Sentletse Diakanyo
Sentletse Diakanyo

The global leadership crisis

The 2008 global financial crisis has exposed the dearth of global leadership, especially in responding to the complexity of multiple global events that characterise our modern existence. The eurozone has been subjected to absurd economic policies that have plunged its economy into deeper trouble. Unimaginative leadership should be blamed for failing to propel the eurozone economy to full health. Austerity measures imposed on already depressed economies have not been very helpful. Anyone with pedestrian knowledge of economics would have predicted that austerity measures imposed during a recessionary period would do more harm than good.

The IMF, which has been party to policy absurdities in the eurozone, now armed with the benefit of hindsight, admits to the damage that their nonsensical austerity measures have caused, more especially to the Greek economy. Former IMF managing director Dominique Strauss-Kahn when interviewed by Richard Quest on CNN also admitted to the unimaginative approach by the IMF, the European Commission and the European Central Bank and its failures. Forcing Greece to cut government spending when the economy was in recession was not only stupid but dangerous. Unemployment in Greece has since skyrocketed from a low of 8.5% in 2008 to an eye-popping 26.9% in 2013. Consumer spending, which is a critical component in the engine of economic growth, failed to grow due to lack of stimulus.

The one-size-fits-all policy approach to the eurozone under the dictatorship of Angela Merkel will not assist with economic recovery and will continue to negatively impact on the global economy. A policy shift is necessary to respond to the global economic realities. The global economic outlook has been slashed. Major economies have recorded declining growth rates. Emerging economies, which have been driving global economic recovery, are also under severe strain while still posting positive growth rates.

Japan has struggled for many years to fondle its economy back to decent growth. Its economy has been plagued by protracted periods of deflation, which are exacerbated by lower than desired consumer spending. The stimulus package of about $600 billion has had minimal inflationary effect to reach the target of 2% by 2015. Instead the Bank of Japan has cut the inflationary outlook, in spite of pumping liquidity into the market. The significant increase in government spending does not seem have the desired effect on the $5 trillion economy.

China, which has grown at mouth-watering rate for a consistent period, is also experiencing a slowdown. Some instructive lessons could be drawn from how Beijing has managed its economy over a period of three decades and how it continues to respond to changing circumstances with appropriate policy. The manner in which China manages its economy has offended some like the US, which accused Beijing of manipulating the exchange rate. The Chinese economy had been export-led for a number of years and low exchange rates served a meaningful purpose. There has been a policy shift in that there is an attempt to focus on consumption-led growth going forward. Low exchange rates, which the US has been whining about for a number of years, are of no significant consequence in the long-run. Consumer spending in China is about 40% of total GDP, compared to 70% in the US.

Policy-makers ordinarily see consumption as an opportunity for long-term growth and have responded accordingly with a stimulus package of about $600 billion. The results of policy intervention in China are evidenced by rising demand in luxury goods. Consumer spending on luxury products has been on steroids. The obvious question raised is the sustainability of these policy measures and potential bubbles created in the system, which may return later to cause heartache. But one thing remains, China appears to be demonstrating practical approaches to its own economic situation.

There are numerous global economic forums, like the G20, the World Economic Forum and so on, where global leaders converge on a regular basis to discuss problems confronting the world and how best to respond to them. These forums have become nothing more than talk-shops that do not generate any meaningful outcomes. There seems to be a greater need by world leaders to be seen to be doing something about global problems when in practical terms only narrow national interests take priority. The amount of hot-air emitted during these global forums could be the biggest contributor to global warming. The people are not doing enough to hold their leaders accountable and keep them honest.

Until the people begin to forcefully demand that leaders commit themselves to promotion of common welfare, they will keep getting the leaders they deserve. When leadership fails, it becomes the responsibility of the people to transform society and their conditions into what they should be. The act of transformation in the vacuum of leadership should begin with the overthrow of purposeless government, in the knowledge that revolutions are merely a means to an end but not an end itself. A successful revolution must equally transform the general thinking of society and strengthen their resolve in the pursuit of what is just and equitable. According to Che Guevara: “The revolution is not an apple that falls when it is ripe. You have to make it drop.” This persistent deterioration in the general welfare of society should be enough to agitate people to rebel against their thieving governments and punish crooked politicians. The people must rise!

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    • manquat

      A government for the people, by the people, of the people. What a dream! What a vision! 27% Unemployment is not good for the people. Government should create an environment for all its people to thrive. Everyone can win! Create a win-win!
      There’s only one catch everyone has to share! I don’t think the elite like that idea! Sharing my wealth, are you serious?

    • Juan José

      “Under the dictatorship of Angela Merkel.” Thank you.

      JJ Cruz
      Canary Islands.

    • Tofolux

      @Sentletse, I beg to differ with your premise. The global financial crisis had NOTHING to do with the lack of leadership and everything to do with capitalism and the election model that exists in these so-called democratic countries. It is an open secret that the way American Pres are elected is a major faultline. Fact. It is an open secret that most global leaders are there on the back of their financial masters. So, what needs to be dealt with is, who was at the centre of the global financial crisis and why were leaders so compromised. Secondly, some of their bail-out schemes were highly questionable. The underlying broad question is why this financial crisis affected Scotland before the english and then the major spill on the americans? Who hid what from the public and why were the civil society groups in America so quiet? To glibly generalise on an issue that rendered havoc on so many lives is irresponsible. To properly interrogate and ask relevant question will surely render a compliment to those country’s who had the foresight to pre-empt this situation. Why there is a need to put ALL leaders in one basket is fraught with innuendos. It presupposes that ALL leaders especially in Asia, S America and Africa are just as guilty. Clearly that is a fallacy. The fault lies with the West and the grand failure of capitalism. No other type of economies are interrogated especially the success of mixed economies eg Bricsa against the backdrop of the financial crisis. Y is that?

    • george orwell

      Well written. You may enjoy this read:

      “Narrow Framing of Debate’ – FPJ

      ‘Ordinary people feel let down; they see their politicians as part of the plutocracy that governs their lives, regardless of who wins the election. Politicians have merged into the 1% who are unaffected by hardships… The wealth gap is getting wider.

      ‘In a democracy, politicians are supposed to be able to empathize with the ordinary voter; alas that is no longer the case. The 1% and politicians have formed an international elite class, whose members have far more in common with each other regardless of nationality, culture, religion etc., than they have with their fellow countrymen.

      ‘Where is the democratic oversight? Is it right that banks should have been granted the privilege to create money by their respective governments? This is a pertinent question that is invisible to mainstream media [even in South Africa, where hacks queue to praise neo-liberal sell-out Obama who bailed out greedy bankers].. [Journalists] conduct discussions within narrow limits, vindicating Noam Chomsky saying:

      “The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum.”

      The media, in its narrow framing of economic debate, is guilty of censorship by omission, bad for society and a…

    • kwayu

      Opinion is changing, that the Keynesian way to spend more during hard times to stimulate economy may be counter productive. This is what America is actually doing, stimulating economy by spending more. Inflation is already on the rise in America –
      There are also other predictions that the tumble is expected in the near future, and this time it may be worse.

      So Madam Merkel could have the last laugh?

    • Momma Cyndi

      Why do we even have governments?

    • Brian B

      Ever repaid a large credit card or overdraft debt ?
      It takes a long long time and much discomfort to recover from excessive debt . The focus should be on eliminating wastage while stimulating growth.
      Creating a whole lot of unemployment worsens the problem but paying salaries for little or no production does not stimulate growth and steadily increases debt.
      Perhaps the key lies in eliminating levels of government and management in the private sector. In addition a multitude of specialists in the public and private sectors. A lot of these people are earning obscene salaries and not adding much value, Rather eliminate one highly paid obsolescent public or private “executive” than the multiple of workers that their salary would cover.
      Strong visionary leadership is essential.

    • Sterling Ferguson

      [email protected], welcome back because I missed your insight on many subjects. I enjoyed your article until you got to Che and I don’t think he is relevant to the problems the world is faced with today.

      @Kwayu, the US isn’t having any problems because this country is running a massive budgets surplus. There isn’t any inflation in the US economy.

    • Yaj

      True. what leaders and markets are failing to acknowledge and deal with , is the fact that the end of the era of cheap crude oil (the life-blood of modern industrial economies ) spells the end of economic growth as we knew it.

      This in turn spells the end of the debt-based money system of fractional reserve banking and compound interest as a viable and sustainable system for the immediate future

    • Sterling Ferguson

      @Yaj, very true and the end of cheap crude oil will also be the end of cheap food.

    • Nicola Grace

      You nailed it on when you said there is a dearth of global leadership. No one seems to have a finger on on the pulse of where the market and the mood of the market is moving. The demand for equitable share of resources and opportunities, sustainable renewable energy, and corporate greed culture change seems to escape our politicians. So it is indeed up to the people and social entrepreneurs to go ahead and grow the new world in-spite of them. Perhaps a new leadership is being born amongst the global community of every day folks that is more community based?