There’s a thought provoking article in the new Vanity Fair by Joseph Stiglitz, the Nobel Prize winning economist, which evaluates what the current financial situation throughout the world means to America’s position in it.
It is worth reading and thinking about, since it lays most of the responsibility on a “free-market economy” as foisted on the world by a greedy and thoughtless Wall Street, which set very different standards for other countries than it adopted for the U.S. This from the article:
Among critics of American-style capitalism in the Third World, the way that America has responded to the current economic crisis has been the last straw. During the East Asia crisis, just a decade ago, America and the I.M.F. demanded that the affected countries cut their deficits by cutting back expenditures-even if, as in Thailand, this contributed to a resurgence of the aids epidemic, or even if, as in Indonesia, this meant curtailing food subsidies for the starving. America and the I.M.F. forced countries to raise interest rates, in some cases to more than 50 percent. They lectured Indonesia about being tough on its banks-and demanded that the government not bail them out. What a terrible precedent this would set, they said, and what a terrible intervention in the Swiss-clock mechanisms of the free market.
The contrast between the handling of the East Asia crisis and the American crisis is stark and has not gone unnoticed. To pull America out of the hole, we are now witnessing massive increases in spending and massive deficits, even as interest rates have been brought down to zero. Banks are being bailed out right and left. Some of the same officials in Washington who dealt with the East Asia crisis are now managing the response to the American crisis. Why, people in the Third World ask, is the United States administering different medicine to itself?
So, as our influence in the world diminishes and that of countries like China increases, we are watching a situation where Wall Street has actually been brought in to handle what’s wrong with Wall Street. Stiglitz thinks that Americans “will realize that what is required for success is a regime where the roles of market and government are in balance, and where a strong state administers effective regulations. They will realize that the power of special interests must be curbed.”
If we do realize this, will we do so too late in the game to make the kind of recovery which protects our lifestyle and influence? If you realize that of the top 5 banks in the world, the first 4 are Chinese and America has number 5 where it used to be number 1, then you know our position in the “free-market” economy is shaky at best.
And he goes further:
There used to be a sense of shared values between America and the American-educated elites around the world. The economic crisis has now undermined the credibility of those elites. We have given critics who opposed America’s licentious form of capitalism ample ammunition to preach a broader anti-market philosophy. And we keep giving them more and more ammunition. While we committed ourselves at a recent G-20 meeting not to engage in protectionism, we put a “buy American” provision into our own stimulus package. And then, to soften the opposition from our European allies, we modified that provision, in effect discriminating against only poor countries.
Are we weakening the sense of “global trust” necessary for “global recovery?” Stiglitz thinks so, and I have to agree with him.
Read the article and see what you think.