Globalization and speculation

Six years ago, at EI’s 4th World Congress in Porto Alegre, Brazil, I had the privilege of introducing the Congress theme: “Education for Global Progress”. I made the point that we tend to assume that economic progress will continue, indefinitely, without setbacks, in a kind of linear progression. But that is not the lesson of history. The reality is that in the course of human progress there are all kinds of ups and downs, surprises and shocks. In that address I identified three risks – breakdowns in social cohesion, politico-religious extremism, and irreparable damage to the environment. All three risks remain evident today. But history also has a way of coming up with surprises, of producing events that nobody had really foreseen.

The financial crisis was foreseen, by a number of recognized economists, as well as the global trade union movement. But the warnings were ignored. On the other hand, the paralysis of European aviation because of volcanic ash from Iceland happened without warning. As the disruption to air travel quickly extended across the globe, public authorities and airlines in 20 European countries scrambled to find answers. They sought answers from specialists in the uncertain sciences of seismology and meteorology. At the time of writing, they are trying to re-open airports, and then figuring out how to manage the consequences of volcanic ash clouds that may continue to drift across the continent for months to come.

So global economic progress is taking a double whammy: first the man-made financial crisis, then an awakening of nature which impacts on a key sector of the economy.

Both of these events certainly show how the global economy is interlinked. Disruption spreads rapidly to affect all countries, albeit to varying degrees. That is the inherent down side of globalization. These events ought to demonstrate a key point that we try to emphasize again and again at Education International, and more broadly, through the Global Union movement. This key point is that in today’s world, we need cooperation, mutual support, solidarity if you will, more than ever. We need cooperation to clean up after the financial crisis, to put regulations into place to prevent a new crisis, to restore global trade, and to re-create employment. We need solidarity to confront effectively the ravages of nature: earthquakes, tsunamis, erupting volcanoes, tempests and viruses. This lesson ought to be obvious.

Speculation

Sadly other recent news items show that the obvious lessons are still ignored – that the spirit of “everyone for him/herself” is very much alive and well. In the US, the SEC has launched a case against Goldman Sachs, charging this leading bank with selling bad investment instruments as the sub-prime crisis developed, even while it continued to sell those same investments to clients. In Europe, attempts to resolve the debt crisis in Greece are hampered by massive speculation on the bond markets. It is reported that speculators, including hedge funds and the like, are now targeting Portugal. By betting against countries with economic problems, the major speculators make a lot of money for themselves while making it more difficult for rescue packages to work (since the cost of refinancing of public debt is increased).

Ordinary people pay the price for the actions of the speculators. As public sector spending is reduced, teachers and other public employees are among the first affected. Then the prospects for recovery of the broader economy are seriously jeopardized by cuts in education, health and other public services.

There are issues of values. There are also issues of the incapacity of regulatory control. Global governance (through summits and a patchwork of international agencies) is inadequate. Speculators can easily pursue their own interests at the expense of the greater good. There is growing frustration that the lessons of the financial crisis are being pushed aside by the mentality of “back to business as usual” – at least until the next crisis. Meanwhile, nature’s awakening in Iceland ought to remind us that adaptation to unforeseen change requires cooperation. Ultimately, global progress will be more likely achieved through cooperation than through competition.