Gathering Clouds

A Professor of Economics at NYU, in a recent study, confirmed what many analysts have been trying to hide. The TIMES OF MALTA covered this man’s work in an article with the headline: “The perfect storm leading to a global recession”

“The probability is growing that the global economy – not just the US – will experience a serious recession”, he begins. “Recent developments suggest that all G7 economies are already in recession or close to tipping into one …”

“This looming global recession is being fed by several factors” the professor states. “The collapse of housing bubbles … punctured credit bubbles … the severe credit and liquidity crunch following the US mortgage crisis … the negative wealth and investment effects of falling stock markets (already down by 20 per cent globally) … the global effects via trade links of the recession in the US … the US dollar’s weakness …”, he recited.

Policy responses, such as hiking interest rates and cutting interest rates, he warns, “will be too little, and will come too late, to prevent it”. Policy responses? Hiking interest rates and cutting interest rates? That’s what they’ve tried repeatedly, and unsuccessfully, the professor is trying to tell us. But he prescribes no elixir for the malady.

Creating buying power for the working man is the only way to put an end to this economic death spiral. “Policy responses” that provide widespread employment is what’s needed, and it’s this kind of a response that we’re hearing from overseas sources.

The South Koreans know the score. Even though a number of contracts have been cancelled in recent weeks, that nation’s shipbuilding industry didn’t panic. On the contrary, the Samho Group just announced its intention to invest $ 1.65 billion in what will turn out to be the world’s fourth largest shipyard. This new facility will employ, directly and indirectly, some 50,000 to 60,000 workers and will produce, and sell, about 50 ships every year. Maritime is boom-time.

And what is our country’s response in this economic crisis? Well, we’ll build new ships, too. But in order “to implement an effective maritime strategy” and “provide stability of the industrial base”, we’ll build warships not merchant ships. And we’ll sell these warships, too … to the U.S. taxpayers.

The Congressional Budget Office estimates that the execution of the U.S. Navy’s 30-year shipbuilding program will average out to about $ 25 billion annually. But why? This isn’t World War II when we had to contend with powerful Japanese, German and Italian naval forces. Those days are gone forever. The 313-ship Navy is a wasteful, useless and unprofitable scheme. It mirrors the “corporate fanning of feathers”, and it doesn’t create the thousands of jobs we need.

With $ 25 billion we could build, and sell, about 500 merchant ships every year. We’d need another hundred shipyards and several hundred thousand new workers. Now that’s a policy response!