SocProf over at The Global Sociology Blog and I must be reading the same things, and thinking along similar lines, because I had planned to link to precisely the same articles she highlights in an update to my recent post on the state of the global financial crisis.
In The Guardian, Will Hutton explains why measures to halt the cascading crisis have been ineffectual to date. He might have made more explicit the implication that one of the basic structural problems is that action taken at the level of the nation state can be counter-productive given the disseminations and movements of capital, and that there are real domestic political barriers to coordinated action, as well as all the obvious problems of concertation through institutions such as the EU and the G20.
But he does make this point - harmonising with the note I’ve been sounding repeatedly - very clearly indeed:
There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, ’securitised’ capitalism existed, or any political muscle to support it even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilment, personal experience and loyalty to self.
Hutton is perhaps more sanguine than I am, though, about the capacity of state action to turn all this around. In essence, he’s making an argument he’s been making for some years - about the virtues of other forms of capitalism than that which has been hegemonic in the neo-liberal Anglosphere. He briefly had some success in influencing Tony Blair in the early days of New Labour - in opposition, to be precise - in pushing ideas about “Stakeholder capitalism”. Whether a reorientation to a capitalism focused on the medium rather than the short term and on the real rather than the financial economy would work now - or whether as John Quiggin seems to think the Gordon Browns of the world are predisposed to be pushed, however much they might kick and scream, in something like the correct direction, is perhaps anyone’s guess as events continue to move at breakneck pace.
Immanuel Wallerstein puts a contrary view. I’m not quite sure if I agree - though he’s right more often than most. It is certain that what is occurring is Schumpeterian “creative destruction”, but whether or not the capacity to begin the cycle of valorisation and capital accumulation anew exists is something I think it’s better to be agnostic about at this stage. While I dare say he’s right about the end of a Krondatieff cycle, beyond that, prognostication seems to have a very short shelf life in these times.
It’s also interesting to observe that some are suggesting that the Canadian Tories’ “steady as she goes” approach is precisely what is leading to their decline in support in the campaign which has reached its final stretches. It may well be that Stephen Harper has more problems than just perceived inaction in the face of the credit crisis, but it probably is significant that voters are demanding state action to propitiate fear. In the Australian context, I wouldn’t be at all surprised if Kevin Rudd and Labor are able to consolidate their support at a time when their momentum may have been sagging. The “cut through” of the opposition really diminishes at times of crisis, and it may be that Rudd has a chance to entrench himself with his response. To some degree that’s dependent on how far Australia is able to resist the global push towards recession, and again, I really would hesitate to place much value in any predictions at this stage.
It will be interesting to see what happens to Sarkozy’s proposal of a new Bretton Woods because, contrary to Bush, Merkel and others, Sarkozy’s not a lame duck, he still has his majority in Parliament. And with the socialist party in disarray and therefore no threat to the next electoral cycle, Sarkozy is in a stronger position to make such proposals.
Actually, (and I may have mentioned it before), alter-globalization groups should get their own New Bretton Woods to put forward their own reform proposals.
The future keeps happening and I welcome the obvious collapse of this golden calf of Austrian - economics. It was always as bogus an ideology of the right as Marxism on the left. I have to disagree with the framing of this as a fork-in-the-road between capitalism and statism. Its more like a lane merger. But now - aided by the net - we will see some genuinely competitive alternative and independent markets emerge in real-time, more Proudhonian mutualism emerge, more Stirnerian co-ops and collectives and more libertarian-socialism and revolutionary syndicalism all around. The first planet-wide revolution in fact. Free trade means open borders and a global commonwealth economy requires a global ‘ hawala’ of a convenient common currency. ( The Euro will do for now )
Anarchism is such a neat fit with P2P, Freenets and wildnets, cryptoanarchy, prediction pools and open-source operating systems it’s practically indistinguishable from magic.
‘ The urge to destroy that is also the creative urge…’ Bakunin.
Bretton Woods lasted as long as it did because the US found it to be advantageous to maintain its aims and methods. When these aims and methods ceased to be advantageous to the US, the US dumped its commitments to Bretton Woods. Without US support Bretton Woods was doomed.
Any return to a Bretton Woods-style arrangement requires both China and the capital that is property of the oil-rich Gulf states.
I’m not sure what kind of argument can be made to China which may convince them of the advantage of underwriting a new regime of fixed exchange rates, perhaps using the RMB as the reserve currency.
Katz,
to be sure a New Bretton Woods would not look like Bretton woods. As you mention (as do the articles and posts mentioned by Mark), the US hegemony is no longer a given and we’re are more now in a multipolar world. This would have to be taken into account.
And what of the global civil society? How much involvement here?
So there is “return” possible. Bretton Woods was the product of very specific conditions that are mo longer present. What I meant with “New Bretton Woods” was more as symbol of “building a new global economic order.”
What would you imagine to be a minimum set of operating principles for “a new global economic order”?
Man, that’s a tough and complicated question. Just a few thoughts as to who should be involved:
- Governments, of course, and not just the Big Ones (US / China / Russia …) but there should be representatives of regional governance bodies (EU, African Union, etc.).
- This should be organized under the auspices of the UN.
- I would hope that non-orthodox economists would be involved as well (Sen, Yunus, Stiglitz, Bello).
- The World Social Forum should be working on that as well to provide representation from the global civil society.
- There are already a vast array of global regulatory statutes. They should be reviewed to see how they work and whether they could be adapted to the financial world.
- The goal might be to draft a global social contract / compact on economic governance to replace the Washington Consensus.
- This would mean a reexamination of the statutes of the IMF, WB and WTO.
This is, of course, assuming, against Wallerstein, that capitalism can / should be saved.
This also does not address the issues specific to the American economy: the massive deregulation, huge levels of state / corporate / household indebtedness and unsustainable spending.
The idea that capitalism is in such a state as to require ’saving’ is just bizarre. It treats capitalism as a synonym for a particularly opaque and unsustainable model of high finance. It also ignores the underlying capitalistic nature of social democracies, and of any conceivable post-crisis framework for trade/capital movements.
BBB
What exactly are you saying, BBB, that the provision of credit is not necessary for a capitalist economy to function? Or, ahem, access to working capital?
Some practical questions SocProf.
Is it possible to run an intergrated economic system with a plethora of currencies?
If so, how? If not, what should replace them and how would that replacement be achieved?
BBB, aren’t complex finance arrangments the crowning achievement of capitalism? Bretton Woods attempted to excise these complex arrangements from the system and failed. Aren’t these arrangements, therefore, unavoidable?
“BBB, aren’t complex finance arrangments the crowning achievement of capitalism?”
Perhaps for some. Mostly investment bankers and derivatives traders, I suspect (at least up until mid-last-year). For the rest of us, the crowning achievement of capitalism must surely be the massive productivity increases in the manufacture/production of clothing, food, and housing and lately the integration of information technologies into the privately-owned and operated means of production. But here you’ve highlighted the problem. Bretton Woods was a global framework which enshrined capitalism as the dominant feature of the post-War international economic order. After all, the primary objective of Bretton Woods was to create a monetary stability that would facilitate trade. And yet we have people setting it up as the antithesis of capitalistic behaviour on a global scale. Really it is Capitalism, Flavour B.
BBB
There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces;
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The Left and organized labour parted ways somewhere back when. The unions are outplayed by global transfers of capital often to places where organizing labour gets you a visit from a midnight death squad. Corporations can hold nations to ransom. Hence centre-left parties like British Labour face either electoral annihilation or must conform to the one ideology state. At least that’s as they see it.
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The enthusiasm for restricted states and international free markets was simply smoke. A cursory look at ‘free’ trade deals like NAFTA shows pretty clearly that the freedom belongs almost exclusively to firms that are already multinational. Having an ineffective international system of ‘law’ in addition to very effective international systems of economic policy dictations (the BWIs) and institutions like multinational corporations which are designed to eschew liability whilst at the same time enjoying full rights is obviously disasterous.
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Part of the blame lies with us of course. Part of it lies with people like Tony Blair who appear to me nothing short of moral vacuums who, at the same time, indulge the conceit of being righteous (!). We need one of two things: a resurgence of democracy with some kind of internationally enforced apparatus or - the collapse of it followed by some kind of regional autocracy.
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I know which one I pick.
After all, the primary objective of Bretton Woods was to create a monetary stability that would facilitate trade.
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Well that might’ve been the Dream. The reality is that it became the New Way to have an old Empire keep on keeping on. Mercantilism never went away it just called itself liberal economics. And just like moving the power from Athens to Alexandria or Rome to Byzantium it shifted from London to New York/Washington.
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And in keeping with the NeoEmpire in answer to the ‘what have the Romans ever done for us’ question, the new answer is: lend us money at impossibly high rates delivered Don Corleoni style and/ore Jack Shit.
Adrien wrote:
When did that happen? The credit derivatives that exploded were all written at *too low rates to reflect the risk*.
Credit card rates are high and cripplingly so, but at least they reflect the risks of default (which is partly what interest is supposed to do).
David
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I wasn’t referring to the current meltdown. I was referring to loans made for development to third world countries based on impossible growth forecasts. It’s generally agreed that these loans are impossible to repay. Please see John Perkins Confessions of an Economic Hitman for how this worked.
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I myself grew up on a World Bank project community. The idea was sound. But it was corrupted by a lack of transparency, by a lack of competition and by the inevitable problems encountered when the source of the loans are also the recipients of the contracts building the projects that said loans are supposed to fund.
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In essence I lend you my money for you to pay me to do work in the expectation that it will help you make X amount of dollars. The trouble is that the X is a fiction cooked up by consultants working for me. The deal being that you end up at my mercy for good. In real life such consultants (like Perkins) forecast figures such as 20% growth. This is thought to be impossible. Trouble is: the third world governments didn’t know that. In the event if the shonky dealing doesn’t do the trick btw, the CIA will.
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Whether organized or not the end result is that the third world stays where it is except insofar as having infrastructure vital for us to exploit its resources without helping the people out one bit. The Empire without the hassles.
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One day we’ll pay for that.
Which Paul Krugman seems to have predicted August 29, 2005:
http://www.huffingtonpost.com/2008/10/12/economic-honor-roll_n_133928.html
It’s not as if “capitalism” had no warnings. (Notably, as I recall, Krugman was the only one who predicted the SEA meltdown of 97/98. Wish I’d known about that at the time.)
Steve Keene has been pretty much, as they say, on the money, for quite a while hasn’t he?
Yep, mercantilism as a conceptual input to economic policy is alive and well in the American Empire, which is why the American state has ensured a healthy trade surpl… oh, wait. What rubbish you are talking, Adrien. But anyway it’s a refreshing departure from the standard critique of modern globalisation, which usually claims, among other things of course, that trade itself is the imperialist instrument through which the West, and in particular the US, maintains its hegemony. You have neatly and succinctly divorced the two.
BBB
BBB - America’s trade deficit has to do with living on credit complements of China et al and allowing them to become the world’s workshop which, for some reason, economists didn’t think a problem. Result: the US is now at the PRC’s mercy.
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My reference to mercantilism is more by way of explaining the strategy behind the corruption of the BWIs.
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Thing is it’s not really mercantilism in the sense that it was in the days of the British Raj. It’s more casual. Third world countries are required by the BWIs to adhere to strict regulations particularly low tariffs and almost no social spending on things like health and education. This, it is said, is for their own good. A necessary condition if they’re going to develop despite the overwhelming historical evidence to the contrary. Either they’re blind ideologues or straight-up lying crooks. You decide.
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At the same time the States along with the EU and Japan etc persist in maintaining tariffs precisely in those markets that third world countries can compete in - like agriculture. Add to this the extension of such laws as intellectual property that enable people in America to patent traditional remedies or the imposition of ‘free’ trade deals designed to prevent governments from impsing sanctions on odious regimes like, say, the NFTC’s suit of the State of Massachusetts for boycotting Burma and the picture that emerges is not one of free trade so much as the structural privileges of multinational corporations.
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The strategy is to use the rhetorical appeal of free trade (I endorse free trade btw) in order to impose a restricted regulatory regime that prevents states from imposing restrictions on multinationals whilst at the same time positively obliges states to restrict and even oppress their own populations for the convenience of these same institutions.
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Far from free trade and competative markets the move is toward entrenched oligopolies which sew up markets in entirety much like Mafia families carve out territory. Take the shitty bits of capitalism and socialsm and mix ‘em together. Fab!
Fair enough, Adrien. If the position is that the US extols the virtues of free trade while it goes about protecting well-heeled producers from foreign competition (in a range of sectors, but most obviously agriculture), you’ll get no argument from me. It’s disgusting. The massive government failure that this represents is quite literally killing people. And there’s more than enough blame to share around on that: the so-called social democrats of Europe have turned screwing third-world agriculturalists into a fine art. Is there any more grotesque a policy than the CAP?
BBB
The “crash course” series at http://www.chrismartenson.com/ seems to offer a comprehensive view of the trends that got us here and why, or am I missing something obvious?
Repeat after me: regulation is GOOD, regulation WORKS.
BBB - It’s realpolitik. Any American or European politician who tried to do the right thing would be tossed out. Simple as that.
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It’s one instance where enlightened monarchy would be better than democracy. Actually enlightened monarchy is the best form of government as Aristotle said. The trouble is enlightened monarchs come around about once in every 10 000 years and are usually strangled in the cradle.
Adrien obviously likes being at the cutting edge of political economy - giving it a whole new meaning and applying it to a completely different time than when Mercantilism (as commonly taught in unergraduate economic history courses) thrived.
You can have Krugmann’s Nobel Prize when he is finished with it.
Razor - I admit I’m using the word mercantilism a little loosely but I think it applies:
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Definition: The theory and system of political economy based on national policies of accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade.
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Except for the accumulation of bullion I think the arrangements installed in the name of ‘free trade’ can be considered a kind of mercantilism. A controlled trade system favourable to those states that wield such.
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If my description of this is inaccurate or lacking in some way I would sincerely like to hear about it.
You can have Krugmann’s Nobel Prize when he is finished with it.
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No thanks. I have serious doubts as to the veracity of any award granting institution that’d give Henry Kissinger a peace prize - seriously.
Adrien, the institutions are different. The Nobel Peace Prize is a proper Nobel Prize, one of the five instituted by the will of Alfred Nobel. The granting institution for the Nobel Peace Prize is the Norwegian Nobel Committee (which is appointed by the Norwegian Parliament). By contrast, the co-called “Nobel Prize in Economics” is not a proper Nobel Prize; it is a late-60s invention of the Swedish central bank. The granting institution is the Royal Swedish Academy of Sciences (which, incidentally, also selects laureates for the proper physics and chemistry Nobels).
BBB
Perhaps Bush may salvage something from the wreckage of his presidency by winning the Nobel Prize for Economics for his contribution to the theory and practice of centrally planned economies.
It’d only be fitting…
Back to Bretton Woods Mark 2 - as I recall it a central element of Keynes’s proposal was the establishment of an International Clearing Union as a world central bank, but the realpolitik of 1944 ensured the US Dollar was made the world reserve currency. Bretton Woods collapsed when the Johnson and Nixon administrations printed dollars to pay for the Great Society and Vietnam War programs, and the rest of the world eventually decided to stop paying premium rates for the effectively devalued currency. Perhaps it’s time to revisit Keynes?