A New Year’s financial system resolution needed

Taming the finance sector and generating decent jobs should be the New Year’s resolution for global leaders.

  Despite the fact that the global economic crisis is inflicting enormous damage on communities around the globe, the causes of the calamity remain largely unresolved. That very little has been done to restrain finance capital from repeating the mistakes of the past, attests to the political and economic power of the sector and neo-liberal ideological dogma. This power has not gone unchallenged but reform of any significance is not likely to occur in the absence of a great movement for change, one that pushes governments to regulate the banking and finance sector in the public interest. The cost of inaction is unthinkable. Trillions of taxpayers’ dollars have already been used to prop up the banking and finance sector as well as deal with the consequences of the crisis on public finances and employment. To try and prevent Australia from plunging into recession billions of dollars were injected by the Federal Government though the stimulus package. Banks and financial institutions were given a government guarantee to bolster confidence. Fortunately the strategy worked. Early intervention helped us avoid joining the US and Europe in recession but it didn’t prevent the loss of tens of thousands of jobs in vulnerable sectors including finance, construction and manufacturing – we have lost around 10,000 finance sector and 100,000 manufacturing sector jobs since the Global Financial Crisis (GFC) began. The impact of the GFC, particularly on the Australian exchange rate, is likely to fuel a further 80,000 manufacturing job losses over the next five years, according to the Prime Minister’s Taskforce on Manufacturing. The story elsewhere is much more frightening. The crisis engulfing the United States has led to the loss of around 6.5 millions jobs while in Europe 40 million jobs have been lost. This is a catastrophe that is generating great hardship and unrest, particularly in Europe where millions of young people’s hopes have been dashed. Despite our exceptional performance, Australia remains vulnerable to the ongoing impacts of the crisis so long as the underlying causes of the crisis remain largely unaddressed and the neo-liberal economic solutions offered continue to fuel it. Austerity policies shift the burden of responsibility for the GFC away from the banking and finance sector to communities. What is needed is a new international financial architecture that finances productivity and employment generating investment while heavily taxing and curbing the speculative excess that prevails in international financial markets. Separate markets for productive and speculative investment need to be created by subjecting highly speculative financial instruments to differential risk taxes as part of a global financial transactions tax regime. Austerity policies must be abandoned and replaced by pro-employment strategies that stimulate rather than dampen growth. There is no shortage of productive work to be done as we confront the need to create more rewarding and secure jobs in a carbon-constrained world. Global leadership is required to bring about a new economic and financial deal – one that tackles the interrelated problems of excessive high-risk financial speculation, corporate collapse and mass unemployment. I don’t normally look for inspiration from the Vatican but I recently came across the Pope’s World Day of Peace message, which I am inclined to quote, in part, to provide a moral dimension to the debate that might resonate for some. The passage focuses on employment as a fundamental good, a right if you like that is central to the well-being of individuals, families and communities. More than this, the message provides further legitimacy, if it is needed, to the critique of unregulated finance capitalism. For those who find this uplifting and for others who are persuaded all the same, there is a pressing need to take up the challenge of advocating for a new global financial architecture. There is also a need to expose the folly and fundamental inequity of the policies of austerity that are being imposed on too many communities around the world, including in Australia where the Queensland Government has been the pace setter. ‘It is alarming to see hotbeds of tension and conflict caused by growing instances of inequality between rich and poor, by the prevalence of a selfish and individualistic mindset which also finds expression in an unregulated financial capitalism. One of the social rights and duties most under threat today is the right to work. The reason for this is that labour and the rightful recognition of workers’ juridical status are increasingly undervalued, since economic development is thought to depend principally on completely free markets. Labour is thus regarded as a variable dependent on economic and financial mechanisms. In this regard, I would reaffirm that human dignity and economic, social and political factors, demand that we continue “to prioritise the goal of access to steady employment for everyone. If this ambitious goal is to be realised, one prior condition is a fresh outlook on work, based on ethical principles and spiritual values that reinforce the notion of work as a fundamental good for the individual, for the family and for society. Corresponding to this good are a duty and a right that demand courageous new policies of universal employment.’ (Vatican, December 8, 2012) Bringing an end to the global economic and financial crisis demands a fundamental policy shift, one that will only be achieved when governments are subjected to overwhelming pressure for a fair and just international financial system. Wishing you a very happy new year. Associate Professor John Spoehr is the Executive Director of the Australian Workplace Innovation and Social Research Centre at the University of Adelaide