THE ROARING NINETIES

This past week the London Guardian ran two articles excerpting from renowned economist Joseph Stiglitz's new book The Roaring Nineties.

Part one:

The fruits of irrationality

Our emerging understanding of the 1990s requires that we admit - to ourselves and the world - that we were engaged in a misguided attempt to achieve growth on the cheap.

Instead of curbing consumption to finance our boom, the US borrowed heavily, year after year from abroad, at a rate of more than a billion dollars a day. We did this to fill the widening gap between what we were saving and what we were investing - a gap that opened in earnest under Ronald Reagan but grew under George Bush Sr and Bill Clinton, and has reached new dimensions under the new President Bush.

And

The central lesson that emerges from this story of boom and bust - that there needs to be a balance between the role of government and the markets - is one which evidently the world has had to learn over and over again. When countries got that balance right they grew strongly - America through much of its history, East Asia in the sixties, seventies and eighties. When countries got that balance wrong, veering either toward too much or too little government, disaster awaited. Although the failures of excessive government - evidenced by the collapse of the communist system - are the most dramatic, there are failures on the other side as well. If we in the Clinton administration sometimes lost that balance, matters have become even worse in the next administration - with the predictable consequences that our economy's performance has become worse.

For the entire article, click here.

Part two:

New world potion that was poison to Dr Sam

That is, Uncle Sam as a snake oil salesman to the third world: the economic roots of anti-Americanism.

The international agreements reflected our concerns, our interests: we forced those abroad to open up their capital markets to our derivatives and speculative capital flows, knowing how destabilising they could be. But Wall Street wanted it, and what Wall Street wanted, it more than likely got. Developing countries were told to open their markets to every form of import, including the things corporate America was best at, such as financial services and computer software.

Meanwhile, we maintained stiff trade barriers of our own on behalf of US agribusiness, thereby denying our market to the farmers of the third world. To a country fallen on hard times and having trouble paying its debts, our standard advice was to slash spending - even though we had routinely relied on deficit spending to get us out of economic downturns.

And

The policy framework we pushed abroad was the one that would help our businesses do well abroad. At home, there was a check on these policies, caused by concern for consumers and workers. Abroad, there was none. At home, we resisted pressure for changes in the bankruptcy law that would unduly hurt debtors. Abroad, a primary concern in any foreign crisis seemed the promptest and fullest repayment of debts to US and other western banks, even to the point of supplying billions of dollars to ensure that they happened. The deregulation mantra that we pushed too far at home we pushed even further abroad.

Not surprisingly, the policies we pushed and the way we pushed them generated enormous resentment. The already visible results include growing anti-Americanism in Asia and Latin America. Today, in many countries, the endorsement of a policy by the US government is almost certain to lead to its defeat.

For more, click here.

I think I can sum this up in one sentence: the hypocritical philosophy of neo-liberalism, which is now the conventional economic wisdom, gets the lion's share of the blame for the very dangerous situation in which our country now finds itself. Greed is not good and the market is not magical. That so many intelligent Americans so blindly believed (and still believe) such bullshit is a profound lesson in and of itself. My faith in the human race grows ever weaker.

Thanks to J. Orlin Grabbe for the tip.

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