Eye of the storm
As 2011 ends, the sheer scope of upheaval and drama is so vast that it simply cannot be fathomed.
One might have thought that nothing could outdo the drama of 2008, the year when the global financial system slithered toward the void. But then came 2011 and took the cake with a cherry on top. It was an astonishing year, economically speaking, a year full of surprises.
As January rolled to a close, the leaders of the global economy, the so-called 1% (though they didn’t know they’d won that soubriquet yet) convened among the snowy scapes of Davos for the annual World Economic Forum meet. And the first scraps of news began to arrive about stirrings in Cairo’s Tahrir Square.
Several international tycoons were sitting in the central lounge. Some of them did business, big business, with Egypt, and were staying abreast of events, but weren’t impressed yet.
“Nothing will come of it,” a billionaire of about 60 with ties to Egypt’s most powerful families told me. “Mubarak will stamp it out pretty quick.”
For a moment there, I was prepared to sink into Davos’ usual headlines about western markets. But then I spoke to a young Chinese woman of about 30. She’d heard I was from Israel and began to grill me about the latest news from Egypt and how I believed events would develop.
Later, when I googled the young woman’s name, I realized she was China’s most successful property developer, worth more than $1 billion. In retrospect, I think her insistent, concerned questions about Cairo were not due to casual curiosity. She may have sensed what billions of people know now that 2011 is over: that the economic and political balance of the last 30 years may be changing.
As 2011 ends, the sheer scope of upheaval, of drama is so vast, so all-encompassing, that it simply cannot be fathomed. It’s hard to keep track of developments. Take just one example. How many readers know that the European banking system essentially has been bankrupt for months? Probably not many. But it is. Two weeks before year-end 2011, the European Central Bank was forced to offer a €600 billion credit window. The money was gone within hours, snapped up by more than 500 ravenous banks.
Why did the ECB give that much money to the European banking system at low, low interest of 1%? Because it had no choice. Its only other alternative was to buy up European government bonds, hoping to keep that market from crashing.
Ah, yes, in the flux it almost escaped our minds. During 2011, three or maybe four European nations, some of them giants, teetered on the edge of default. Yields on government bonds issued by Italy, one of the world’s biggest economies, soared toward 8%. In plain English, that means investors thought it feasible that Italy might go broke, too.
Just a few years back, it was practically unthinkable that a sovereign nation Italy’s size could go bankrupt.
The events engulfing the world’s economies, political systems and financial markets are complicated. Some are entirely local and some are part of a global story, but they have some common themes. One is a corrupt financial system that grew to monstrous proportions. Another is feeble, inept economic policies by central banks and governments.
A third is widening inequality within the great economies.
A fourth is revolt by the middle classes as they begin to understand what happened to them during the year that was.
If you watched the rescue of Europe’s banking system and the unprecedented demonstrations in Moscow this month, and figured Israel’s “social justice protests” have died out − you evidently learned nothing from 2011. Or you’re so preoccupied with your own woes that you have no time or inclination to lift your head, look around and grasp that the American financial crisis of 2008 and the Tahrir revolution of 2011 kicked off a far greater process that will likely shape the next decade.
It would be foolish to predict what the next great thing will be, or what it will look like. But Francis Fukuyama, who wrote his famous book “The End of History” in 1992, apparently will have to profoundly rethink his thesis.
Naturally, if you ask the 1% in the United States, Egypt, China or Italy, they very much like the idea that history has ended, and that the next two decades will be like the last ones: Things will quiet down politically and socially, the most talented (or the best-connected) people will continue accumulating wealth, the richest decile will continue flourishing, their growing affluence paid for by widening social gaps.
But with every passing day, more people are dissatisfied with this political and social arrangement, from China to Cairo, Madrid to New York. They feel they’ve been left out of the game and that they have no chance of becoming one of the 1%, of realizing the “American dream.”
Surprisingly, it was in Israel, where the economic upheavals of the past three years were minimal, where the social protests reached such dimensions. Nowhere else did 10% of the adult population take to the streets.
Professor Manuel Trajtenberg, the man the prime minister tapped to chair the committee to soothe the social unrest, may not have won the people’s hearts. But he did describe the spirit of the times beautifully.
The Israeli public, he wrote in the introduction to his report, feels alienated, shut out of the economic game. It is under pressure from above and below by the sectors that know how to demand their share given the current political structure, he wrote.
Trajtenberg understood that the tremendous wealth accrued during the last decade wasn’t only a function of talent and market forces. He understood that it smacked more of crony capitalism, contacts and strength.
Now it’s winter. Israelis aren’t Russians. They don’t know how to take to the streets in January. But in the summer of 2011 they had an epiphany. They lost any belief that the current social and political systems serve them. They don’t believe they’re stagnating economically because they’re losers. They suspect the system is askew, that nobody’s looking out for them. They also suspect that the press and media have betrayed them.
They believe their friends on Facebook more than the evening news anchor and when they look ahead, they are afraid their children’s future will be even worse.
They have not forgotten the summer of 2011.
The only question that remains is timing. A quiet has fallen. But behind it, a great storm could be brewing. Nobody knows where it will strike or what route it will take. But political and social events are unlikely to revert to the same tame path of the last 20 years.