The Fun Has Fallen Through: the Rent is Now Due

By Richard Laidlaw
For The Bali Times

“What matters now is whether Bali’s multilevel and often conflicting administrations can work out (and keep to) a plan for a plainer future.”
UNGASAN, Bali ~ It now seems very likely that Wall Street greed, criminality and incompetence is leading the world into a very prolonged and potentially very deep deflationary slump. These are not normal cyclical times and this is not – on the mounting evidence – just another sharp “correction.”

What was seen when it began last year as just that – a market correction brought about by the consequences of financial stupidity, corporate malfeasance, mistaken policy and politically driven refusals everywhere to see the writing that was plainly on the wall – has now ominously begun to take the shape of a rare and dangerous long-term retreat from growth and profit.

It is not clear how this will play out. No one can even guess its likely time-span. And plainly, no one has any idea what to do. What it may eventually cost – in money, fractured economies, dysfunctional governments and social stress – is at the moment incalculable. All we know is that what is to come will be very unpleasant, perilous in terms of global politics and ruinous for people whose rapidly depleting wealth has hitherto driven the vast discretionary spending of consumer societies.

At this year’s Davos Summit (just over and itself a narcissistic indulgence of an über-capitalist system now in freefall), Russia’s Prime Minister Vladimir Putin pointed to the collapse of capitalism – ironically one of the foreign political aims of the former Soviet communist regime whose interests he spent a KGB career trying to advance – and warned that a panicked retreat to government control of economies was not an option. It had not worked in Russia, he noted, and it would not work anywhere else.

National leaders everywhere need to heed that advice. It will be difficult, especially in countries such as Indonesia where the international sector of the economy is small relative to population and focused overwhelmingly on resource exports. It will anyway be hard, everywhere, because of domestic political requirements. It is for this reason, after all, not for any rational reason, that the Americans, the Chinese, the Europeans and even the Australians are throwing money at public infrastructure programs.

Even closer to home, the signs are ominous that Bali faces a lengthy period of difficulty. Its economy – beyond the basic one of village life and rice self-sufficiency – is almost wholly dependent on the discretionary spending of Western and rich Asian tourists. It’s what drives the local market, puts money (little enough) into Balinese pockets and provides revenue that sensible governments can apply to building up physical and social infrastructure.

Not many belts can stand tightening in Bali. The tourist boom of the past 40 years has not stretched the resulting revenues very far at all. Past failure on that point has been made irrelevant by these new circumstances. What matters now is whether Bali’s multilevel and often conflicting administrations can work out (and keep to) a plan for a plainer future.

Already it is clear that for some time to come, global tourism, just like global business, will soon look radically different from the fire-and-forget business of the past. American and European consumers, who look with alarm at the prospective virtual collapse of their own economies, are stuffing their wastepaper bins with no-longer-viable discretionary spending lists. Australians, Bali’s traditional source of much tourist traffic, are also taking a long, hard look at holiday plans. When their jobs aren’t safe, they aren’t going to spend money on luxuries.

In these circumstances, it is not hard to see that whole societies and cultures might fracture. This may not necessarily happen, but it is the (relatively) free flow of trade in goods and services that has fuelled world economic growth since the end of World War II. In a period of sharp contraction, when national economies are feeling the pinch of disastrously lower revenues, slumping real employment and (in the West) an end to taken-for-granted income growth, social pressures will build up that will demand political answers. Politics rarely provides the right answers.

It is of course unfair to lay all the blame for these circumstances at the feet of Wall Street, or any of the world’s major bourses. It is the historic failure of regulation that has brought Wall Street down; the political unwillingness of successive American governments to accept that there are as many crooks per capita in the money houses in Manhattan as on the dim and dangerous streets of the country’s multitude of urban no-go zones.

Governments don’t need to be in business themselves (leaders everywhere please note) but they do need to apply strict laws to govern commercial conduct. If you hold up a shop, the police chase and arrest you (well, that’s the theory). Until recently, if you defrauded people of millions of dollars, you could get away with it with the help of smart lawyers.

There is however an even greater failure. It is a political failure, and not just of governments, but also of the people they are elected (often, not always) to govern. The fools’ paradise of unending, unfettered growth – in wealth, in life benefits – now stands exposed as a thorough fraud. In the end, contrary to fairytale the West has been telling itself for 60 years, everything has to be paid for. Living on a credit card – a dream of all but a tiny minority of Indonesians anyway – is not a sustainable possibility.

Billy Joel, the American artist who is certainly no economist (that may be a plus in his resume these days), long ago made this apt point (in another context but the lesson is the same): That when the fun falls through and the rent comes due, you pay for your satisfaction somewhere along the line.

Richard Laidlaw worked in the media and politics in Australia and now lives in Bali.

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