The Global Recession is a Consequence of Greed and Economic Crime

Banking, finance, the stock market, and marketing have committed a crime against the real economy in satisfying the greed for profit and winning elections

This column may seem like mere philosophizing to some, but let it be allowed for the columnist to step into those waters once in twenty years. I believe the reason is justified. Even economists find it difficult to understand where this crisis, which is flooding the globe at an astonishing speed, suddenly came from.

Therefore, it is a pity that the average inhabitant of the world, and then Croatia, does not treat the economy at least as they do ecology.

People understand that ecology, simply put, is a responsible relationship with nature. Even if they do not treat it that way, they at least understand that harming nature brings punishment in the form of pollution, water and air quality issues, global warming, or extreme weather events.

When it comes to the economy, most people do not fundamentally understand what it is about. They are not to blame for this, as rulers around the world have done everything over the years to obscure the picture. Just as there is a fundamental natural law that cannot be violated without consequences, there is also a fundamental economic law whose ignoring and violation is punished by a major crisis, such as the one currently sweeping the world.

There are dozens of definitions of economics. For me, the most accurate and simplest is the one that defines economics as the management of limited resources to satisfy human needs as much as possible. Human desires are limitless, while the resources to satisfy them are limited, and all wisdom boils down to balancing the satisfaction of needs with available raw materials, semi-finished products, and services.

A person has the right to receive the equivalent of others’ goods for their products (whether they live from selling shoes, renting apartments, or providing health services) as much as the market allows with its purchasing power. Accordingly, there should be slightly more money and credit in the world than the amount of international exchange of goods and services. This guarantees sustainable development without recessions, depressions, and crises.

The current recession is a consequence of long-term violations of the fundamental economic law. Banking, finance, the stock market, and even marketing have lost control and, in satisfying corporate and political greed for profit and winning elections, have committed a crime against the real economy. By approving more and more loans, global demand was ‘pumped’ beyond all limits. Technological progress has meanwhile enabled many products to be manufactured in incredibly large quantities. The economy of scale (the larger the series, the lower the cost per unit of product, and then profit) pushed for ‘pumping’ demand at any cost.

Then came the army of marketing masters whose task was to push the consumer class (formerly the proletariat) into greater debt and consumption. This had to burst sooner or later.

Have you never wondered what will happen to the tons of goods that shopping centers, increasingly numerous every day, were ‘stuffed’ with to the last centimeter?

The collapse would have come later if wealth in the world had been distributed more fairly and if developed countries had seriously helped Africa, parts of Asia, and South America so that their inhabitants could start producing goods with higher added value. Then they would be able to exchange their goods for, for example, American ones without taking out fictitious loans to buy more cars, televisions…, and go on more tourist trips.

Such a combination of circumstances would allow global economic growth rates to be four or five percent, without the danger of everything collapsing after investment banks fail and stock markets crash. As it is, the house of cards is collapsing, and it is only a matter of ensuring that the landing is not sudden and hard, but lasts as long as possible and is, if possible – not too hard.

And finally, another signal that there is some invisible hand that punishes the violation of fundamental laws. Excessive economic growth has polluted the Earth. The recession that has arrived will shut down the chimneys of many factories that emitted carbon dioxide. Politicians could not agree on reducing its emissions. Something has ensured that the disrupted balance begins to be restored. Ecology and economics are not as separate as they seem.