Though a straight line appears to be the shortest distance between 2 points, life has a way of confounding geography. Often it is the dalliances and the detours that define us. There are no maps to guide our most important searches; we must rely on hope, chance, intuition and a willingness to be surprised.

Wednesday, October 29, 2008

In times of need.

All picture in this update are from a visit to the 2008 Sculptures By the Sea exhibition last Monday.

One view of the world.

It’s 2008, turning into late 2008. Markets crash, then countries crash. Your workmates suck their teeth and tell you that the ASX has fallen 10%, then your friends invite you to share their disbelief – ‘haven’t you seen that the ASX has fallen 20%?’ – and then your mum tells you that the SAX has fallen 40% and so you reckon you’d better start following this ‘credit crunch’ yourself.
So you start reading the business news section of the newspaper. But by this time the business news has become front page news.

It was bemusing when large banks with vaguely familiar names bit the dust. It was downright alarming when your bank went bust. Now it’s nothing short of bizarre – are you reading that right? The government is buying your bank and you’re about to become your own bank manager...?

Who’s going to pressure you to cut your spending when you’re your own bank manager? Well, no need actually. Peer pressure will do that alone.

The Australian last weekend ran their ‘Melbourne Cup Fashion Tips’ article. Headline – ‘how to look like a million dollars on a hundred dollar budget’. Frugality is this season’s flair.

If cutting back has gone beyond need and is now fashion, it's time to ask what to cut first? Well the mortgage payments might be falling (the one plus-point of the credit crunch so far) but they’re not crashing. Maybe the holiday will have to go, or it’ll have to be 4 stars again, not five. And maybe it'll be another 6 months before it's time for a new car.

One cut tends to be implicit though.


Why? Well, in the hard-nosed economic view of the world 'Discretionary Spending' is the first thing to be cut when times are bad. In this context, discretionary means optional, expendable (or non-expendable!) – essentially… ...non-essential.

And if there’s one thing that’s not essential, then surely it’s giving money to charity.

One view of the world.

Another view of the world.

What role for the poor in all this? The credit crisis is hitting us bad, but what about the poor? After all, they don't have shares, or pension funds, or banking jobs.

Inflation pushes up the price of food - the poor spend 75% of their money on food, compared to 15% for Australians. The economic slowdown is reaching even the developing countries now, with growth in India stalling and interest rates rising. And those interest rates affect the poor too, through their impact on the Microfinance Institutions (MFIs) the poor rely on. The credit cruch has pushed through the roof the rates that MFIs borrow money at, and this affects the interest rate that the MFIs pass on to their clients.

Even in good times, life is hard for the poor in India. Half of children under 5 are stunted or too short for their age, 20% are too thin, 43% underweight. 7 in every 100 will die before the age of 5.

When times are good, most fair-minded people expect that there will be some effort to spread the wealth around, as Obama would say. Implicit in this is the idea that when times are bad, that charity will dry up.
But I hope that won't happen this time. I hope that crashing markets and shrinking investment funds will bring about a more fundamental shift in people's attitudes to charity. I hope people will see value in other things aside from a new car and a fancier holiday.

What greater achievement than to help end poverty.

And finally…

A recession is when your neighbour loses his job, a depression is when you lose your job. Is a credit crunch when you go broke without even losing your job?

Talking of which, where are all those job losses? Does anyone know anyone who’s lost their job yet? Well obviously we’re told that the financial sector is ‘hard-hit’, but surely a depression means more than financial sector job losses?

I think they’re coming. It will get worse before it gets better. But if this is a chance for a fundamental shift maybe better could be much much better.

That’s something to hope for.

The economy might be off the rails, but I truly hope it's not the end of the line yet for charitable giving...

No comments: