Thursday, April 30, 2009
The False Promise of Market Fundamentalism by Henry CK Liu
Market fundamentalism is the belief that the optimum common interest is only achievable through a free market equilibrium created by the effect of countless individual decisions of all market participants each freely seeking to maximize his/her own private gain and that such market equilibrium should not be distorted by any collective measures in the name of the common good. It is summed up by Margaret Thatcher's infamous declaration that there is no such thing as society.
The fact is that in a world of sovereign states, all economies are command economies. The United States, the Mecca of market fundamentalism, commands its alleged market economy in the name of national security. While the US tirelessly advocates free trade, foreign trade is a declared instrument of US foreign policy. President George W Bush declares that "open trade is a moral imperative" to spread democracy around the world. The White House Council of Economic Advisers is organizationally subservient to the National Security Council. National-security concerns dictate trade policies the US adopts for its economic relations with different foreign countries.
World trade today is free only to the extent of being free to support US unilateralism. For the US imperium, the line between foreign policy and domestic policy is disappearing to make room for global policy. The sole superpower views the world as its oyster, and global trade is to replace foreign trade in a global economy the rules for which are set by a World Trade Organization dominated by the sole superpower.
Market fundamentalism as the term is generally used in macroeconomics is a key component of neoliberal globalization of trade, in the same sense that the British, through Adam Smith, promoted "free trade" in the 18th-19th centuries. The difference between Smithian free trade and today's neoliberal market fundamentalism is that British free trade was limited to the sphere of political influence within the British Empire, whereas neoliberal market fundamentalism aims to be truly global. The Washington Consensus is a conditionality for inclusion into global market fundamentalism through intervention on national sovereignty over monetary and fiscal policies.
Eisuke Sakakibara, Japan's former vice-minister for international finance, widely known as Mr. Yen, in a speech titled "The End of Market Fundamentalism" before the Foreign Correspondent's Club in Tokyo on January 22, 1999, presented a coherent and wide-ranging critique of global macro-orthodoxy. His view, that each national economic system must conform to agreed international trade rules and regulations but need not assimilate the domestic rules and regulations of another country, is heresy to US-led, one-size-fits-all globalization. This view was prescient in view of the globalized market conditions that had led to the current financial crisis and is at variance with that put forth in the 2009 London G20 summit.
Market fundamentalism helps no economy. It helps only selected segments in economies that subscribe to it. Since the segment most helped by market economy is in political control of the US polity, market fundamentalism is billed as being the appropriate doctrine for the US and hence the world as well. Dollar hegemony is also detrimental to the US economy, as it is only good for the global dollar economy of which the US economy is but one component, albeit a key major one. Through globalization and the growth of euro-dollars (the name given to all offshore dollars everywhere and has no direct relation to the euro or the EU), the dollar economy is increasingly detached from the US economy. What is good for the dollar economy is not necessarily good for the US economy. Economic nationalists in the US are beginning to understand the threat of dollar hegemony to the US economy itself.
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Posted by nickglais at 8:32 AM