More questions than answers
Conspiracy of silence conceals next big crisis
THE BIG LOOMING GLOBAL economics question is simple enough: Where, and when, will the next shoe fall? It is, of course, the answer – or more accurately, the multiple different answers – that is so difficult. I’m talking of the world economy, with all its implications for South Africa, after the current international crisis has passed into history.
Although that assertion may seem grossly premature, I’ve no doubt that there will be resolution – with many major flaws, naturally – of the current crisis. However, I’m equally sure there will be other periods of massive turbulence ahead.
Indeed, the seeds of some of those calamities have already long been sown. They’re also the consequences not of failure but of unprecedented socio-economic success worldwide – with some appalling exceptions. The success is reflected in the extraordinary rise in overall international real living standards over the past 50 to 55 years.
That surge in the wealth levels of billons of people has necessarily brought immense gains with it. But those gains soon became largely taken for granted – and focus nearly everywhere has understandably been not on what was achieved but on how much more was needed, or at least desired.
However, even if – and I don’t remotely expect it – there were severe and sustained recession in the United States in the coming years, people there generally would remain better off than they were only 20 years before. But if that puts the current economic scenario into better perspective it doesn’t touch on the colossal issue that becomes more socially and economically threatening by the year but which few politicians wish genuinely to confront. That relates to three directly associated facts. • People throughout the world – with a few very special and wretched exceptions, particularly in sub-Saharan Africa – are happily living greatly longer than they did 50 to 60 years ago, let alone a century or earlier. That’s in part a product of vastly higher global wealth, enabling billions to enjoy levels of food intake, healthcare and basic shelter than would once have been possible (with key limitations) for only a privileged few. But even those fortunates were still deeply vulnerable to illnesses that today can be simply and widely cured. When Nathan Rothschild died in his fifties in 1836 he was probably the world’s richest man. The cause of death was blood poisoning that could today be quickly and effectively treated by a cheap and easily obtainable antibiotic. So the plus side is that together modern medicine and money have brought about proportionate enormous advances in longevity – apart essentially in those developing and emerging market countries ravaged by Aids. But that broadly wonderful scenario doesn’t come for nothing. It imposes immense funding costs in terms of pensions and medical care, including long-term hospitalisation and similar nursing. But politicians are nearly all extremely reluctant to face up to the awesome financial consequences.
Robert Samuelson, economics columnist at The Washington Post, believes neither Barack Obama nor John McCain is spelling the ultimate truths about pensions and healthcare costs in the US. But that’s primarily because the American people don’t want to hear them.
Similar observations are made by other economists about all big-league political leaders and political parties in the European Union, Japan and other developed nations.
The reason for this conspiracy of silence? There are few votes in taking lots of money from virtually the entire electorate – no matter the cushion of progressive taxation – to finance developments that will show few if any direct rewards for any- one for many years ahead.
Politicians rather prefer to go the other way. For example, in 1997 Gordon Brown, then Chancellor and now Prime Minister of Britain, imposed special levies on private pension funds to provide “stealth finance” for Government spending. Actuaries estimate the cumulative cost to Britain’s pension funds now totals £100bn to £150bn. That’s crisis in giant capital letters down the line.
In the European Union and many others, not least Russia, falling populations are subverting the outlook for social welfare by a demographic inverse pyramid. The percentage of those working in relation to those who have retired for health and/or age reasons keeps on declining.
But where then will the money be found to pay for ever-rising pensions and state healthcare needs? On current trends, it won’t.
SA’s judges can order the Government to make medicines for Aids (and what else?) freely available to all. But the judges can’t whistle up the money.
So don’t think for one moment that once this current global economic crisis is off the front pages it will be the end of brutally disturbing financial news. It definitely will not be – internationally or in SA.