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It is time for some humility from the proponents of unregulated markets and intensified economic globalization. It is no longer even superficially plausible for their proponents to contend that the solutions to the problems caused by deregulation, marketization and globalization are more deregulation, marketization and globalization.
Wall Street’s wild swings, the collapse of the Russian economy and the phenomenon of the Asian economic contagion suggest important lessons that we can no longer ignore.
— All advocacy for Social Security privatization should cease and blush. Irrespective of the Wall Street trajectory over the next few days and weeks, the myth that the stock market provides a relatively risk free, high-return investment outlet -a safe place for the nation’s accumulated savings for retirees -has been re-shattered. Unless proponents wish more government bailouts of stock markets, as some Asian countries have attempted, enroute to a full corporate socialism, let them redirect their efforts to proposals that give more Americans a stake in capital, as suggested in Jeff Gates’ new book, The Ownership Solution.
Senior citizens banking on social security cannot afford a two-week 15 percent drop in their retirement lifeline. Their daily anxiety factor alone is enough to disqualify Wall Street’s self-serving Social Security privatization proposals. After all, some large listed companies make big money selling “peace of mind” products and services.
— Financial globalization entails massive, unsupportable risks; controls are needed. While it may reflect underlying problems of overvaluation, the most recent Wall Street plunge was touched off by economic anarchy in Russia, now a country with a shrunken economy. Globalization brings with it an excessive interdependence that can ricochet isolated problems into worldwide slides. Unregulated globalization in finance — far looser than in the real economy — must be reversed. National and international legal controls are needed to cool the foreign investments and short-term loans that pour too fast into oligarchic countries that appear attractive and evaporate as soon as economic indicators start to sour. Too often, this foreign money is taken from the savings of ordinary people in U.S. mutual funds.
— The International Monetary Fund (IMF) has worsened the economic crisis and should be denied any new money. The IMF multibillion dollar bailout of Russia has been completely frittered away. This money, like that lent in Asia, has gone to rescue foreign investors and the domestic super-rich. Rather than bridging countries through troubled times, the IMF loans have spread economic contagion.
On the one hand, the IMF has encouraged foreign investors to make additional risky investments around the world without the discipline of the fear of failure. On the other hand, the IMF has pressured countries to further open up to short-term loans and investments, making their economies even more vulnerable to sudden investor withdrawal.
— The international pull-down model (subordinating health, safety and other standards of living to the supremacy of international trade) of the IMF and World Trade Organization (WTO) should be discarded. IMF austerity measures — imposed on borrower countries as a condition for receiving loans — depress domestic demand, and have transformed acute financial crises in Asia into chronic recessions and depressions.
Meanwhile, the WTO sets countries against one another in a global race to the bottom in wages, environmental standards and health and safety protections — all for the purpose of promoting exports and attracting foreign investment. The combined effect of these pull-down strategies weakens global demand and creates a worldwide overcapacity problem. The United States, as buyer of last resort, has absorbed the worldwide excess, but there is a limit to how much our debt-loaded consumers can spend.
–With financial uncertainty high, now is the wrong time to act on misnamed financial modernization proposals now pending in the Senate. This proposal, H.R. 10, would permit common corporate ownership of banks, insurance companies and securities firms, and foreshadows many future injustices. With a big bank merger binge bringing radical change to the U.S. financial landscape, and world markets in turmoil in Asia and Russia — where major U.S. banks have significant investments — there is no basis for the Senate to rush forward with a largely corporate-drafted deregulatory bill that will add to the uncertainty that huge concentrations of power bring.
Under the guiding hand of the Clinton administration and Treasury Secretary Robert Rubin, formerly a partner at Goldman Sachs, economic policy is increasingly crafted to benefit the U.S. financial sector, even at the expense of corporate manufacturers. The result has been a casino economy, where speculative capital reigns supreme, where criminal capitalists of Russia are viewed as worthy business partners, where big investors often win big, but where the game is rigged against small investors, workers, consumers and the environment.
Critics of the model of unregulated globalization have issued dire warnings for some time now, with much of their analysis rejected by powerful corporate interests and their allies in academia and the punditocracy. With the critics’ warnings increasingly borne out, it is time to consider their proposals for a global economy more oriented to serve workers and consumers’ needs under the rule of law, rather than those of financial speculators and a national corporations that have no allegiance even to a nation that created and domiciled them.