Why the Global Economy fails to recover?

The Global Economy fails to recover because economists, policy makers, and the government together have nothing new to revive the economy. All prescriptions like lowering interest rates, fiscal stimulus, deficit spending etc. have been used many times without any impact to revive the global economy.

The creation of the central banks in various countries, fractional reserve banking, and delinking currency with links to gold or silver have played, are playing, and will play a role in stifling the global economic revival. The policy of low interest rates, purportedly to revive the economy, instead of helping economic revival helps banks and governments to borrow at lower rates of interest. The people who save and matter the most for economic revival are penalised by negligible interest rate on savings. For economic revival, fractional reserve banking has to be discarded, currency has to be linked to gold or silver, and savers have to be paid reasonable rates of interest.

Banks should be forbidden to indulge in speculative business-like equity, derivatives etc. In other words, Banks should limit themselves to conventional banking.

Financing manufacturing companies with equity has done more harm than good. Management of companies instead of focusing on the economy focus on profits. Profits are essential, but not at the cost of the economy. Manufacturing involves research and development which is overlooked by management focus to satisfy the stock market. So, manufacturing companies have to be funded with preference capital which can pay a fixed rate of dividend which in turn will be substantially lower than dividend outflow for equity. This way manufacturing companies will have more retained profits to grow their companies.

Why are governments allowing finance companies with no stake in any industrial segment to speculate on a commodity concerning a particular industrial segment? Take crude petroleum for instance. The demand for petrol or diesel is determined by the number of vehicles both personal and commercial, industrial and domestic power plants, aircrafts etc. A company like Royal Dutch Shell will invest based on the demand for petrol and diesel. Let the producer of petrol or diesel and end user determine and discover the price of petrol or diesel. Why should Goldman Sachs be allowed to speculate on crude oil commodity?

Similarly, trade unions and government policies like minimum wages kill jobs. Economic Policy makers should recognise the power of customers to buy or reject a product. In other words, customers determine whether a business stays alive or is killed. So, policy makers instead of saving or protecting jobs should focus on creating job opportunities. It is natural for a business to die or a new business to be born. Job mobility should be the goal and not job security.

Mainstream banks should not fund speculative business either directly or indirectly. Speculation should be with one's own money or savings.

Economy will also be saved by manufacturing companies funded with preference capital. Pension funds can invest in preference capital with fixed rate of return. Pensioners will be happy with fixed and assured rate of return. Manufacturing companies can increase the rate of preference dividend depending on favourable business prospects.

Globalisation in its present form will not benefit large sections of the global population. What is the way out? If an Indian company wants to export to the US it should set up a local unit there. A US company should do likewise. Similarly, an exporter from the US to India will get paid in India Rupees. This will force US companies to import from India. Indian exporters will get paid in Dollars. Trade will balance. There will be no balance of payment crisis.

Medicare or healthcare can't be a business but a service to society. In its present form healthcare is expensive and unaffordable for individuals and adds substantially to manufacturing costs. The usual culprit:  Management focus of pharma companies on profits drives unethical practices in the medical profession and the cost of healthcare. If Medicare is taken care of by governments as a no loss no profit service healthcare costs will substantially come down as people will consume less medicines, unethical practices will be eliminated, and manufacturing costs will come down.

You will see from the points outlined above existing policy measures cannot deliver results.

Covid-19 pandemic has further compounded the global economic crisis. Any economic revival post covid-19 crisis will require throwing into the dustbin all tried and tested prescriptions/policies of economists including Nobel Laureates. The world badly needs out of the box thinking to revive the global economy.