DURBAN — History has an uncanny tendency of repeating itself and each time it replicates, its lessons are ruthlessly unforgiving.
International economists warn that the world is on the threshold of yet another devastating global economic and financial crisis equal and possibly greater than the 2007 recession at a time when neo-liberal economics’ decades-old fundamental flaws are ripping apart humanity’s socio-economic fabric.
The London Academy has since summed up the neo-liberal economics’ failures to, for the past 30 years, foresee recessions that included the 2007 global crisis.
“…the failure to foresee the timing, extent and severity of the (2007) crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole,” said the academy in a letter to Great Britain’s Queen Elizabeth after she asked why the world failed to see the crisis coming.
Despite tell-tale signs of yet another impending disaster the world, however, appears content with listening to listen to the neo-liberal economics’ hypnotic mantra of hope although the collapsing Greek economy, which is grappling with a joblessness rate of nearly 30 percent, provides clear evidence that the cookie is crumbling yet again.
Greece has been asked to retrench 25 000 government workers as part of austerity measures for it to receive financial bailout from the European Union and the International Monetary Fund.
Other Mediterranean nations such as Portugal, Italy and Spain are also not far from Greece’s predicament.
Signs of yet another global meltdown are real and abundant.
Detroit, one of the United States’ largest cities and once the world’s automobile industry centre, has filed for bankruptcy after being weighed down by a US$18 billion debt. More than 80 000 buildings in Detroit now stand empty after being abandoned.
However, most ominous is the real prospect of the collapse of the Chinese economy.
The world’s fastest growing economy that is eyeing a double digit growth within the next decade has actually been in decline, in real terms, over the past decade, economists have observed.
A 60-minute exposé on China’s unsustainably incredible fast growth, which was posted on YouTube early this month by Australia’s Unconditional Economist, exposes China’s slow growth because the country’s massive new cities are not being occupied.
The ghost cities are a major pointer to a country that is fast driving itself and the world towards a serious crisis.
Despite the fact that China’s phenomenal growth effectively shielded Australia from the 2007 global financial crisis because Australia was, at the time of the crisis, busy enjoying brisk business supplying mineral resources such as steel to prop up the Asian giant’s urban development drive, this time around another global crisis will not spare the land of the Kangaroos.
“Vast new mega-cities bigger than London or New York are shooting up all over the country at a rate of 20 a year. But there are disturbing signs that the bubble is about to burst. Take a visit to some of these mega-cities and you’ll find them bizarrely empty. Brand new, shiny, ghost towns,” the Unconditional Economist observed.
China hopes that 350 million of its 1,3 billion people will move into the white elephants during the next decade in what has been described as the world’s largest mass rural-urban human migration in history. But because of generally high unemployment and poor wages in the country, the people are yet to start entering the mega-cities.
An Australian company contracted to design the mega metropolitans said the Chinese are literally constructing the cities faster than they are being designed. One 30-storey hotel building was, for example, said to have been completed in an incredible record two weeks.
China’s supersonic growth is graphically demonstrated by its latest bullet train that effortlessly achieves speeds of more than 300km/hr.
If placed on the Harare-Bulawayo track it can complete the 430km distance in 1 hour 25 minutes, approximately 40 minutes behind an air flight to the city.
But even more disturbing is that the BRICS wall could tumble incredibly. BRICS, the acronym for the so-called emerging markets that comprise Brazil, Russia, India, China and South Africa, is a group of countries whose growth is currently riding on China’s extraordinary development.
For instance Brazil is the largest exporter of chicken in the world with China being the biggest market for Brazilian chicken. If China suffers the price of chicken will go down dramatically at a time when, according to the Latin American country’s 2010 statistics, commodity exports now contribute 14 percent to the country’s gross domestic product compared to six percent in 1990. Brazil’s exports topped US$256 billion in 2010.
“If China suffers its first series of capitalist crisis introduced by the bursting of several bubbles that include that in the real estate sector, the rest of the world is going to be affected in many ways,” says Mexican economist Alejandro Nadal, adding: “There will be a financial shock all over the world and the interdependences that had been created over the past 15 years are very strong and form a tightly knit tissue so whatever happens in China will affect financial markets all over the world.
China, already the second largest economy, is the largest owner of reserves denominated in United States dollars so that will also bring an impact on the world economy but especially on the US economy.”
For Africa, where China-Africa trade surpassed the US$160 billion mark in 2011, a troubled Chinese economy would be devastating.
“With many southern African countries relying on exports of raw materials to China this (China economic recession) will cause immense problems,” Lorenzo Fioramonti, an economist with Pretoria University believes.
Effects on the Zimbabwean economy are too ghastly to contemplate.
The country, after crossing swords with its traditional western economic partners in 2000 because of its controversial land reform programme, decided to look east, chiefly to China.
While looking east the country’s currency was crashed out of circulation in early 2009 due to hyperinflation, forcing the southern African nation to also look back west as it dollarised its economy which resulted in it adopting mainly the US dollar as its main mode of exchange.
In a nutshell, although the talk of a recreation of a local currency makes Zimbabweans develop goose pimples, Zimbabwe lost its sovereignty in 2009 when it dollarised and the country is living dangerously without its own currency as the Chinese bubble nears bursting point.
Today, the biggest chunk of Zimbabwe’s trade deficit is a result of the country’s insatiable appetite for imports that are mostly emanating from the Asian market, especially China. In return, China is getting an undisclosed amount of raw minerals that include diamonds and gold.
For the first four months of the year Zimbabwe’s trade deficit stood at US$1,6 billion after the country imported US$2,62 billion worth of goods against US$1,02 billion in exports.In 2012, Zimbabwe’s balance of payments stood at US$3,6 billion after importing US$7,48 billion worth of goods against US$3,88 billion worth of exports.
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