Trapped by Financialzation
“The lost decade since the financial crisis is living up to that old adage that when you get economists in a room, you’ll get eleven opinions. The old guard is unable to explain to people just what on Earth is going on”– Grace Blakeley
A pulse check of the level of debate concerning all matters affecting Barbadians in this space and elsewhere has fallen short of the mark, IF, we are to be regarded as an educated people. Of concern is the gimmickry we accept from our political and civil leaders instead of reasoned perspectives and efficient implementation of projects. Some say this is where education has failed us.
Many of us align to views based on political allegiance, school tie, built up neighbourhoods and the like. In recent days this blogmaster has retreated from the incessant stream of nonsense which abounds to read. On the bed stand is the book Stolen (How to Save the World from Financialisation) by Grace Blakeley. Although Blakeley’s focus is on the United Kingdom and USA her observations are relevant to Barbados given we are an island buffeting in the exhaust of global turbulence.
The relevance of what financialization to the Barbados space defined in the book as the
…increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies. In other words, financialzation means more and bigger financial institutions – from banks, to hedge funds, to pension funds – wielding a much greater influence over other economic actors – from consumers, to businesses, to the state (blogmaster’s emphasis)…
should be of interest given the approach being undertaken by government to stabilize the economy. It seems we have wired our success to a financial model sector as a means to fuel growth. A good example is the ease we accept asset growth in the financial sector which translates to household and commercial debt and – wait for it – a widening current account deficit.
The blogmaster posits that a variant of financialization has exposed itself in Barbados by the wholesale sell out of local companies fuelled by the expectation of shareholders to maintain profit margins. The government cannot dictate or influence credit or pricing policy given the close 100% ownership of the financial sector. Local players cannot influence the price of food because the major supermarkets and wholesalers are foreign owned. Even the entertainment space is controlled by foreign agents.
The author makes the point that households traditionally worried about wages and wage bargaining, these days they worry about debt. Businesses historically focussed on producing a quality product or service in a market space there had a competitive edge or advantage, these days it is about monitoring share price, dividend scheme,s borrowing and watching key performance metrics. For both individual and business it has become fashionable to borrow more than earn. Therein lies the problem – a conspicuous consumption model fuelled by greed.
To the blogmaster’s simple way of thinking we have a financial system that prey on the establishment by extracting interest earned from burgeoning debt. In such a model only the owner of capital will benefit from the riches.
The thesis position of the book is that we are living through the tail end of finance-led growth and that every capitalist model must end in crisis. It is up to Barbados to position itself to be able to rise like the proverbial phoenix from the ashes.
In recent years successive governments have borrowed and borrowed to respond to the lifestyle needs of consumers.
And so here we are.