Babylon’s Confusion—Economic Neither their silver nor their gold will be able to deliver them on the day of the Lord’s wrath; and all the earth will be devoured in the fire of his jealousy, for he will make a complete end, indeed a terrifying one, of all the inhabitants of the earth.—Zephaniah 1:18, NAS Leonard Griehs The contrast of today’s economic world is striking. Countries from Japan to Brazil have become economic disaster zones, and their residents face harsh and lean times. Yet in other countries such as the United States, residents are enjoying economic conditions unseen for a generation. Those enjoying such prosperity shrug off the thought of a global economic crisis. In many ways, the 1997-1999 global financial mess has actually been good for many. Many students of economics believe that "globalization" means that sooner or later everyone sinks or swims together. Today, however, some countries seem to be standing on the shoulders of those whose heads are under water. These countries are actually thriving as a result of the global malaise. How should we assess today’s economic world in view of the knowledge that the Scriptures tell us that we are entering "a time of distress such as never occurred since there was a nation" (Daniel 12:1, NAS)? Current Situation There are two facets to the success of some countries such as the United States in today’s world amidst the turmoil of other countries such as Japan, Russia and Brazil. First, the damage from the global financial and economic crisis hasn’t been as severe as many had expected. Second, the benefits from the crisis have been more than most experts could have hoped. The damage has not been as bad as many had thought because globalization has not yet gone nearly as far as some thought it would. For example, in the U.S. economy, trade makes up a larger share than it did ten years ago, but it is still only 11% of U.S. Gross Domestic Product. Most of that trade is with Canada, Mexico and the European Union, which have suffered far less financial turmoil than have Japan, South Korea, Thailand, Russia, Indonesia and Brazil. Harvard economist N. Gregory Mankiw says, "International trade isn’t so important for the U.S. that we couldn’t get by without the rest of the world." In fact, the U.S. trade deficit (what the country exports compared to what it imports annually) has increased to $170 billion in 1998 from $110 billion in 1997. Thus, before we experience the impact of our theme text, we would expect to see events in the economic world occur which would increase the dependence of prosperous countries such as the U.S. on foreign trade. Unforeseen benefits of the economic crisis in many parts of the world have proven a counterweight to the predictable costs of such crises. For example, plunging raw material costs have proved a boom to many. In August 1997, a month after the collapse of the Thai currency sparked the global financial crisis, import prices for agricultural products fell by over three percent. Asia’s profound and prolonged recessions have helped builders pay less for lumber that would have skyrocketed in price had Japan been in a position to bid against the other parts of the world for that lumber. With the increased economic power created by the European Union, we should expect to see increased pressure on costs in countries that have so far been able to secure raw materials in a relatively non-competitive environment. A Sea of Excess Savings The world today is awash in a sea of excess savings. There are not enough good investments to go around. Foreign purchases of U.S. stocks, corporate bonds and other non-Treasury securities measured just $57 billion in 1994, according to the Commerce Department’s Bureau of Economic analysis. By 1997 inflows rose to $197 billion and they were expected to reach $228 billion in 1998. The largest single factor holding these investment dollars today is the U.S. stock market. The biggest risk confronting the world economy is that this miraculous wealth machine will go into reverse. In one intriguing analysis, The Global Equity Correction—How Big and How Damaging, investment banker Goldman Sachs suggest that a 20 percent decline in the global equity market would represent a shock as large as the Asian crisis. At worst, it would start a cumulative decline in the U.S. economy. Worst Case Scenario Although today’s world is far from falling apart, we should expect continued crisis to occur. Psalm 82:5 says, "They do not know nor do they understand; they walk about in darkness; all the foundations of the earth are shaken." We should expect to see the international situation worsen. No one really knows what will happen with the former countries that are now part of the European Union. It already is showing signs of slower growth. Brazil is balanced on the edge of a cliff and if it falls, so could Argentina, Mexico and other Latin American countries. A "worst-case scenario" could then have the financial problems echo back to Asia, through Hong Kong and China. The damage to healthy economies would be even more serious. Alan Greenspan, Chairman of the United States Federal Reserve Bank summed it up this way: "You cannot have the United States as an oasis of prosperity . . . if the rest of the world is in serious trouble . . . Clearly, we do live in a global world and we will be impacted in a more general way eventually." The New Europe A most momentous economic event occurred in 1999: the New Europe. Eleven countries joined together to promote economic prosperity. On January 1, 1999, the world saw the birth of a new currency called the euro. Despite the New Year’s calm, the birth of the euro will be anything but a nonevent. Consider these widely-made predictions:
Goldman Sachs International chairman Peter Sutherland says that European integration, economic and monetary union is "the single most important project" in more than 40 years. Indeed, the very magnitude of the change now underway has many observers worried. In the midst of a slowdown in world economic growth and against the backdrop of potentially destabilizing imbalances among the economies of the U.S., Europe and Japan, the new Europe could produce results contrary to those hoped for. Nobody knows how quickly governments and investors can adapt to change, perhaps disrupting to the international financial system. Internationally the consensus among government experts and bankers is that within the next five years, there will be a massive shift out of U.S. dollar-denominated securities into European countries. Few doubt that the single currency will contribute to the transformation of the European economy and especially its capital markets. The changes will impact not just the 11 direct participants in the EMU, but also the U.K. and other European Union and non-EU nations whose economies are linked to the euro zone. "The single currency is only likely to be a catalyst for changes that are driven by other forces," says Graham Bishop of Salomon Smith Barney, an adviser on European affairs. Linked together as a single economy, the 11 Euroland nations boast a gross domestic product of $6 trillion, compared with about $8 trillion for the U.S. However, the equity markets are far apart, with the U.S. stock markets totaling $11.1 trillion at the end of 1998 and the European markets totaling $3.9 trillion. The single currency provides a new impetus to shift the balance of investment. Globalism Creates Unstable Economic Systems While the current situation appears stable, there is general agreement that things can change rapidly and unpredictably. The Thailand crisis that began in August, 1997, has continued to create upheaval in the world’s financial markets. There are constant new threats to the industrialized world. No government or economist predicted this crisis or how it would impact the rest of the world. For example, in Indonesia, government cronyism has been permanently overthrown. In Brazil, the most reform-minded government in decades is faced with severe economic crisis almost daily. Indeed, the impact of the Thailand currency crisis can be found in Eastern Europe, South Africa, and Latin America. Economic historians point to the reckless laissez-faire capitalism of the 19th century that led to the birth of Marxism and Communism as an example of where the current free market capitalism could lead. The indiscriminate globalism occurring through such things as the European Economic Union could generate a worldwide assault on free markets everywhere. Such globalism views the entire world as one market in which the most efficient and competitive prosper while others suffer economic ruin. The situation in the world today is an example of this. The globalism emerging in the world today is creating a clash between the political realms of Babylon and the economic realms. While Economics declares there is one world in which capital flows freely, Politics divides the world into national units where each government determines its own fate. Certainly the clash of political leaders creates instability as economic suffering is imposed by dictates from abroad. Our era is the first in history to experience a genuine global economic system. Markets around the world interact continuously. Investors possess the power and resources to profit from huge swings in financial markets. What used to be direct foreign investment has given way to speculative capital. The benefits of the injection of foreign investment to the host country has given way to a deeper and more vicious crisis created when financial institutions buy and sell currencies on speculation, creating mass acceleration in the outflow of funds during times of crisis. Speculators turn weakness into disaster. The lack of confidence in one country’s economy now triggers the outflow of investment in others. The ability of funds to flow rapidly in and out of countries instantly through electronic means severely reduces the relevancy of the nation states. Battles between nations are less important than trade between nations. People today are willing to compromise ideals, religion and social principle to achieve economic gain. Zephaniah 3:8 predicts this globalization in our day: "Therefore wait for me declares the Lord. For the day when I rise up to the prey. Indeed, my decision is to gather nations, to assemble kingdoms, to pour out on them my indignation, all my burning anger; for all the earth will be devoured by the fire of my zeal." Truly the nations are already gathered through the sharing of a global economy. The Battle of Armageddon The increase of knowledge in our day, predicted by Daniel, has produced an increase in both discontent and fear. Large nations now fear each other’s prosperity. The joining together of European countries came from the fear of some individuals that nation states had become irrelevant in today’s world because of the ability to move funds at the strike of a key on a computer. Only by joining together in common union could one country hope to stave off its gradual decline and dissolution. Note these words from the 1916 forward of The Battle of Armageddon: "Although all have been growing fabulously rich, all are more discontented than ever before and more fearful that something will occur to hinder their enrichment and to turn the streams of wealth to the ports of the competitor. . .The same spirit is manifest everywhere—ingratitude for the present and the past, fearfulness for the future, and a selfishness which pays little heed to the Golden Rule." The author gives ten "predictions" which provide an excellent summary of the events we see in the economic world around us today:
The More Peaceful World Fantasy The era dominated by "super-powers" is over. It is no longer a case of good versus evil. Today, the economies of the many drive the world. Clashes in the world today take place over economic interests rather than military ones. Albania has continued to see a disruption of its social order due to the mismanagement of the economy by its leaders. Indeed, we find that economics cuts through the national frontiers of politics. Economic power is a matter of people and technology, not size. As we approach the end of the 1900s, we see a world that is much more unpredictable. The world of a few large battleships circling each other has given way to a crowded ocean with many ships being piloted by unskilled captains. The threat of collision is much greater. In the time of the end there will be "men fainting from fear and the expectation of the things which are coming upon the world" (Luke 21:26). The Greek word translated world means the earth, or land, as distinct from the water. It is the place where people dwell. People will be at a loss for a way out. Let us prepare ourselves to escape the plagues of Babylon (Revelation 18:4) by making every effort to make our calling and election sure. |