Causes of Economic Depression

By Dada Maheshvarananda

The global capitalist system has changed much over the several hundred years since
its inception, but it continues to be based on profit, selfishness and greed. It
excludes more people than it benefits. Today nearly half the world’s population lives,
suffers and dies in poverty.

Because of its inherent contradictions, the global economy is doomed to crash,

causing a great depression. P. R. Sarkar, the founder of Prout, explains that there are
several causes of economic depressions.1 The first is great concentration of wealth.
Since 1960, the wealth of the world has multiplied eight times, but the world’s
richest people are hoarding almost all of this wealth. For example, the chief
executive officers (CEOs) of multinational corporations are now paid salaries with
stock options that Fortune magazine describes as “outrageous!” In the year 2000,
the director of Citibank was paid $151 million. Disney paid their CEO US$575 million.
The head of Oracle received US$707 million. Apple Computers paid CEO Steve Jobs
$872 million, more than 30,000 times what the average Apple employee is paid each
year!2

The wealth of the world’s 200 richest people more than doubled during the last four
years, to more than $1 trillion.3 This is more than the combined annual income of
half the world’s population – three billion human beings.

Another cause of global depressions is blockages in the circulation of money. For

example, in 1970, about 90% of international capital was used for trade and long-
term investment--more or less productive things. By starting new companies, paying
more salaries, and producing more goods, money flows through many hands and
benefits many people. In 1970, about 10% of international capital was used for
speculation. By 1990, those figures had reversed.4 About $1.5 trillion per day is
shuffled around in the great casino of speculation as investors gamble in the world’s
stock markets to get rich quick.5 Stock market prices represent a speculative bubble
of incredible proportions, completely based on investor confidence – a misplaced
confidence.

The professors of the prestigious Duke University School of

Business in the U.S. are debating whether to ban their students
from bringing laptops to their lecture halls. Why? Not because they
are typing notes in class. It is because with their cell phones, they
connect to the Internet and buy and sell stocks, sometimes
earning thousands of dollars of profits during class!

Sadly, more than half of U.S. households have invested their savings in the stock
market, sometimes involuntarily through their retirement programs. Common people
cannot afford to risk losing all their savings in a downturn of the ever-volatile stock
markets.

What significance do the investments of the super rich have for the rest of the world?
A lot! Today the capitalist economy is more and more interconnected and
interdependent. If the New York Stock Market starts to fall, or if the value of the
dollar falls, within minutes the world’s other stock markets and economies will also
begin to fall.

Great wealth, when it is concentrated in the hands of a few and not circulating
productively, decreases the purchasing power of people. The North American
economy is today the strongest in the world, yet in the month of October 2001,
415,000 Americans lost their jobs. In the United States, more than one-and-a-half
million individuals and businesses went bankrupt in the year 2001.6 In Brazil, the
government of Sao Paulo reports that nearly 70 percent of small businesses fail
within the first two years, and there are many more bankruptcies by small
businesses that do not legally register.

Poverty and suffering on our planet is increasing. Latin America has 442 million
people, but more than half of them – 250 million – live below the poverty line.
UNICEF reports that of every two inhabitants of the planet, one lives on less than $2
per day. Of every three inhabitants, one has no access to electricity. Of every four,
one lives on less than $1 a day. Of every five, one has no clean drinking water. Of
every six adults, one suffers from hunger.

In addition to this terrible human suffering, the excessive greed of capitalism is

destroying the environment. In the last fifty years, our planet has lost one-third of its
forests, one-fourth of its topsoil, and one-fifth of its arable land. P. R. Sarkar
predicted that deforestation would cause a global water crisis in this decade.

Another destabilizing factor is monetary devaluation and the resulting inability of the
unit of money to be the unit of economic stability. This is evident in the economy
today, with the dollar and other currencies no longer being based on gold reserves or
other real wealth. Governments and corporations are printing more and more “virtual
money”, i.e. government securities and bonds, stock shares and especially credit
creation, encouraging consumers and businesses to buy on credit. In the United
States, mortgage debt rose US$700 billion in 2003 to a total of US$6.2 trillion. On a
global level, there is US$100 trillion of debt outstanding.7

Global capitalism will crash because of its critical flaws. We need to consider
alternatives that aim for the welfare of everyone, not just a few. We need to envision
a future after capitalism.

Dada Maheshvarananda is the author of a number of books including After Capitalism: Prout’s Vision for a New
World. He can be reached at: Proutist Universal, Platanvej 30, 1810 Frederiksberg, Denmark. Tel. 45-33-256671,
Email: maheshvarananda@prout.org,
www.prout.org www.proutworld.org www.ru.org

REFERENCES:

1 P.R. Sarkar, Proutist Economics, Ananda Marga Publications, Calcutta, 1992, pp.91-
93.
2 Geoffrey Colvin, “The Great CEO Pay Heist”, Fortune, Jun. 25, 2001.
3 Forbes Magazine, www.forbes.com/lists/
4 Noam Chomsky, “The Erosion of Democracy and Visions for a New World”, in After
Capitalism: Prout’s Vision for a New World.
5 “The Economics of Social Responsibility and Spirituality: An Interview with Dr.
Marcos Arruda”, New Renaissance, Vol. 10, No. 4, 2002.
6 Administrative Office of the U.S. Courts, Statistical Tables for the Federal Judiciary,
2001.
7 Ann Pettifor, “The Coming First World Debt Crisis”
http://www.opendemocracy.net/debates/article-6-28-1463.jsp#
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Copyright The Author 2003