Meanwhile, different debates were taking place at the "alternative" World Social Forum in Belem, Brazil.

There, an eclectic mix of some 100,000 campaigners, thinkers, and
working people came to starkly different conclusions about the causes
of the downturn, and how best to address it.

We asked four participants from around the globe to give us their opinions.

Walden Bello is a university professor, senior analyst at Focus
on the Global South, and president of the Freedom from Debt Coalition.

Week after week, we see the global economy contracting at a pace worse than that predicted by the gloomiest analysts.

We are now, it is clear, in no ordinary recession but are headed for a global depression that could last for many years.

The origins of the present crisis lie in the strategies adopted by
economic and political elites to resolve the crises of stagflation –
the coexistence of low growth with high inflation – which followed
rapid growth in the post-World War II era, both in the G8 economies and
in the underdeveloped economies.

Stagflation, however, was but a symptom of a deeper problem: the
reconstruction of Germany and Japan and the rapid growth of
industrialising economies like Brazil, Taiwan, and South Korea added
tremendous new productive capacity and increased global competition,
while income inequality within countries and between countries limited
the growth of purchasing power and demand, thus eroding profitability.


This produced the dilemma of overproduction.

One "escape route" from the conundrum of overproduction, and for maintaining and raising profitability, was "financialisation" .

With investment in industry and agriculture yielding low profits as a
result of over-capacity, large amounts of surplus funds have been
circulating in or invested and reinvested in the financial sector –
that is, the financial sector began turning on itself.

The result has been a divergence between a hyperactive financial economy and a stagnant real economy.

This was not accidental – the financial economy exploded precisely to
make up for the stagnation owing to overproduction of the real economy.

Profits, not value

One indicator of the super-profitability of the financial sector is the
fact that 40% of the total profits of US financial and nonfinancial
corporations is accounted for by the financial sector although it is
responsible for only 5% of US gross domestic product (and even that is
likely to be an overestimate) .

The problem with investing in financial sector operations is that it is
tantamount to squeezing value out of already created value. It may
create profit, yes, but it does not create new value – only industry,
agriculture, trade, and services create new value.

Because profit is not based on value that is created, investment
operations become very volatile and prices of stocks, bonds, and other
forms of investment can depart very radically from their real value.

Profits then depend on taking advantage of upward price departures from
the value of commodities, then selling before reality enforces a
"correction" , that is, a crash back to real values. The radical rise
of prices of an asset far beyond real values is what is called the
formation of a bubble.


We are far from over the worst of this crisis.

In the US real-estate sector, millions more mortgages are likely to go into default over the next few years.

Securities with a value of as much as $2 trillion dollars (£1.4
trillion) have already been injected, like a virus, into the global
financial system.

Massive injections of taxpayers' cash have failed to kickstart lending
again. Not surprisingly, with global capitalism's circulatory system
seizing up, it was only a matter of time before the real economy would
contract, as it has with frightening speed in the last few weeks.

Globalisation has ensured that economies that went up together in the
boom would also go down together, with unparalleled speed, in the bust,
the end of which is nowhere to be discerned.