Retrospect
When I was first invited by the then Editor-in-Chief David de Caires about a decade ago to write a regular Sunday column for the Stabroek News, which would focus on locating Guyana’s situation in the context of regional and international developments, I readily agreed to undertake this task. At the time, Mr de Caires’ concern, as well as mine as an educator, was that the explosive growth of globalization and its accompanying policy bias towards liberalization had already deeply engulfed Guyana.
Sadly, however, the local media were not addressing this important topic seriously and in any depth. The intended goal of the column, therefore, was to be informative, educational, and analytical.
The series of articles which I have been writing ever since has been framed under the general rubric or umbrella topic of Guyana and the Wider World. However, over the years, the emphases in the articles that I wrote have shifted between local, regional and international.
Nonetheless in every instance my intention was to respond in a timely manner to situations as they unfolded in order to keep the column on top, as it were, of current national, regional and international discourses. Within this general approach I have always deliberately sought to embrace in the treatment of every topic both their domestic and external aspects.
Readers would recall that the last time I wrote extensively on the “wider world” was in the year-long series of articles which focused on the global crisis (November 2008- November 2009).
While these dealt with multiple aspects of the unfolding global crisis, I was able also to treat with several local and regional issues as they emerged during the global crisis. Good examples of those issues were my treatment of 1) the Stanford and Clico fiascos; 2) the wider financial meltdown in the Caribbean; and 3) Guyana’s and Caricom’s national budget and policy responses to the global crisis.
Treatment
Writing on these complex topics for a lay audience has never been an easy task. I knew as an educator that its treatment should be, you should never set out to write, as the saying goes, “an illiterate, ill- informed or semi-literate article on any topic assuming that your audience is illiterate, ill- informed, or semi-literate in regards to the topic.” It is my considered view that all intelligent persons who read, want to be informed and enriched from their reading, even if they are doing so for pleasure or entertainment. It is for this reason the greatest personal satisfaction I derive from writing these columns is the feedback from readers. In this category I have a special soft spot for those secondary school students who choose one of their fellow students to email me to ask for particular articles to be sent by email for copying and distribution among them, because they do not all have internet access.
Explaining the global crisis
It is also my best judgement that, at the centre of the global crisis which emerged three years ago lies the bursting of the United States subprime private housing market bubble. The bursting of the housing bubble immediately spilled over to other United States financial markets and shortly thereafter also engulfed the wider global financial system. This occurred for two reasons.
Firstly, because of the ever-present threat of financial crisis, which faces financial operations in capitalist market-driven economies. And, secondly, because of the close financial integration of the global economy which had by then been firmly established. From these perspectives the globalisation of the crisis was therefore, quite inevitable.
When the financial crisis became manifest, it was further fuelled by the wealth and income effects on consumption spending in the United States occasioned by the collapsing values of assets held in the private housing market. As a direct consequence, those mortgage assets which had been acquired during the private housing market bubble had become toxic, thereby impairing a wide swath of other financial assets held in private financial institutions, particularly commercial banks. The culmination of this disastrous sequence of financial events was the precipitation of a credit crunch, which further compounded the global crisis.
I have in previous columns explained what is a credit crunch or squeeze. Of note, the global crisis coalesced around three separate, yet integral elements, namely 1) a financial crisis; 2) a credit crunch as lenders lacked confidence in lending to potential borrowers; and 3) an economic recession, as economic growth stalled and with it trade, investment and spending.
These three elements were added to by two further complications, namely, 1) a host of negative psychological and market factors, and 2) the residual effects of the crisis produced by inflationary increases in food and fuel prices, in the period immediately preceding the global crisis (2007-2008).
As I shall reveal in next week’s column the global crisis is now described as the ‘Great Recession.’ This is in recognition of the fact that it is the worst global crisis since the Great Depression of the 1930s.
This Great Recession has been transmitted to Guyana and Caricom through multiple channels. These should be noted, and guarded against, for future financial and economic crisis management.
