Highway to Hell(as) or just a roller coaster ride?
von Frank A. Gupta
Writing an editorial, reflecting on global economy and on future development is quite a tricky thing these days as words written today can be as obsolete tomorrow as the suggestions to solve the problem made by some economists or politicians.
But is a national insolvency such an exceptional state of emergency? Not at all, if we take a closer look at history.
In April 2008, Carmen M. Reinhart, University of Maryland, and Kenneth S. Rogoff, Harvard University, published a paper called “This Time is Different: A Panoramic View of Eight Centuries of Financial Crises”.
Reading that paper, we can find that national insolvencies happened several hundred times for various reasons in the past centuries and that governments had interesting ways to solve these financial crises.
There was a time when the haircut was more a throatcut, because for example French monarchs had a habit of executing major domestic creditors during external debt default episodes (an early form of “debt restructuring”). The population came to refer to these episodes as “bloodletting.”
Another way of refinancing was the merciless exploitation of colonies. Which in fact was not more than transfering the problems from one country to another.
Nowadays both solutions are socially not very well perceived, politically incorrect, and therefore not applicable.
Ok – joking aside….
Even I, not being an economist, understand that the situation is more complex in a globally interconnected economy and that domino effects can easily happen. And I am not sure whether the French finance minister Abbe Terray, who served from 1768 – 1774, and opined that governments should default at least once every 100 years in order to restore equilibrium, is right.
On the other hand, I also understand that the long term basic needs of a growing world population can only be met by solutions provided by the plastics industry. Whether it is a better cold chain to prevent food wastage, better insulation and lightweight construction for energy savings or comfort products for an ageing society, to name but a few.
For that reason I believe that we are not on a highway to hell but on a bumpy roller coaster.
But even if also a roller coaster ride always ends at the very bottom of the drive and you might feel queasy when getting off – be brave and get into the wagon again for the next ride.
Frank A. Gupta