“Wall Street is run for the benefit of Wall Street … In truth, there is no substitute for regulation … It is time to end the failed experiment with radical deregulation.”
— The American Conservative, October 2008.
When words like these appear in a bastion of United States conservative thought, you know something is on. More so when The American Conservative graces that article with this blurb about rescuing the U.S. economy: “Goldman Sachs alums aren’t the men for the job.”
The piece by Eamonn Fingleton goes on to say why: “Both Treasury Secretary Henry Paulson and his key adviser Neel Kashkari, formerly held top jobs at Goldman Sachs, and it seems clear that their highly controversial and, to economic historians, bafflingly unorthodox bailout plan serves Wall Street’s interests — particularly those of their former employer — far more than the American public’s.” There’s a start, with the recognition that Wall Street and corporate interest (and even “leaving it to the market”) can be very different from public interest.
The first part of October, said the New York Times, “represents the most sweeping government moves into the nation’s financial markets since The Great depression and perhaps ever, according to economists and finance experts.” That month saw government after government sworn to ‘free markets’ and deregulation announced they were acquiring ownership stakes in banks and declared they would prop up dying private institutions with billions in public funds, and guarantee bank debt. Whether in Britain, Germany, France, Italy, Spain or the United States, massive state intervention is the order of the day. Across the world, governments are in one way or the other in profoundly interventionist mode.
How profound? Estimates by the United Nations and like bodies suggest that with $60-80 billion a year additional spending, major issues in education, water, sanitation, or health could be well addressed worldwide.
Governments have long pleaded that this money simply didn’t exist. Yet, a handful of them discovered they could find over a trillion dollars to bail out mostly private corporations.
In its amazing fervor for privatization, India’s post-1991 elite never once admits why quite a few industries had been nationalized in the first place. Their private owners had run them into the ground — with huge amounts of public money. As one top official put it at the time: the sicker the industries get, the healthier the owners get. That’s when governments stepped in to save thousands of jobs. Once nationalized, these looted, “sick units” were quickly dubbed as symbols of “public sector inefficiency.”
Now it’s happening across the world. In the United States, too, the public will pay the bills of the decades-long frenzy at the corporate feeding trough. But here, the bailout cannot be called nationalization, though often, that is what it is about or could well be about. That would be “communistic.” In some cases, companies are being bailed with amounts of public funds greater than their current market value. (The $25 billion bailout the auto makers seek is worth even more than that of Citigroup — till late the 800-pound gorilla of American finance.)
The right wing slogan of “not with my tax dollars” now chokes its authors. Investors and shareholders were, on the one hand, sacred (or supposed to be) in corporate theology. In the larger economy, on the other, you had to cut any public spending you could. Now, when you’re spending billions of public tax dollars on these behemoths — shouldn’t that make the public their owners? Their main shareholder? Till now, there is not even a semblance of accountability to the public on the billions so far doled out to the oligarchs.
Market fundamentalism is in bad shape. Shrine attendance has fallen. Its televangelists are subdued, their psalm book is lost and the singers have laryngitis. Market jihadis scour other subjects to crusade about. Remember the editorials urging India’s governing coalition after the Left’s walkout to “push ahead with financial liberalisation” since “the cancer” was gone? There’s no official recanting — but a more subdued mood for sure. The government itself takes credit for “insulating the economy” against the global meltdown. In short: credit for non-liberalization. That the insulation arose from the restraint imposed on it by the Left and public opinion is hotly denied.
In the U.S., words are now being bandied that were unheard on air in decades. ‘Socialism for the rich.’ ‘Deficiencies of the Free Market.’ This shift is more important than it seems. For three decades, markets were raised from a tool — one amongst many — to being a tyranny. There was nothing ‘The Market’ could not solve. Thomas Frank summed up the mindset very sharply in his book One Market Under God. “Markets enjoyed some mystic organic connection to the people, while governments were fundamentally illegitimate … markets expressed the popular will more articulately and meaningfully than did mere elections … markets are where we are most fully human; markets are where we show that we have a soul.” The market was not merely inseparable from democracy. It was democracy.
In India, as late as this June during the food price crisis, there were ideologues who saw hunger as essentially a function of anti-market systems. (One editorial argued that if the markets were allowed to do their job, food would rush to the places where demand was highest.) What about health, education or agriculture? Just leave it all to The Market.
Of course, The American Conservative does not take an anti-market position. Nor does it plead for intervention as a rule, even in vital sectors. It singles out finance as unique. “Finance simply cannot be left to its own notoriously conflicted devices,” it declares. It then calls for the regulation of that sector, quoting from Market Fundamentalist scripture to show that such exemptions were implicit in the words or silence of True Prophets such as Milton Friedman. This is one of the more thoughtful journals of its spectrum.
Market Jihad is mortal, martyred but not dead. It has merely gone underground, or is catching its breath. The meltdown has devastated its storm troopers. The IMF soldiers on bravely, though, presenting an ideological volte face as business as usual. As Professor Jayati Ghosh points out, its prescriptions for rich countries in crisis contradict its fatwas for developing ones. When in financial crisis, the latter have to cut spending, reduce their deficits (and turn them into surpluses — no matter how painful it is to their poor.) But rich countries, says the IMF — like the U.S. which brought on this crisis — can provide ‘financial stimulus’ to their economies, and support economic activity, even if they run up large deficits. In short, they are exempt from the rules. But then we know which of these worlds the IMF represents. As Prof. Ghosh points out: “The tiny countries of Belgium, Netherlands and Luxembourg, with a total population of less than 28 million, have more votes in the IMF than China, Brazil or India.”
But while on the meltdown, consider one sector that has not had the scrutiny it deserves. The media — particularly financial journalism. Still each night and day we suffer the same “experts” who know exactly what went wrong. Precisely how to save your money (a bit hard if that money is already gone). Sure, there have been some fine stories on the stable after the horses have bolted. Not a word of introspection. How could this expensive edifice of financial journalism fail its audiences across the world at every critical stage? Remember Enron?
Or a dozen other episodes where their ‘expertise’ ought to have kicked in and saved millions from being cheated of billions? Far more alarms have been rung by government officials and regulators than by a completely corporate-captive media. But they are never called to account. Not even those who dismissed talk of a housing bubble only months ago. Or who just a month before the meltdown assured the world that no 1980s-type crisis was to be expected! Market jihad may have lost its best shock troops. But its propaganda pundits are still around.
P. SAINATH is the rural affairs editor of The Hindu, where this piece appears, and is the author of Everybody Loves a Good Drought. This fall he is giving a course at UC Berkeley. He can be reached at: email@example.com.