Raising Fresh Debate On Liberal Democracy
Unlike most people I don’t fall for the idea that rabid speculators caused the financial debacle. The West are brilliant strategists and since the Asians have been taking over the economic and financial markets they have wanted to retake full control for some time. In fact, the Asians have been beating the West at their own game and they have been pretty upset about it. For example, Asians have been buying up companies, banks, etc in the West (they almost own the west) which they see as a real threat, so by creating chaos in the financial world, the goal of the West is to weaken Asian power and discourage them from their unbridled western spending spree, thus leaving the way open for western investors, companies, entrepreneurs, etc, to retake control of their financial and economic system..
That is why it does not surprise me either that the Western governments stepped in and now want a monitoring role, since this debacle is just another western scheme to retake control of the system in order to maintain their control. Western companies will need the help of their government to achieve this goal, It is governments that will make the laws which will redirect the market in the direction that the West wants it to go and that is why no one has been trumpeting the idea that government has no place in the private sector, which is one of the basic tenets of neo-liberalism ..
I think however, that the West may have miscalculated this time, because unlike Africans, Asians do not easily forget. They have still not forgotten that it was the west that was responsible for the Asian crash a few years ago. Don’t forget that it was the west that pulled its money out of the Asian economy, causing it to crash and they will not forget that this crisis is an attempt to dislodge them from their position in the market, but rather, will learn from this experience and will counter attack. So we can expect more fireworks between these 2 competing blocs in future. The fight is going to be bitter because the world is changing but the West is stuck in a time warp and refuse to change. If it is not the West that has intentionally caused this financial chaos, then it must be the Asians paying them back by trying to destroy the Western economies, but one thing is sure, the official version we were handed is wrong.
Finally, don’t you find it a little odd, that now that a black man has a real chance of becoming president, the West are suddenly welcoming more government intervention in the economy? They have allowed all the American presidents carte blanche for years, but now that Obama may come to power they want to tighten control. More government intervention also means more checks and balances on the president. Think about that. That’s why black people need to study western strategy because rarely are things ever what they seem. I can only hope that our people have finally learnt something from this crisis. Firstly, that the West is not god, Secondly, that they do not have any viable answers to Africa’s problems and thirdly, that it is African people alone who will solve the continent’s problems, so perhaps this debacle might in fact be a godsend. It depends from what angle you look at it. Hort
http://allafrica. com/stories/ 200810230925. html
Raising Fresh Debate On Liberal Democracy
By Austin Oboh And Rafiu Ajakaye
22 October 2008
Socialists are nodding their heads in self-justification, amused at the nonsense analysts believe the current global financial crisis is making of liberal democracy, the idea of small government, the supremacy of free market in economic growth and its proponents. The crisis, it is believed, has given the lie to the chest-beatings of liberal democracy theorists like Francis Fukuyama who authored the The End of History and The Last Man Standing, a classic on the purported supremacy of liberal democracy, after the curtain fell on the Soviet Union.
Aside all the lessons learnt so far, questions are now being asked about the veracity of the ideology (of small government) that is being sold to the outside world, especially African countries, whose economic woes the West often blame on "undue interference and overbearing influence" of government in the economy. Today, many African countries are implementing economic policies handed down by Western-oriented Breton Woods financial institutions - like the International Monetary Fund (IMF) and the World Bank - regardless of whether or not such policies conform with their national interests.
How the Crisis Started
The recent financial crisis that has hit the world, according to experts, first became apparent on August 9, 2007. It is believed that it began when loss of confidence by investors in the value of securitised mortgages in the United States resulted in liquidity crisis. The development prompted a substantial injection of capital into the financial market by the Federal Reserve - America's equivalent of Nigeria's Central Bank - and the European Central Bank. Some economists, while conceding the role of America's housing collapse, nevertheless, admit that the financial system had become vulnerable.
One of the first victims of the mortgage crisis outside the U.S. was Northern Rock, a major British bank. The bank's inability to borrow additional funds to pay off maturing debt obligations led to a bank run in mid-September 2007. The highly leveraged nature of its business, unsupportable without fresh infusions of cash, led to its take-over by the British Government, which provided an early indication of the troubles that would soon befall other banks and financial institutions.
Initially, in the United States, the companies affected were those directly involved in home construction and mortgage lending, such as Northern Rock and Countrywide Financial, among others. On July 11, 2008, the largest mortgage lender in the U.S. collapsed. IndyMac Bank's assets were seized by federal regulators after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. Beginning with bankruptcy of Lehman Brothers on Sunday, September 14, 2008, the financial crisis entered an acute phase marked by failures of prominent American and European banks and efforts by the American and European governments to rescue distressed financial institutions. In the United States, thisnwas marked by passage of the Emergency Economic Stabilisation Act of 2008, and in European countries by infusion of capital into major banks. As the crisis developed, stock markets fell worldwide, and global financial regulators attempted to co-ordinate efforts to contain the crisis. Some claim that the United States neo-liberal economic polices in the past three decades actually led to the crisis while other commentators have suggested that if the liquidity crisis continues, there could be an extended recession, or worse.
After initial failure, President George Bush succeeded in getting Congress' approval for a $700 billion bailout proposal, and on Tuesday last week, the lawmakers backed a Treasury Department's plan to use part of the approved bailout package to buy shares in U.S. banks. The House of Representatives had earlier rejected the rescue plan in protest at what critics saw as the taxpayer being forced to bail out irresponsible bankers.
Under the plan, the Treasury Department would purchase up to $250 billion worth of non-voting shares in banks. The plan is meant to ease worries that the banks were financially vulnerable and encourage them to start lending again. It also aligns the United States with similar efforts announced by European governments about the same time. In addition to buying equity in banks, the federal government would insure small-business bank accounts and stop banks that accepted the federal funds from paying dividends to shareholders.
There is nothing wrong many say with government buying back enterprises which, if not rescued, would impact negatively on people's welfare, as did the America's Great Depression of 1929. But critics have tagged the buyback rescue plan, a negation of the idea behind capitalist economy - and the brand of liberal democracy the U.S. espouses and exports. Indeed, the move has provoked a barrage of reactions and attacks on the system. Opponents say it contradicts what the U.S. teaches abroad - that governments should cut down on their involvement in business. The question being asked is: what happens to investments now bought with the taxpayers' money? Would they, in the long run, be returned to the very same private investors who caused the initial problem in the name of small government policy?
In an article entitled 'Ideological Failure', Sameer Dossani of the Foreign Policy, an online research group, said the crisis represents a drawback for neo-liberalism and neo-conservatism. Dossani stated: "As the disaster known as the Bush era draws to a close, we'd do well to recognise just how deep its failures go. The Bush debacles - unbridled deregulation, illegal and immoral wars, the experiment in 'disaster capitalism' that used to be the proud city of New Orleans - aren't primarily or exclusively policy failures. They're failures caused by two distinct yet interconnected ideologies: neo-liberalism and neo-conservatism. "
His words: "On the economic front, both mainstream political parties (the Republicans and Democrats) embraced neo-liberalism (also known as market fundamentalism) even before George W. Bush's presidency, though he took the ideology to new heights. Stemming from the ultra-conservative ideology of world leaders including Ronald Reagan, Margaret Thatcher, and Helmut Kohl, neo-liberalism advocates small government and the supremacy of free markets to promote growth. The United States exported these 'Washington Consensus' policies - privatisation, liberalisation, and budget austerity - through influential financial institutions such as the World Bank and the IMF. "It's worth bearing in mind that neo-liberalism and neo-conservatism are deeply intertwined and have roots in the colonial history of Europe and the United States. Both ideologies hinge on the idea that the world should follow U.S. orders, but not emulate U.S. actions and, are therefore, deeply hypocritical. As the Bush administration finally draws to a close amid a global economic crisis sparked by inadequate regulation, it's time to permanently retire both of them.
"The United States has never practised pure neo-liberal capitalism as preached by Ronald Reagan and as implemented by institutions like the IMF. Of the IMF's three core policies - cutting government spending (education, health and co), liberalisation, and privatization - the one that the U.S. government is least likely to implement is reducing spending. Due in large part to massive military expenditures, the U.S. debt-to-GDP ratio (which economists use to measure debt sustainability) is about 3.1:1. By contrast, when Brazil's debt-to-GDP ratio went up to 0.51:1, it received a stern rebuke from the IMF.
"This massive state spending goes to some of the least transparent and most unaccountable companies imaginable. Bush's presidency went a step further and often awarded these companies no-bid contracts. In Iraq, stacks of hundred dollar bills were used as footballs and misplaced, taking corruption to hitherto unimagined heights. Even aside from incidences of corruption, as others have documented, the entire Pentagon procurement system amounts to huge taxpayer subsidies for those at the very top of the income scale. "But budget cuts aren't the only Washington Consensus principle that the U.S. rejects. While the United States has negotiated free-trade agreements with about 20 countries, it uses anti-free market protections such as agricultural subsidies and steel subsidies. These and similar European trade distortions are the primary reason for the World Trade Organisation' s latest Doha 'Development' Round failure."
Critics have argued that deregulation caused the financial mess in which the world is currently enmeshed, insisting that the idea that banks could produce opaque mortgage securities and sell them to other financial institutions without any oversight was always going to lead to abuse. Anyone paying attention should have noticed, added another critic. Dossani added: "As Wall Street's house of cards tumbles down, we would do well to remember that this now-discredited model has already been exported around the world. Many in Asia see this crisis as an echo - albeit an amplified echo - of the Asian financial crisis that began in 1997 and of similar crises in Mexico, Brazil, Russia, and elsewhere. In the Asian case, a housing bubble in Thailand brought about by deregulation rapidly burst and shook investor confidence, not only in Thailand but, throughout much of East and Southeast Asia. IMF-backed liberalisation policies not only created the crisis, but as the crisis developed, the IMF insisted on even more liberalisation and increased interest rates (in stark contrast to the recently ordered interest rate cuts in the U.S. and Europe). Those who followed this advice recovered more slowly than those who didn't. Those who stood up to the IMF, including Malaysia, came under heavy criticism from economists and international media.
"While Malaysia is an example of resistance in the face of the failure of the Washington Consensus, it's worth remembering that there have always been those who resisted these market fundamentalist policies. When Salvador Allende, a Chilean physician, became President of Chile and threatened to implement such radically anti-free market ideas as a free-milk programme for children, Henry Kissinger and Richard Nixon argued for and ultimately implemented a CIA-backed coup. His successor, Augusto Pinochet (whose recent death forestalled his prosecution for war crimes), acted quickly to restore free market rules.
"Though these examples came long before anyone had heard of the word 'neo-conservatism' , the histories of U.S. intervention in Iran, Guatemala, El Salvador, Chile, Cuba, Brazil, and elsewhere largely follow a similar pattern of countries unwilling to tow the U.S. economic line being forced to do so. During the Cold War, the pretence for intervention generally involved references to democracy, but few believed that the citizens of Chile wanted to be invaded by the United States."
Limitations of American Capitalism
Analysts say that despite decades of free-market rhetoric from both Republican and Democratic lawmakers, Washington has a long history of providing financial help to the private sector when the economic or political risk of a corporate collapse appear too high.
The effort to save Fannie Mae and Freddie Mac is only the latest in a series of financial manoeuvres by the government that stretch back to the rescue of the military contractor, Lockheed Aircraft, and the Penn Central Railroad under President Richard Nixon, the shoring up of Chrysler in the waning days of the Carter administration, and the salvage of the U.S. savings and loan system in the late 1980s, they say. More recently, after airplanes were grounded, because of the terrorist attacks of September 11, 2001, Congress approved $15 billion in subsidies and loan guarantees to the faltering airlines.
Now, with the U.S. Government preparing to save Fannie and Freddie only six months after the Federal Reserve Board orchestrated the rescue of Bear Stearns some say, it appears that the mortgage crisis has forced the government to once again shove ideology aside and get into the bailout business. "If anybody thought we had a pure free-market financial system, they should think again," said Robert Bruner, dean of the Darden School of Business, University of Virginia.
How Karl Marx Saw It
In Volume III of Capital, Marx demonstrated why capitalism is unable to develop along a path of uninterrupted expansion and, instead, always evolves in cycles of booms and busts. Because the system is essentially anarchic, he contended, during periods of boom it is driven by a feeding frenzy of individualised expansion into new areas of activity. Inevitably, after time, this includes areas where the underlying productive activity is unable to sustain profitability. The cycle turns and a huge competitive struggle ensues to determine which capitals must be destroyed to allow the system to re-create itself in another cycle of expansion.
The global economic crisis is likely to have profound, long-range consequences for American politics and its relations with the rest of the world, severely constraining any effort to maintain or revive the Bush administration' s propensity for unilateralism, and posing a broad international challenge to free market ideologies, according to some experts. Perhaps, ironically, because of Africa's generally weak integration with the rest of the global economic system, it is believed many African countries would not be affected from the crisis, at least not initially. The wealthier ones who do have some exposure to the rest of the world, however, may face some problems. In the long run, it could be expected that foreign investment in Africa would reduce, as the credit squeeze takes hold. Furthermore, foreign aid, which is important for a number of African countries, is likely to diminish. In recent years, there has been more interest in Africa from Asian countries such as China. As the financial crisis is hitting the Western nations the hardest, Africa may yet enjoy increased finances.
Views From Within
The global economic crisis has spawned different reactions among experts and ideologues in Nigeria with some of them using the opportunity to lash out at western governments and world financial bodies. Leftist politicians have noted the interventions of the United States government with its $700 billion bailout and similar rescue plans by other western nations, despite their avowed commitment to a free market economy devoid of government intervention. The National Chairman of Democratic Alternative (DA), Abayomi Ferreira, emphatically stated that the global situation is a clear signal to African countries to develop an original blue-print that would effectively address problems of the continent.
In an interview with Daily Independent, he said: "Western nations have all along been running down socialism, but we have seen the measures they have taken recently - they are now nationalising their companies; they are buying back companies. As a matter of fact, the British Government has so far bought back two banks, with the Americans doing the same. The lesson for Africa is that we have to go back to the plan we had for the growth of Africa; we have to devise something original." Reacting to soaring opinions against foreign recommendation of free market economy by the U.S. Government and the World Bank and the IMF, former Presidential candidate of Africa Democratic Congress (ADC), Prof. Pat Utomi, disagreed. He explained that the World Bank had never recommended that African governments completely withdraw from the economy, but that what the world financial body had often queried was a government-dominate economy with its consequent promotion of inefficiency.
As Utomi told Daily Independent, that free market economy is very broad phenomenon that and stretched from the extreme laissez fair ideology, which advances the prime importance of market forces, to the liberalised interventionist ideology which emphasised the role of institutions in a market economy. This latter, he said, promotes government interventions in economic trends when necessary. "This is the version of free-market economy favoured by the Democrats in the US," he said, adding that, "the irony at the moment is that it is a Republican government that has now adopted the policy."
Festus Iyayi, former president, Academic Staff Union of Universities (ASUU) also joined in the fray. His words: "Neo-liberalism is the ideology that drives capitalism in the current period. Liberal democracy and the financial system are two major parts of the neo-liberal ideology, which places the rights of freedom of the individual over those of the community, and the ongoing financial crisis is a result of this emphasis." Dipo Fashina, also a former ASUU president, added: "Classical democrats and libertarians espouse the doctrine of non-interference in the market. Most liberal democrats support some redistributive interference in the market. But the point is that neither classical nor liberal democrats in economics have an answer to the problem of market failure."
In a speech given at the silver jubilee anniversary of The Guardian Newspaper, Kenya Prime Minister, Raila Odinga had stressed the need for African countries to evolve home-grown policies as well as political and economic framework that suits the African situation. His words: "I have come to Lagos direct from France, where I have been attending the World Policy Conference, hosted by the French Institute of International Relations. I told my fellow conference participants, comprising heads of state and government from all over the world, that the old order of aid and dependency has perpetuated under-development in Africa, resulting in debt portfolios that represent merely resources that have been diverted into personal wealth, leaving the common man and woman with nothing to show for this massive influx of international wealth." He continued: "I told them that the Millennium Development Goals established by the international community were but benchmarks that we in Africa must use to encourage efforts towards the achievement of greater national visions. MDGs alone will not eliminate poverty in Africa, nor will they ensure equity in resource allocation within our countries. These goals will only be achieved with good governance and sound economic policies formulated in the national interest and implemented in a non-partisan, equitable manner.
"We need the developed world and they need us. We need significant private investment, and they need a strong and prosperous Africa to be a good and dependable partner in the international trading community. We in Africa must shoulder our share of the responsibility in aiming for the UN's 'global partnership of equals.' We shall not achieve this lofty ideal without the groundwork and sound construction materials required to build a solid edifice that can stand the test of time. "That groundwork can only lie in a bold determination to commit long-term to good governance and leadership on our continent, building development- oriented solutions for our myriad problems, and embracing true humanitarianism in our democratic revolution. It is a vital step for all of us, whether we are Kenyan, Nigerian, Zimbabwean, South African or a citizen of any other country on this great continent.
"Terrible to recount, this has been a continent where our own people have visited on their brethren great wrongs and injustices. But this is our defining moment. We must seize it and never let it go. We have the power, we have the opportunity. We can change our world. "Our only enemy is inaction - otherwise, everything is possible. We must confront our demons, raise our heads proudly, shoulder the burden and go the extra mile. We must make democratic change - and all that this entails - not just possible, but a reality."
How Not To Be Victims
In the last several weeks, the mainstream media has questioned everyone who has been sceptical of what critics called the unbridled expansion of U.S-style capitalism. "The question on every reporter and television producer's mind appears to be, 'What will it take to solve this crisis of global capitalism?' They should ask, instead, whether it's worth saving global capitalism at all," said Dossani. More of Dossani: "In practice, neo-liberalism has meant a world order with the United States and its allies dictating economic rules that serve their own interests and, backed by neo-conservative ideology, using force or the threat of force to enforce those economic rules as and when necessary.
"There are alternatives to these ideologies, and many of them have their basis in already existing structures. For example, the Universal Declaration of Human Rights outlines a vision of a world where: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. "Though these words were written more than half a century ago, we're far from achieving those rights for all. Instead of these basic human rights, the economic system has been built upon a 'right to profit.' Our ability to build a just and sustainable economic system depends on the extent to which we can make profit subservient to human need.
"And that will never be possible unless all nations, including the U.S., agree on the principle of rule of law. The UN Charter outlines the framework for an international set of laws based on principles of sovereignty and self-determination. Just as we cannot have a functioning economic system without recognising the principle of human rights, we can't have a functioning political system until we accept the rule of law (and not the rule of force), as the driving principle behind international relations."
Some believe that the crisis has pointed the need for nations and peoples, especially Africans, to look inward for own socio-economic and political paradigms that suit their situations. Of all the arguments for and against market supremacy, critics seem to believe that the problem is not really in government managing public enterprises. The headache seems to be with human greed - that is the underlying factor in the two scenarios and its politics.
Bubbles, Booms and Busts
The 'shock and awe' (if you'll forgive the borrowing) in global financial markets is but the bursting of the latest bubble in world capitalism. For a brief span, imperial economists suggested that the age of boom and bust was a relic of the dusty past, saved by a kind of brilliant economic technocratic thinking that worked the markets like a well-oiled machine.
Inflation too high? Lower it by tightening the money supply.
Neat. Predictable. Manipulatable.
Except theory never fully captures the vagaries of life. Because theory ignores human compulsions like greed, avarice, or mindless stupidity.
It also ignores social and political realities, for example, that capital is divorced from national government structures, and as such, are not answerable to them. They are thus able to easily avoid taxation, regulation or extra-corporate oversight.
In the 19th Century, the robber barons simply walked into government buildings and capitals with satchels swollen with money. They literally bought off politicians to do their bidding. They do the same thing today, but they do it with a little more finesse. Today, they don't bring suitcases on the Senate floor, they donate to PACs, or invite their intended on golfing treks, where real business is done on the green. Then they take their pots of gold offshore, say, to the Caymans, and fuel the latest speculative, capital bubble.
The bubble swells, and eventually busts, and that's where the bought-and-paid for politicians come in handy. They transfer public money into private hands, all the while screaming "deregulations!", or "free market!" So the big dogs get paid on both sides of the bubble -- while it grows and after it bursts!
How can you lose? (Well, not you.)
If you believed in the hype and bought into the bubble, you lose. And as taxpayers, you lose. If you've been foreclosed on, you've already lost. If you want a good paying job, you've lost.
If you want a decent education for your kids or grand kids, you've lost.
For capital is hungry, and the beast must be fed.
Let me tell you what capitalists really think of the notion of "free markets." In 1995, Dwayne Andreas, then-chairman of the agribusiness giant, Archer Daniels Midland, told and interviewer, "There isn't one thing in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not from the Midwest do not understand that this is a socialist society."*
'Free market' is a talking point.
The only thing free, is the pain.
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