Over the past 30 years the globalised economy has been predicated on unending expansion, and many argue that the resulting wealth is in fact illusory. Whilst economic expansion remains the goal of a growth-based economy, inflation - its antithesis - is paradoxically an inevitable consequence of economic growth. The battle to keep inflation low has become a major preoccupation for governments the world over.
Financial speculation on the world's stock markets has increased dramatically over this period, particularly foreign currency speculation, as have the number of financial products and funds available to speculators looking for rapid returns on their investment. The movement of capital around the world now accounts for a large percentage of economic growth, although this growth is increasingly detached from the production and consumption of goods. It remains based on the assumption that the increasing levels of debt can always be paid because the economy will always expand - and this applies equally to people, corporations and governments.
As recent history confirms, the rapid flow of capital in and out of developing countries often destabilises their economies. Since the financial crisis which began in Thailand in 1997, the inherent instability of capital flows has been globalized with disastrous consequences for other countries in S.E Asia, Latin America and Russia.
The credit crunch in the US and UK is the most recent manifestation of this international financial instability, and is a direct result of under-regulated international speculation using sophisticated debt-based financial products. The phenomenal hikes in food prices that are widely reported at present can also be attributed in part to stock-market activity, as traders buy up huge quantities of scarce agricultural produce, not primarily for consumption, but to speculate with - which increases demand and inflates the price of these...