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On Nov. 29, the market forecasting company InTrade warned that there was only a 50 percent chance that the euro would survive until the end of 2012. This is a remarkable prediction, especially considering that the euro zone’s disease should not have been anything close to terminal.

The current European crisis started bleakly enough. The collapse of housing bubbles in parts of Europe and especially the United States led to a significant decline in global consumption. Governments all over the world took steps to make up for the lack of demand, including stimulus packages to inject money into struggling economies. But starting in 2010, the euro zone (and to some extent, the United States) changed the focus from making up for lack of demand to the notion that countries had to take steps to reduce their deficits.

That tactic failed miserably. Prior to 2007, Greece was the only nation in the euro zone that had significant deficits. Now Italy, Spain and even France face increased borrowing costs. Instead of changing policies, the European Central Bank and its German handlers are concentrating even more on austerity, ensuring that the crisis will last even longer.

The European crisis is bad news for workers who will remain unemployed, but it may be even worse news for the planet.

At the recent COP17 climate change talks in Durban, South Africa, participants were told that the earth may be on a path to warming as much as four degrees above preindustrial levels — double what was previously thought could be sustained without massive damage to communities. Worse, Europe and the United States (sometimes citing the need to recover from the economic crisis) refused to accept their fair share of responsibility in the climate crisis, even though they are disproportionately responsible for causing climate change because of their carbon emissions over the last century.

Instead, fingers were pointed at the new industrial powers, especially China and India, who were asked to agree to binding targets when some developed countries, including the United States, have yet to do so.

The agreement that was eventually reached should actually be described as a non-agreement. Countries agreed to agree on something by 2015, and in the process agreed to ignore much of what had already been agreed on in previous meetings. Although 2015 may not seem that far away there’s no guarantee anything will be agreed then either. More importantly, every day of delay represents a theft from future generations who will do their best to survive in a much less stable planet.

So what should we as a global society learn from these failures? When it comes to the European economy, the first lesson is that the so-called Washington Consensus — the idea that privatization, liberalization and budget austerity are the key to economic growth — must be confined to the dustbin of history. Short-term solvency is different from long-term development, and development requires investment. This is the lesson that Europe is learning, and it is one that Indonesia and other Southeast Asian countries should also have already learned, especially given the lessons learnt from the 1997 financial crisis. The International Monetary Fund and other institutions that continue to insist on these policies should be ignored when they do so.

But there’s an even more important lesson to be found here. Money’s influence on politics has been evident since the days of Caesar, but we are now at a point where policies made by and for the richest 1 percent are putting the entire planet at risk. If something isn’t done soon, the survival of the human species may be in danger. In this context, it seems almost incidental that the same 1 percent is also blocking sensible solutions to boost employment and growth in Europe and the United States. The same two regions have lectured the rest of the world for decades on the dangers of corruption, but it is corruption in their societies that poses the greatest threat.

The good news, and there is good news, is that it’s not too late. The need for significant government investment in many parts of the world is happening at an opportune time. The global economic model, developed in large part in Europe during the 19th century, has failed to create wealth for all and to create growth while protecting the environment and ensuring a decent standard of living for all. It is time to invest in a new model.

Government spending can go into things such as sustainable, climate resilient agriculture, developing and subsidizing alternative clean energy sources, or more energy efficient transportation technologies. As we can now be sure that the impacts of climate change will continue to get worse before, if ever, it gets better, government money must desperately be deployed to protect forests, help communities prepare for extreme weather, assist farmers transition towards climate resilient sustainable agriculture, and transform poor countries into clean energy economies.

Fortunately, we have not yet arrived at the point of no return. But whatever solution is ultimately agreed on must represent a shift away from a mantra that seems to be enshrined in global politics: What’s good for the richest 1 percent is good for the country.

 

Sameer Dossani, is the regional coordinator for South Asia and Southeast Asia with Action Aid International.