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28 September 2000 Edition

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The forgotten economic lessons


Twenty-five years ago the economies of Western Europe, North America, Japan and Australia were approaching a crisis. A combination of high inflation, volatile currencies and domestic economies clearly out of control was creating huge international tensions in the global economy.

An overlooked side element of the economic crises of the industrialised world was increasing poverty, disease, economic underdevelopment and in some cases war and famine ravaging the less developed states and regions of the world.

In the industrialised regions of the world people's expectations of higher levels of personal consumption and ever increasing standards of living were being thwarted by a combination of seemingly uncontrollable economic forces.

Then to compound an already precarious situation, enter a group of states saddled with massively underdeveloped economies but who possessed vast quantities of oil, a resource on which the industrialised world was dependent. They were dependent on it for transport, be it plane train or automobile, for power generation, for hundreds of millions of domestic boiler units and for the even more important plastics industry.


These states, mainly in the Middle East, had usually drilled and sold oil on the open market run from Rotterdam for oil products, with the aid of US and European oil companies.

They formed a new group naming themselves the Organisation of Petroleum Exporting Countries (OPEC). Overnight they doubled the price of oil by simply controlling how much oil they collectively supplied to the international market. The result was chaos, businesses ground to a halt, whole regions endured power cuts and inflation already in an upward spiral rocketed while workers were cut back to a three day week and the economies of Europe and beyond battened down to a huge downward descent into recession.

In the less developed regions of the world, the economic crisis gripping the industrialised world sparked off a cycle of debt generation, from which these parts of the world have never recovered. The economies of the less developed regions were in a fragile state. Most were attempting over a period of ten or twenty years, the level of economic development it took Europe centuries to achieve. They were also taking the path of trying for the main part to create market economies, or variations on the flawed soviet model.


Rather than face up to the international economic issues that had generated this crisis the industrialised world found some easier targets to blame for the dire state of the global economy. First off and most identifiable, were the Arab states who formed the core of OPEC. They had amassed huge riches from the oil price hikes and by simple logic it was deemed to be money taken from the pockets of Europe and North America.

The second target was the social democratic and nominally socialist governments found at the time in Germany, Britain, France and the Nordic states. Their policies of nationalisation and market intervention, particularly in the currency markets, were direct contributors to the long-term recession now being endured.

Their greatest mistake was their failure to take on their partners in crime in the trade union movement. `Greedy' workers were at the root of the economic problems.

This month inflation throughout Europe and North America is again on the move up. The petrol queues have returned, albeit briefly and once again there is huge economic uncertainty as to what is actually happening in the first-world economy. Once again international currency market turmoil is also an important factor, and yes once again the less developed regions and economies are gearing themselves for the brunt of whatever economic hurricane emerges from Europe and North America.


Sadly once again it is the workers and the OPEC states who are being blamed. We cannot blame the flawed euro `one size fits all'' policy. We cannot point to the huge financial interests driving international financial markets. We cannot point to the oil companies and oil producers outside of OPEC who have made hundreds of millions of pounds from the oil price increases of the last two years.

No, these are irrelevant factors. Workers and consumers are chiefly to blame. We are either buying too many goods or demanding too large a wage increase. Why is it that no one can admit that the real problems afflicting the global economy in the 1970s were never really tackled?

Look at it this way, the centre left ideology has been replaced by free market ideologies, the chief proponents of which throughout Europe and North America are the former centre left parties of the 1970s. Workers in the industrialised world have been disempowered over the past 20 plus years in ways never thought possible in the 1970s, yet we suddenly have the same economic problems today we had then. Why?

The reason is that the core problems afflicting the global economy 25 years later, have still to be tackled. There is still massive dependency on oil products for our economies. We have not really bothered to find a safe alternative to fossil fuels. As a by-product of this, the international economy has still not faced up to the environmental consequences of such a massive fossil fuel burning economy.

In the 26 Counties, in recent weeks, we have seen a growing number of groups protesting and lobbying about the effects inflation, rising fuel prices and currency turmoil is having on them.


In some cases, like the Irish Farmers Association this week, these interest groups have been looking for special deals to ease their economic pain.

While there is merit in this the central lesson of the 1970s was that a massive chance to assert the principal of creating a just equitable solution to the crisis was missed. Instead worker was set against worker and piecemeal short-term solutions were implemented that benefited only an inequitable status quo.

The final irony of this process is that the global campaigners who were protesting in Melbourne and are this week gathered in Prague are the only groups really looking for an equitable global solution. Their repayment is to be beaten off the streets, in Seattle, Washington, London, Melbourne and now Prague. It seems that 25 years on the lesson of how to move forward towards a just global economy is there to be learnt again, but those in power are still are not listening.

An Phoblacht
44 Parnell Sq.
Dublin 1

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