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jcmargesonEconomic Crisis: The Fragility of “Normalcy”
Posted by laissezlbtr on January 31, 2009
Although this past week screaming headlines about executive bonuses, plummeting markets, and massive job losses have graced the the front pages of the Financial Times, this Tuesday a smaller article below the fold caught my attention. This article described the resurgence of international bartering between governments of countries who are unable to secure credit. The article lists Russia, Malaysia, Vietnam, Morocco, North Korea, Cuba, Jordan, Syria, and Iran as involved in or discussing bartering deals for commodities and food, including rice, palm oil, machinery, and oil. The resurgence of this antiquated practice struck me more than any of the recent devastating financial news because to me, it demonstrates a large-scale departure from what we consider civilized international economic practices. Bartering represents the failure of money – a tangible concept that touches everyone, not just Wall Street Banks or savings accounts. It illustrates the possible failure of the entire system at its core, and highlights the very real uncertainty of what sort of international economic future we will face. As a student of international economics, I have been following the news about the crisis and have been struck by the superficiality of much of the coverage. While experts from every sphere of the economic world have been putting forth policy suggestions and describing the best ways to handle potential scenarios, I have been struck by the political unfeasibility of many of these plans. Each warns harshly against US protectionism, yet it already appears to be growing. It seems to me true attempts to make policy prescriptions for addressing the crisis should include this growing protectionist tendency rather than simply warn against it, because to do otherwise fails to take into account the political atmosphere. While experts debate the minutia of ideal economic stimuli, American citizens are closing their doors to free trade and governments are abandoning the foundation of commerce: currency. This strikes me as a dangerous disconnect and leaves me considering a single, nagging question. How fragile is the economy as we know it, and how quickly could basic foundations like currency wither away?
whodan2 said
On protectionism:
Someone has to consistently argue against protectionism in order to keep that opinion in the mix. Obviously not all policy recommendations have been anti-protectionist–witness the recent House-version stimulus bill’s “buy American” requirements for steel and other basic commodities. Such requirements wouldn’t have made it without someone recommending they be there. The myriad interests we as a country have in maintaining domestic capacity in certain sectors will certainly overwhelm anti-protectionist arguments on the whole, but those arguments need to be there to encourage us not to become overly-protectionist–a balance must be struck.
jcmargeson said
I have to ask a relatively ignorant question; I’m not an economist. What about the argument that, since the credit crisis started here the stimulus should be injected into the American economy as directly as possible? Wouldn’t allowing the finds percolate into other economies diffuse the impact and negate the intended effect?