The collapse of Lehman Brothers in September 2008 marked the beginning of a year that saw the world stutter from on economic crisis to another. One year on, there are clear signs that the worst is over. But how fast can world economies start to grow again? Is sufficient action being taken to help the world economies bounce back fast?
The G20 summit meeting being held in Pittsburgh will no doubt review the successes and failures of the past year and map out strategies for the future. While some countries, like France and Germany, are moving out of the recession, no one can claim that the battle against the worst economic downturn for the past century has been won.
The rebound of the stock markets, the renewed interest in mergers and acquisitions, the stabilisation of the financial markets, and the first signs of optimism that the economic slide is slowing down, are indeed welcome news. But financial regulation reform is proving to be stubbornly slow. To quote President Barack Obama, "complacency is not an option".
The financial system remains dysfunctional despite the strong fiscal and financial stimulus promoted by the leaders of the major G20 economies. Banks prefer to mend their damaged balance sheets rather than make credit easier for businesses.
Bankers are back to their greedy habits focusing their attention on how to build again fat bonus packets for themselves. They seem to be oblivious of the fact that their continued existence was guaranteed just some months ago through the tears and sweat of millions of taxpayers who bailed them out with their hard earned cash and some of whom have now also lost their jobs.
On the local front, we often hear that we have weathered the various crisis triggered by this world recession better than the rest of the other eurozone countries. Indeed some laudable important measures were taken to support export oriented businesses.
Many argue that our businesses did not face a credit crunch mainly because our banks were never very keen in the first place to provide credit to manufacturing industries unless tangible assets were offered as security. But of course some prefer to veil our bankers' adversity to risk by attributing to them the virtue of prudence.
After seemingly missing the oncoming dark clouds of the global recession that were inevitably approaching our shores, some of us started to believe that we would indeed be spared the worst effects of the recession.
With unemployment increasing by 24 per cent over the last year, with an economic decline of -3.3 percent, with a fiscal deficit that is likely to hit four percent by the end of the year, it is now clear that the government's projections for 2009 were rather unrealistic. It makes sense to be more sober in future when forecasting future economic trends, even if no one should expect the Minister of Finance to have a crystal ball.
The let us wait-and-see-what-happens strategy will not help us accelerate economic growth that is so badly needed if we are to create sufficient jobs for our young people. Our ability to withstand the current economic crisis with fewer consequences may be partly due to so many of our workers depending on the recession proof public sector.
The public service needs radical reform if the hard-earned resources of the country are to be channelled to the more productive private sector. If this bloated public sector were at least effective in providing the country with a top grade infrastructure, then there would be less urgency for reform.
But just look at our roads, at the state of cleanliness of public areas especially in the tourist zones, at the general shabbiness that characterises so many areas of our overcrowded island, and you will soon realise that we have no reason to gloat.
The change programme for our educational, pensions, health, and social systems should be defined in detail now before we continue to lose ground to our competitors in tourism, manufacturing and services.
Our ambitions for a strong welfare society based on sustainable economic growth can only be achieved if we are bold enough to address the issues that are hindering our progress, but that we often prefer to ignore.
Complacency is indeed not a viable option for us.
johncassarwhite@yahoo.com