What Have They Done?

It's a familiar scene in B-grade movies. A scientist, fuelled by ambition and besotted with his own genius, creates a terrifying new creature. The creature spins out of control and ravages through the world, destroying lives everywhere. Eventually humanity is saved from extinction but only after staggering devastation has been caused. The message is clear: do not be too arrogant in your knowledge, humans, lest you unleash a force that will bring you to ruin.

We watch these movies in wry amusement at their melodrama. And we're silently relieved that the deep fears that these movies play up to have so far proven unfounded.

Or have they?

Substitute "financial whiz-kid" for scientist, and replace "terrifying new creature" with "sub prime derivatives" and suddenly the story sounds uncomfortably familiar.

No loss of life has yet been blamed on the current situation in the world's financial markets. The only deaths reported until now have been those of corporations. The human impact so far has been limited (such an inappropriate word!) to loss of income and depletion of savings. That's bad to begin with, but it will probably get worse.

A loss of income always hits hardest on the poor, who have little saved up against hard times. They're the ones who will be forced to compromise on nutrition and health care. They're also the ones who will be hurt the most when governmental and non-governmental funding for health care programs comes under pressure. We'll probably never be able to say exactly how it happened, but I have the sad conviction that many lives will be hurt and some will be cut short by the financial shrapnel that will fly around the world over the next few years.

Somehow the media seem to have lost sight of this completely. Instead they've given in to the basest instinct for revenge. You can almost hear the shrill voices in newsrooms everywhere as journalists try to find the best way to sensationalize the news of bonus payments to AIG employees. Yes, there is something obscene about these payments, but will it really matter whether or not those bonuses get paid? The damage that's been done to the world's economy will not be undone. The genie is out of the bottle now, and we can do little more than watch grimly as governments and regulators struggle to undo the damage they failed to prevent.

No amount of punitive legislation will reverse the effects of the collapsing markets on the people who will be hit hardest and are also the most defenseless. I wonder if we will learn the really important lessons from this episode. There are multiple instances of economic crises that were triggered by investment bubbles in new markets and by "innovations" in financial markets. And yet governments seem to do precious little to ensure that these innovations are safe before they allow their widespread use. It seems to me that it's harder to get regulatory approval to sell a new toothpaste than it is to get permission to sell a new financial instrument.

I think it's time that governments started to take the sort of "safety first" attitude to regulating financial markets that they bring to health care products. Because if a financial product turns out to be toxic, the side effects can be deadly.

Maybe we'll get lucky, maybe this time the men and women in power will make decisions that in the future will protect us better . Time will tell. For now, we'll just have to struggle through the scary movie that we've found ourselves in.