By Ann Pettifor and Victoria Chick – Published on the Huffington Post
The disaster in Japan is almost beyond comprehension. Without minimizing the scale of the humanitarian tragedy, it is already possible to discern the emerging economic debate.
Stock markets immediately anticipated the potential benefits to Japan’s construction industries and their suppliers. Policy makers in the U.K. and Europe, who are busy implementing austerity measures to curb budget deficits, should take note.
The valuable argument coming from the ashes of this crisis is simple: Japan can afford to rebuild.
The Bank of Japan is clear about this. In asserting this point, and calming markets with massive liquidity injections, the central bank is basing its Keynesian policy on a wholly different analysis from that of economists and politicians promoting austerity measures in Europe and the U.S.
The economic possibilities of nations don’t depend on financial resources, but rather on human, technological and organizational power. The banking industry relies on these productive resources. The stability of banks hinges on lending for projects that will generate revenue streams for their own repayment.
Power of Banking
Japan is replete with all the human ingenuity and dedication that reconstruction and rebirth demands. The power of modern banking can enable Japanese society to deploy all of these resources, irrespective of the condition of Japanese public finances. The domestic banking system can circumvent the naysayers of international finance in a manner that should be understood by all financial authorities and economists.
Japan can address this natural and man-made disaster without handing a begging bowl around to other nations.
The same logic that enables Japan to solve its multiple crises defies European Union and American politicians who have reacted to the 2007-09 financial crisis with austerity policies. Their doctrine holds that because public finances are in disrepair we can’t address the energy or food insecurity threatening our economies, or to reduce the unemployment that jeopardizes economic, social and political stability. This diagnosis puts the cart before the horse: There is an energy and jobs crisis, not a public-finance one.
The state of public finances is primarily a consequence of the financial crisis, the increase in insolvencies and unemployment, and the resultant decline in revenue. If there is reconstruction work that can be done by the people of Japan — and there are people to do it — it is affordable. The marvel of the domestic-banking systems that have existed since the 18th century is to permit this economic process to be stimulated. New work will generate all the public revenue necessary to repay any loans from the banking industry.
The nuclear tragedy unfolding in Japan has its roots in faulty logic applied by international financiers and their “hired guns”‘ in the economics profession. Society has been convinced that nuclear power is necessary because it is the only affordable option. But all energy technologies are affordable. The real test of affordability isn’t cheapness but the most effective use of the real resources of society, taking into account threats like climate change and the risks associated with particular technology choices.
To have built nuclear power plants in the so-called Ring of Fire was to create an entirely unnecessary, man-made hazard. Decisions as to whether nuclear power is the most appropriate response to energy shortages and the threat of climate change is a question for society — not for business or finance. This is most clearly illustrated in the demonstrations and debates surrounding the forthcoming elections in Germany’s Christian-Democrat-dominated state of Baden-Wuerttemberg.
It is our tragedy that policy makers permit a glimpse of these lessons only in times of war. Unemployment in peacetime, combined with risky and reckless investment, is imposed on nations by ignorance, greed and special interests. May the legacy of this appalling and destructive crisis in Japan be the abandonment of such faulty and brutal doctrines, so that the people of Japan and of the world may now turn to the possibilities of what can be achieved to restore financial stability as well as energy and job security.