International Forum on Globalization (IFG), have been analyzing the crisis, its roots, its effects, and its remedies. We do so as the architects of this crisis in the International Monetary Fund (IMF), the Fortune 500, and the governments of the industrial world offer mendacious and misleading explanations of the crisis and cobble together feeble piece-meal solutions.

They, the architects, said this
crisis could never happen. Technology and globalization, they promised would spur growth, prosperity and democracy the world over. Besides, they told us, globalization is inevitable. "Not so", we responded in concert with millions of workers, environmentalists, farmers, women and others. Corporate-led globalization is plundering natural resources, creating insufficient and often undignified jobs, spreading hunger as food travels longer distances from producer to consumer, destroying cultural diversity, and widening the gap between rich and poor. No, we said, economic globalization is not inevitable; it is the result of man-made rules that can be re-made. And, we concluded years ago, forcing countries to pry open capital markets is playing with fire. Today's news suggests who was right and who was wrong.

As we sift through the mounting evidence of the crisis from country to country, we conclude the following:
1. The crisis has exposed the crippling volatility of the new global economy and it has spawned crises in the real economies of numerous nations and eroded the political legitimacy of governments from the United States to Russia, from Brazil to Indonesia.

2. The financial crisis is a
logical outgrowth of a corporate-led economic globalization that is also devastating workers, the environment, safe food systems and cultural diversity. 3. The official explanation of the crisis is wrong and has led to new actions by governments that, at best, are piecemeal, and, at worst, have exacerbated the panic.

4. Countries, regions, communities, and citizen
organizations are beginning to craft and implement effective solutions to the crisis that redirect finance toward meeting the needs of people, communities, and the planet.
This paper, representing some of the work of members of
the IFG, seeks to amplify these points and contribute to a vital and vibrant debate worldwide over the rules and direction of economic globalization. The Crisis
As we write, the financial architects of the global
economy have left in tatters a global map that only recently featured what they called the Asian Miracle, the...
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