Financial Debacle Discredits US Economic Model

The United States has been relentlessly preaching the mantras of
liberalization, privatization and deregulation to the rest of the
world. After the recent nationalizations and governmental interventions
here to prop up a financial sector undone by deregulation, such U.S.
advice to other nations wouldn't even pass the laugh test.

The attitude toward private banking has acquired a certain edge, as the New York Times notes.
"We must not allow the burden of the boundless greed of a few to be
shouldered by all," says President Lula of Brazil. Even the
ultracautious U.N. Secretary General Ban Ki-moon says, "The global
financial crisis endangers all our work. We need a new understanding on
business ethics and governance, with more compassion and less
uncritical faith in the 'magic' of markets."

As part of its plan to get U.S. firms into foreign markets, the
United States has tried to get other countries to open up their
financial sector, such as banks and insurance. Often, this has been
pursued through entities such as the IMF, which have made it a major
part of their program. This isn't surprising, since as Nobel-winning
economist Joseph Stiglitz points out in one of his books, the IMF has
changed its mandate "from serving global economic interests to serving
the interests of global finance." He also states that "the IMF and
other international economic institutions . . . are dominated not just
by the wealthiest industrial countries but by commercial and financial
interests in those countries, and the policies of the international
financial institutions naturally reflect this." In other words, Wall
Street calls the shots when it comes to such matters. Stiglitz should
know: He was the chief economist and senior vice president at the World
Bank before he was let go (reportedly at the behest of Clinton Treasury
Secretary Lawrence Summers) for his heretical thinking.

Skeptics of Washington's agenda now have every right to feel
vindicated. As much as the load that is going to be imposed on the
American economy by the cleanup, the burden on fragile developing
economies by such financial debacles could have been far more
catastrophic. So would have been the misery inflicted on their
populations by elimination of government programs and subsidies to
recoup the money spent on such bailouts.

Indeed, politicians abroad who advised against a rush toward opening
up the financial sector are saying, "We told you so." The Left parties
in India, which were part of the governing coalition till recently,
have claimed credit for stopping the lead ruling party from pursuing
reckless liberalization.

"If Union Finance Minister P. Chidambaram could claim that India was
not affected by the U.S. financial crisis and relatively insulated, it
was because the Left parties did not allow him to liberate the
financial sector, said CPI(M) General Secretary Prakash Karat on
Tuesday," reports The Hindu newspaper.
" 'The Bush Administration, which swears by the free market, which says
the market should rule and there should be no state intervention, was
planning to bail out the big bankers, big capitalists and big
speculators by providing $700 billion,' Karat said."

The one good thing that came out of the devastating Asian economic
crisis a decade ago was that the whole notion of having a completely
convertible currency (again pushed by the IMF and the World Bank) was
discredited, since countries like Indonesia and Thailand that had
floating currencies were devastated, while countries such as India and
China that managed their currencies escaped quite unscathed. If there's
any beneficial outcome of the current crisis here in the United States,
it is that countries around the world will realize that the financial
sector is too important to be left to the whims of a bunch of
high-rolling gamblers.