A second similarity lies in the scale of the recession – not regional in nature, such as the Asian Financial Crisis in the Southeast Asian region, starting with the weakening of the Thai Baht exchange rate and then the Rupiah: a 2022 recession is threatening economies all over the world. Next is the infection by the recession of political stability from the 1960s into the 1970s, reflected in the collapse of the Old Order and the establishment of the New Order. We have seen how Sri Lanka and the UK saw a violent change of government leadership as a result of the economic recession this year. (GRAPH 2)
New Economic Policy
The emergence of new economic development models in every economic recession needs to be observed. During the Great Depression of the 1930s, a “Keynesian theory” emerged, declaring that governments needed to intervene when economies were afflicted with downturns. President Franklin Delano Roosevelt, elected during the worldwide economic depression, introduced a “New Deal” concept with massive construction of various infrastructure mega-projects, one of which was to continue the construction of the Hoover Dam in Black Canyon, bottling up the Colorado River, a project initiated by President Herbert Hoover. The construction of the Hoover Dam provided employment for more than 21,000 workers, with an average of 3,500 workers hired per day.
The economic recession of the 1970s saw the Keynesian model starting to be discredited: the figure of Margaret Thatcher in the U.K., who led as PM in the period of 1979- 1990, and Ronald Reagan in the US. Thatcherism did not take long to be championed as the basis for theoretical and practical development in various countries. The main concept of Thatcherism was to drastically cut back on the role of the state in the welfare of the “little people”, and to encourage liberalization in various sectors.
During the same decade, a development model emerged in Latin America, with the concept of neo-liberalism, championed by the “Chicago Boys”, led by Milton Friedman. The brutal experimental application of the neo-liberalist concept was spearheaded by military dictatorships in various Latin American countries, including Chile, between September 11, 1973 and March 11, 1990. The dictatorship in Chile marked a period of economic restart based on a theory of what was informally called “Disaster Capitalism”, forcefully hijacking the economy and opening it to exploitation by American capitalist interests. Since then, every recession has echoed that disaster capitalism scenario.
In the “Shock Doctrine”, Naomi Klein claims that “What we have been living for three decades is ‘frontier capitalism’, with the frontier constantly shifting location from crisis to crisis, moving on as soon as the law catches up”. Capitalism always tries to find new crises to grow and feed upon. Even if there are sacrifices in every frontier capitalist scenario, it is the players of the old capitalism who are unable to adapt, or the petite-bourgeois who do not share in the looting. Obviously, a recession thus provides the momentum for the strengthening of capitalism in every aspect of life.
In the subprime mortgage crisis of 2008, and the European debt crisis in 2013, the neo-liberalism model was pinpointed as the key root of the catastrophe. There are alternative suggestions, positing that the arena of financial sector liberalization, including debt, needs to be reorganized, and government intervention is urgently needed as an effective social safety net. Repairing the crisis engendered by neo-liberalism, through “salvation of an economy” through fresh new debt (loans) is part of what is perceived as an increasingly dangerous crisis-trap.
Yanis Varoufakis, former Finance Minister of Greece, explained it thusly: “Forcing new loans upon the bankrupt, on the condition that they shrink their income, is nothing short of cruel and unusual punishment. Greece was never bailed out. With their “rescue” loan and their troika of bailiffs enthusiastically slashing incomes, the EU and IMF effectively condemned Greece to a modern version of the Dickensian debtors’ prison, and then threw away the key…Debtors’ prisons were ultimately abandoned because, despite their cruelty, they neither deterred the accumulation of new bad debts nor helped creditors get their money back.”
At the same time, the strengthening of discussions related to the climate crisis encourages intra-generational debate. Governments in various countries are urged to acknowledge that the world is not only being assailed by an economic crisis and a pandemic, but also faces a climate crisis. The Indonesian government, after receiving acute pressure both domestically and from abroad, has a net zero emission target for 2060. The target of moving towards a low-carbon economy actually opens up opportunities for a new, more inclusive economic growth model, namely, a “Green New Deal”.