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.
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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.