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Causes of Economic Depression
By Dada
Maheshvarananda
The global capitalist system has changed much over the
several hundred years since its inception, but it continues to be based
on profit, selfishness and greed. It excludes more people than it
benefits. Today nearly half the world’s population lives, suffers and
dies in poverty.
Because of its inherent contradictions, the global economy is doomed to
crash, causing a great depression. P. R. Sarkar, the founder of Prout,
explains that there are several causes of economic depressions.1 The
first is great concentration of wealth. Since 1960, the wealth of the
world has multiplied eight times, but the world’s richest people are
hoarding almost all of this wealth. For example, the chief executive
officers (CEOs) of multinational corporations are now paid salaries with
stock options that Fortune magazine describes as “outrageous!” In the
year 2000, the director of Citibank was paid $151 million. Disney paid
their CEO US$575 million. The head of Oracle received US$707 million.
Apple Computers paid CEO Steve Jobs $872 million, more than 30,000 times
what the average Apple employee is paid each year!2
The wealth of the world’s 200 richest people more than doubled during
the last four years, to more than $1 trillion.3 This is more than the
combined annual income of half the world’s population – three billion
human beings.
Another cause of global depressions is blockages in the circulation of
money. For example, in 1970, about 90% of international capital was used
for trade and long-term investment--more or less productive things. By
starting new companies, paying more salaries, and producing more goods,
money flows through many hands and benefits many people. In 1970, about
10% of international capital was used for speculation. By 1990, those
figures had reversed.4 About $1.5 trillion per day is shuffled around in
the great casino of speculation as investors gamble in the world’s stock
markets to get rich quick.5 Stock market prices represent a speculative
bubble of incredible proportions, completely based on investor
confidence – a misplaced confidence.
The professors of the prestigious Duke University School of
Business in the U.S. are debating whether to ban their students
from bringing laptops to their lecture halls. Why? Not because they
are typing notes in class. It is because with their cell phones, they
connect to the Internet and buy and sell stocks, sometimes
earning thousands of dollars of profits during class!
Sadly, more than half of U.S. households have invested their savings in
the stock market, sometimes involuntarily through their retirement
programs. Common people cannot afford to risk losing all their savings
in a downturn of the ever-volatile stock markets.
What significance do the investments of the super rich have for the rest
of the world? A lot! Today the capitalist economy is more and more
interconnected and interdependent. If the New York Stock Market starts
to fall, or if the value of the dollar falls, within minutes the world’s
other stock markets and economies will also begin to fall.
Great wealth, when it is concentrated in the hands of a few and not
circulating productively, decreases the purchasing power of people. The
North American economy is today the strongest in the world, yet in the
month of October 2001, 415,000 Americans lost their jobs. In the United
States, more than one-and-a-half million individuals and businesses went
bankrupt in the year 2001.6 In Brazil, the government of Sao Paulo
reports that nearly 70 percent of small businesses fail within the first
two years, and there are many more bankruptcies by small businesses that
do not legally register.
Poverty and suffering on our planet is increasing. Latin America has 442
million people, but more than half of them – 250 million – live below
the poverty line. UNICEF reports that of every two inhabitants of the
planet, one lives on less than $2 per day. Of every three inhabitants,
one has no access to electricity. Of every four, one lives on less than
$1 a day. Of every five, one has no clean drinking water. Of every six
adults, one suffers from hunger.
In addition to this terrible human suffering, the excessive greed of
capitalism is destroying the environment. In the last fifty years, our
planet has lost one-third of its forests, one-fourth of its topsoil, and
one-fifth of its arable land. P. R. Sarkar predicted that deforestation
would cause a global water crisis in this decade.
Another destabilizing factor is monetary devaluation and the resulting
inability of the unit of money to be the unit of economic stability.
This is evident in the economy today, with the dollar and other
currencies no longer being based on gold reserves or other real wealth.
Governments and corporations are printing more and more “virtual money”,
i.e. government securities and bonds, stock shares and especially credit
creation, encouraging consumers and businesses to buy on credit. In the
United States, mortgage debt rose US$700 billion in 2003 to a total of
US$6.2 trillion. On a global level, there is US$100 trillion of debt
outstanding.7
Global capitalism will crash because of its critical flaws. We need to
consider alternatives that aim for the welfare of everyone, not just a
few. We need to envision a future after capitalism.
Dada Maheshvarananda is the author of a number of books
including After Capitalism: Prout’s Vision for a New World. He can be
reached at: Proutist Universal, Platanvej 30, 1810 Frederiksberg,
Denmark. Tel. 45-33-256671, Email: maheshvarananda@prout.org,
www.prout.org
www.proutworld.org
www.ru.org
REFERENCES:
1 P.R. Sarkar, Proutist Economics, Ananda Marga Publications, Calcutta,
1992, pp.91-93.
2 Geoffrey Colvin, “The Great CEO Pay Heist”, Fortune, Jun. 25, 2001.
3 Forbes Magazine,
www.forbes.com/lists/
4 Noam Chomsky, “The Erosion of Democracy and Visions for a New World”,
in After Capitalism: Prout’s Vision for a New World.
5 “The Economics of Social Responsibility and Spirituality: An Interview
with Dr. Marcos Arruda”, New Renaissance, Vol. 10, No. 4, 2002.
6 Administrative Office of the U.S. Courts, Statistical Tables for the
Federal Judiciary, 2001.
7 Ann Pettifor, “The Coming First World Debt Crisis”
http://www.opendemocracy.net/debates/article-6-28-1463.jsp#
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Copyright The Author 2003 |