This article is based on a talk delivered June 12, 2009, at an event sponsored by the Brecht Forum.
Perhaps I may begin with a few words about the title. There is too much nuance and variety to make such sharp distinctions as theirs-and-ours, them-and-us. And neither I nor anyone can presume to speak for "us." But I will pretend it is possible.
There is also a problem with the term "crisis." Which one? There are numerous very severe crises, interwoven in ways that preclude any clear separation. But again I will pretend otherwise, for simplicity.
One way to enter this morass is offered by the June 11 issue of the New York Review of Books. The front-cover headline reads "How to Deal With the Crisis"; the issue features a symposium of specialists on how to do so. It is very much worth reading, but with attention to the definite article. For the West the phrase "the crisis" has a clear enough meaning: the financial crisis that hit the rich countries with great impact, and is therefore of supreme importance. But even for the rich and privileged that is by no means the only crisis, nor even the most severe. And others see the world quite differently. For example, in the October 26, 2008 edition of the Bangladeshi newspaper The New Nation, we read:
It’s very telling that trillions have already been spent to patch up leading world financial institutions, while out of the comparatively small sum of $12.3 billion pledged in
The article goes on to predict that World Food Day in October 2009 "will bring . . . devastating news about the plight of the world’s poor . . . which is likely to remain that: mere ‘news’ that requires little action, if any at all." Western leaders seem determined to fulfill these grim predictions. On June 11 the Financial Times reported, "the United Nations’ World Food Programme is cutting food aid rations and shutting down some operations as donor countries that face a fiscal crunch at home slash contributions to its funding." Victims include
As The New Nation anticipated, the "devastating news" released by the World Food Programme barely even reached the level of "mere ‘news.’" In The New York Times, the WFP report of the reduction in the meager Western efforts to deal with this growing "human catastrophe" merited 150 words on page ten under "World Briefing." That is not in the least unusual. The United Nations also released an estimate that desertification is endangering the lives of up to a billion people, while announcing World Desertification Day. Its goal, according to the Nigerian newspaper THISDAY, is "to combat desertification and drought worldwide by promoting public awareness and the implementation of conventions dealing with desertification in member countries." The effort to raise public awareness passed without mention in the national
It may be instructive to recall that when they landed in what today is
As the fate of
Smith was referring specifically to the mercantilist system, but his observation generalizes, and as such, stands as one of the few solid and enduring principles of both international relations and domestic affairs. It should not, however, be over-generalized. There are interesting cases where state interests, including long-term strategic and economic interests, overwhelm the parochial concerns of the concentrations of economic power that largely shape state policy.
The food crisis erupted first and most dramatically in
Later, the United States Agency for International Development (USAID) instituted programs to turn
There is nothing surprising about what followed: a 1995 USAID report observed that the "export-driven trade and investment policy"-that
The story is fairly similar in much of the world. In a narrow sense, it may be true enough that the food crisis results from Western lack of concern: a pittance could overcome its worst immediate effects. But more fundamentally it results from dedication to the basic principles of business-run state policy, the Adam Smith generalization. These are all matters that we too easily evade-along with the fact that bailing out banks is not uppermost in the minds of the billion people now facing starvation, not forgetting the tens of millions enduring hunger in the richest country in the world.
Also sidelined is a possible way to make a significant dent in the financial and food crises. It is suggested by the recent publication of the authoritative annual report on military spending by SIPRI, the Swedish peace research institute. The scale of military spending is phenomenal, regularly increasing. The
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The distribution of concerns illustrates another crisis, a cultural crisis: the tendency to focus on short-term parochial gains, a core element of our socioeconomic institutions and their ideological support system. One illustration is the array of perverse incentives devised for corporate managers to enrich themselves, however grievous the impact on others-for example, the "too big to fail" insurance policies provided by the unwitting public.
There are also deeper problems inherent in market inefficiencies. One of these, now belatedly recognized to be among the roots of the financial crisis, is the under-pricing of systemic risk: if you and I make a transaction, we factor in the cost to us, but not to others. The financial industry, that means Goldman Sachs, if managed properly, will calculate the potential cost to itself if a loan goes bad, but not the impact on the financial system, which can be severe. This inherent deficiency of markets is well known. Ten years ago, at the height of the euphoria about efficient markets, two prominent economists, John Eatwell and Lance Taylor, wrote Global Finance at Risk, an important book in which they spelled out the consequences of these market inefficiencies and outlined means to deal with them. Their proposals conflicted sharply with the deregulatory rage that was then consuming the
In substantial measure, the food crisis plaguing much of the South and the financial crisis of the North have a common source: the shift toward neoliberalism since the 1970s, which brought to an end the Bretton Woods system instituted by the
The "golden age" saw not only unprecedented and relatively egalitarian growth, but also the introduction of welfare-state measures. As Keynes and White were aware, free capital movement and speculation inhibit those options. To quote from the professional literature, free flow of capital creates a "virtual senate" of lenders and investors who carry out a "moment-by-moment referendum" on government policies, and if they find them irrational-that is, designed to help people, not profits-they vote against them by capital flight, attacks on currency, and other means. Democratic governments therefore have a "dual constituency": the population, and the virtual senate, who typically prevail.
In his standard history of the financial system, Barry Eichengreen writes that, in earlier years, the costs imposed by market inefficiencies and failures could be imposed on the public, but that became difficult when governments were "politicized" by "universal male suffrage and the rise of trade unionism and parliamentary labor parties" and later by the radicalization of the general public during the Great Depression and the anti-fascist war. Accordingly, in the Bretton Woods system, "limits on capital mobility substituted for limits on democracy as a source of insulation from market pressures." There is a corollary: dismantling of the Bretton Woods restrictions on capital during the neoliberal period restores a powerful weapon against democracy.
The neoliberal rollback of democracy-often called "democracy promotion"-has enabled other means of control and marginalization of the public. One illustration is the management of electoral extravaganzas in the
For working people, small farmers, and the poor, at home and abroad, all of this spells regular disaster. One of the reasons for the radical difference in development between Latin America and East Asia in the last half century is that
Where neoliberal rules have been observed since the ’70s, economic performance has generally deteriorated and social democratic programs have substantially weakened