Denmark, in the seventies and eighties the sick country of Northern Europe with high unemployment and deficits everywhere, has made an impressive come-back during the last decade. Low unemployment, surplus on the public finances, surplus on the current account. Government debt was practically paid back in 2007. Reasonable – even if unimpressive - growth rates. Looks like a small miracle, doesn't it?
Thorbjørn Waagstein, Economist, PhD, since 1999 working as international Development Consultant in Latin America, Africa and Asia.
As the financial crisis unfolds in the developed world and starts impacting in the developing countries, the question arises naturally: is this just one more cyclical crisis, even if an unusually nasty one, or is there something deeper wrong about the way the “system” is working? This is hardly a new question, as this has been asked as long as capitalism has existed as the dominant system, and cyclical crises have always been an inherent part of its way of functioning. The long period of relatively stable economic growth we have witnessed in the developed world since the mid eighties had led many to believe that serious crises were part of the past, arguing that globalisation paired with more sophisticated financial markets had diminished or even eliminated this cyclical tendency.
The global imbalances and the bubbles in the credit and housing markets that have been building up during the last decade have been noticed by many, and many had predicted that this would not be viable in the medium to long term. But as it often happens, the way this lack of viability expressed itself came as a surprise for almost everybody.
Everybody has probably heard about Venezuelan President Hugo Chávez' weapon deals. Tanks and anti-air missiles from Russia, warships from Spain, training jets from China, air defence systems from Belarus. The US has expressed its concern that Venezuela is provoking an arms race in South America. Its actions could endanger regional stability the US says. Really? Venezuela is number 5 in Latin America in military spending, both in absolute terms and as percentage of GDP. The Latin American leaders in military spending are two close US allies: Colombia and Chile, which in relative terms spend almost three times what Venezuela does.