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Avoiding a depression

It's not often that I find myself in agreement with Peter Mandelson the UK Government Secretary of State for Business, Enterprise and Regulatory Reform but this economic crisis is producing many strange bedfellows, forging unusual statements and acts, as everyone tries to come to terms with what's going on and more importantly what to do about it.

I make no apologies for revisiting the issue of countries creating trade barriers and protective measures for their own economy. I have blogged many times on this issue over the last year but it is now becoming a political and social issue in the UK, with the countrywide strikes against foreign workers. This really is the thin end of the wedge and all countries must refrain from taking any actions that deters open employment markets and free trade.

With this most unusual and extreme current crisis there is a tendency for Governments and industry to panic and make kneejerk decisions especially if they are put under pressure from their population struggling to make any sense of this crisis. For most people this crisis is a complete mystery and they will not necessarily appreciate the many intricate global issues that have converged to make them lose their jobs or in many cases their homes.

We have lived through a decade of outrageous growth and fortune (in the West in any case) and the new generation of people in the 16 to 40 age bracket have little or no experience of such a deep global recession.

Sure we have had bubbles bursting and downturns, which have technically been a recession but nothing of the scale the world now faces. We must turn back the clock to the 1920 and the 1929 Wall Street crash to appreciate anything like we see today. It's for this reason that we should focus on the decisions taken then and what their future ramifications were. We should learn from history and try and avoid pitfalls.

One of the most disastrous decisions was to create protective trade barriers. This was the case in the USA, France, Germany and Japan but many others also followed. The result was a surge of nationalism within each country, as an environment had been created which allowed politicians to use the fear, greed and self protectionism which lay within the population, angry at being put in situations outside of their control. The mood of the common people who have once enjoying successful and fruitful lives can quickly turn to anger and retribution. It is the responsibility of politicians to ensure the world does not look into the black pit of protectionism. The free market is the only model to follow.

Ok, things went wrong and there must be a rebuilding of the financial markets and an equalisation of the global economy but closing down free trade and borders preventing free movement for employment is the way to a future Dark Age, which only holds opportunity to those few willing to exploit at the expense of the many.

My new pal Mandelson and I appear to be singing from the same hymn sheet for perhaps the only time but if we don't want to fall into a 21st Century depression, the world has to come together and promote free trade and free movement of people.      

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Gary Wright

Gary Wright

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BISS Research

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This post is from a series of posts in the group:

SEPA and European Payments

The Single Euro Payments Area, the Payments Services Directive, the Eurosystem, TARGET2, STEP2, the Euro and related matters.


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