|
Comment on this article |
Email this Article
|
|
News :: Miscellaneous |
|
The Credibility of Market Ideology |
Current rating: 0 |
by Seth Sandronsky
(No verified email address) |
07 Jul 2002
|
|
History didn’t end with the fall of the former Soviet Union and the triumph of Western "free markets." In the short-term, market ideology will change in an attempt to cope with its crises. |
To market, to market to buy what we need. And the freer the markets, the better for all has been the ideology of U.S. elites. Yet given the nation’s current wave of corporate crime, the credibility of market ideology isn’t what it was.
Recall that markets, once freed from government regulations, were supposed to give entrepreneurs incentives to serve society. Lack of evidence was no barrier to such a view, repeated ad infinitum as the U.S. economy expanded last decade. The nation’s elites publicly agreed that once government stepped out of the way, markets would meet the population’s needs.
Why? Markets have efficiency. And governments? They're clumsy.
But markets compel the public to bear risk for events (such as California’s deregulation of electricity) beyond their control. Market ideology (and plenty of campaign contribution) played a big part in the state’s deregulation campaign. This has in part spurred California’s current budget crisis, spilling over to the local level in mean and nasty ways.
Somewhat below this radar screen for many, currency markets are becoming less stable with each passing day. Market ideology has downplayed this instability for all the obvious reasons. Yet currency flows between nations have far-reaching effects.
Take the declining value of the dollar. It became highly valued as foreign funds flowed into the U.S. during the 1990s.
On one hand, this spurred the stock market to rise, producing great gains in paper wealth. On the other hand, U.S. exports became more expensive on the world market, leading to many job cuts in the nation’s manufacturing sector.
Greenspan and the Fed may reverse course and raise short-term interest rates to keep foreign capital flowing to the U.S. Foreign investment is how the nation has financed it trade deficit, the difference between what the U.S. buys and sells worldwide.
It is internationally recognized that a nation faces financial difficulties when its external deficit nears five percent of its Gross Domestic Product. The U.S. is approaching this point, one reason why foreigner investors are becoming unsettled about the dollar’s declining value.
If the Fed boosts interest rates, it would most likely dampen economic growth in the U.S., as the domestic cost of borrowing money climbs. Yet such a policy move by the nation’s central bank would meet the needs of foreign investors whose confidence in the U.S. economy has been essential to its growth.
Slow/no foreign lending would affect U.S. consumer spending. Moreover, something is very wrong when the world market needs the U.S. consumer to become more indebted as the "buyer of last resort" for other nations’ exports. Such is the rational logic of an irrational market system!
Cracks in its vaunted efficiency are emerging. What if propping up the greenback’s declining value requires the intervention of central banks outside the U.S.? How will elites respond to this blow to the credibility of market ideology?
History didn’t end with the fall of the former Soviet Union and the triumph of Western "free markets." In the short-term, market ideology will change in an attempt to cope with its crises.
President Bush’s upcoming speech should be proof of that. As losses in paper wealth mount with new revelations of corporate criminality, it is unclear how well he can spin a silk purse from a sow’s ear. Credibility is no small factor in a democratic society dominated by market ideology.
Seth Sandronsky is an editor with Because People Matter, Sacramento's progressive newspaper. |
See also:
http://www.commondreams.org/
|
