The story of Rip Van Winkle is a metaphor about people who sleep through the revolution.
The world continues to go through an amazing economic shake up, and it’s far from over. Currently, even if American politicians can climb in from their egos we are still in for a whole lot of economic bad news.
The last crisis came in 2008, in the early days of the Rudd government. Since then we have had three opposition leaders and a new Prime Minister. We were told at that time that Australia would be ok; that our economy and banks were secure. That was before the 7th of January sell off had wiped 35 billion from the value of the Aussie share market. Our politicians were the last to grasp the situation.
But it soon began to dawn.
When the giant American insurance group AIG started to totter our leaders found we were not insulated from these historic economic shakings. On one Monday AIG suffered a 70% share price fall and its networks carried its reverberations around the world. Bear Stearns and Lehman brothers had collapsed and all the banks associated with them were also tottering.
Our economy was also at great risk.
Little did we know at the time that Prime Minister Kevin Rudd had received a secret report showing how threatening to Australia’s commercial wellbeing AIG’s collapse would be. They insured a third of all oceangoing cargos, and were the prime insurers for more than 100,000 businesses. Our building industry was impacted deeply, with tens of thousands of contractors unable to work because they couldn’t obtain insurance. Enterprises from peak corporations down to Girl Guide barbecue’s suffered paralysis from the loss of insurance cover.
Deeply worried by what he now saw, Kevin Rudd hit the phones to save A.I.G. calling the White House to convey an urgent message of concern to George W Bush. He called the World Bank, the Democrat house leader and anybody he could raise, because he knew any bailout of AIG would require Congressional support. He wanted to make sure that everyone knew that the decision had dire international implications.
Time being, the economic world was in free fall.
In New York and Washington, banks were tumbling like dominoes. There was an immediate run on the $3.4 trillion mutual funds industry. Suddenly there were no funds available in capital markets to keep business and industry going. Australia’s banks owed foreign creditors over $800 billion.
The head of the American Federal bank Ben Bernanke went immediately to speak to a private conference of Congressional leaders. He said, “ I spent a lot of time as an academic studying the great depression. If we don’t act right now and in a huge way, you can expect another great depression, only this one will be much worse.”
The members of Congress were then, as now, so involved in their partisan politics all the warnings fell on deaf ears. On 29th September 2008 Congress rejected the proposed 700 billion banking bailout that would have softened the blow. The outcome was that Wall Street suffered its biggest one-day fall in 20 years. Today the Republicans blame president Obama for the mess largely created by them.
The package recommended to Congress eventually got through a week later, but not before the chaotic genie was out of the bottle and many companies were collapsing around the globe.
The blindness of the arrogant and self satisfied .
In Australia the collapse included the private equity business that nearly bought Qantas, ABC Learning, and many others. By early 2009 investors were facing mammoth losses from collapsed companies, totalling $73 billion.
Superficial appearances indicated we had reason for our delusional optimism. Joblessness still hovered at a historical low of around 4%, and the media told us business seemed to be doing ok. However those who could see over the shoulders of our politicians were catching on, informed anxiety was rising steeply, and this was new.
While it was at its peak and before Congress agreed to intervene, Australian treasurer Wayne Swan and Prime Minister Kevin Rudd had quietly launched unprecedented emergency action. Hence the pink batts and school building blitz.
Most of us were sleeping through the real meaning of it all.
Before we point the finger at America though, it is haunting to remember that at the very time the world’s economic system was tottering on the edge , our Parliamentary headlines were about the internal petty politics of leadership within the coalition.
To top it off, the new government’s Labour Secretary, John Murphy rose in Parliament to complain about the size of a helping of beef stroganoff his wife had been served that day in the canteen. What is that statement about fiddling while Rome burns?
Whatever the outcome , the real battle for trust has been lost .
So we in Australia are once again waiting to see whether the American political system, so heavily built on competition, will be able to cooperate for the sake of its own people, as well is the world.
I am reminded of the verse in Proverbs that says “Only by pride cometh contention”.
I wonder how many of us will sleep, like Rip Van Winkle through this revolution, only to wake up in a different economic world? For those who believe in prayer-may be it’s time to give it a try.