Bankruptcy of Nations Following The Bankruptcy of Banks?

Following the bankruptcy of American banks and giant brokerage firms such as Lehman Brothers, the global financial crisis entered a phase of national bankruptcy, which included Greece with the chance for Portugal and Spain to follow. What are most threatening to the global financial system now are the collapse of sovereign funds after the widening deficit and the declaration of some governments in financial crisis of their inabilities to pay their debts. The global financial crisis did not end, but rather it became a chronic economic crisis creating nervousness among the entire global market while forcing governments to adopt protectionist policies that are at odds with the philosophy of economic openness and free trade.

The danger lies in dealing with the social failings; unemployment is on the rise while prices soar, and there is confusion regarding stock markets, commodities, currencies and bonds. Governments are undecided between keeping their spending in check on one hand and stimulating markets through liquidity infusion and launching major projects that would keep sparks of growth alive while leading the economy towards growth and recovery on the other hand. They are facing challenges such as reigning in inflation and encouraging banks to resume lending to help maintain social and political stability at the same time.

Experts are also puzzled. Some are talking about slow growth and others are warning against another meltdown while a few expect a quick recovery from the crisis by the summer of this year. In reality, no one knows. The recent Davos conference saw varying perspectives without a resolution in any party’s favor.

The biggest challenge facing governments now is unemployment. Millions have lost their jobs and, according to a report by the New York Times, unemployment numbers will not diminish in light of the cautious recovery we are experiencing. When an American state decides to force its people to pay for the cost of making emergency phone calls (around $300/year), it is a clear indication of the collapse of the system in a country known for its comforts and services, not only in the U.S., but in other parts of the world, as well. It was recently announced here, in Jordan, that citizens will be required to pay 15 Jordanian dinars per 1 unit of blood, an act that disregards the human, moral, and social dimensions of such a decision.

When Deputy Prime Minister of Jordan, Dr. Rajai al-Moasher, announces that public debt will equal the GDP within a few years if difficult economic decisions are not implemented, it is time to call upon the government to open up to the people and involve them in decision-making of which they will bear the consequences.

The theme for the next stage will be more taxes and expenses in lieu of services that the country was providing for free or at low costs for its citizens. The goal now is to bail governments out from bankruptcy and pull a crumbling financial sector from the abyss. The citizens end up being the last hope for such governments, even though their citizens’ pockets are empty, their jobs are gone, their children’s education is suffering and their healthcare is being denied. The public is subjected to go through more suffering during the coming months and perhaps the coming years.

The global capitalist system is not well and future challenges are warning of more precarious social and economic shocks. The issue of the ‘sovereign’ debt will be on the table at every conference and regional or international meeting. The big problem is that the classic economical solutions that stem from the core of capitalist thought will cause damage to most people — tax payers and people who borrow from banks. Most importantly, this will finish off what is left of the middle class, let alone the lower class. All of the aforementioned will be accompanied by social and political failings that not all nations can weather.

In the Arab world, it is necessary for the wealthy nations to step up to the plate for others. National Arab security is not dependent on the exchange price of the dollar and fluctuations of the stock market, but the collapse of the economy of one country will ultimately impact the interests of neighboring countries. Instead of having the indebted nations succumb to the demands of the IMF and others, in what entails agreeing to certain political agendas, wealthy neighboring countries ought to intervene. As we witnessed, Euro zone nations rushed to the aid of Greece. We hope that wealthy Arab countries will pay attention to the consequences of having an economic collapse in neighboring countries and decide to intervene to protect their national interests above all. Ignoring the failings of the current crisis will take the area by storm and lead to a regional catastrophe that spares no one.