'THE OTHER SIDE OF THE WORLD'

[Hoje Macau, Macau]

 

 

Financial Times Deutschland, Germany

Obituary for Neo-Liberalism; the Birth of a New Order

 

"The neoliberal ship's officers should be grateful that we live in a relatively moderate era. Not long ago, such failure by the upper classes would have been avenged with the guillotine.  … It can no longer be denied that what is needed is the effective supra-national regulation of the financial sector. There must be institutions that can take drastic-enough measures around the world to prevent the build-up of risk to the extent that we have seen. "

 

By Thomas Klau

                           

 

Translated By Jonathan Lobsien

 

February 27, 2009

 

Germany - Financial Times Deutschland - Original Article (German)

The neoliberal revolution is dead after three decades, because it lost touch with reality. Such policies have failed the task of bringing order to the global economy - it's time for a new world order.

 

The triumph of market liberalism now imploding before our eyes began thirty years ago. Prior to that, most Western consumers refused to allow reduced wages as a response to the forced transfer of wealth to the Arab World in the form of OPEC's energy-extortion. Ideology trumped reason: Three decades after the end of World War II, people felt that income growth was a vested right, although the rising cost of energy should have required a temporary renunciation of prosperity.

 

The Western economies came screaming out of the doldrums. The left-inspired redistributionist ideology of the post-war period shattered under the onslaught of a neoliberal counter-revolution, which could claim - with reason - a return to growth and prosperity.

 

Above all, there was a sense of entitlement and a blindness to reality on the part of those on small and medium incomes - which led to the implosion of the old model and the victory of a movement led by conservatives. Their protagonists were Friedman, Thatcher, and Reagan.

 

[The Telegraph, U.K.]

 

This time, it is the irresponsible sense of entitlement by the nouveau riche [newly rich] as well as blindness to reality on the part of political leaders which has led to the death of the neoliberal ideological cause. A consideration of the consequences has only just begun - but at the moment, the hurricane rages and the capsizing of the ship must be prevented. Yet the storm will blow over, and when it does, the passengers will turn to the ship's officers and demand that the old instruments of navigation be tossed into the sea. This the officers should do - and they should be grateful that we live in a relatively moderate era. Not long ago, such failure by the upper classes would have been avenged with the guillotine.

 

AN ABYSS OF POLITICAL RISK

 

Thirty years of redistribution and then thirty years of liberalization - it’s no coincidence that this is a time-period during which ideologies tend to fail. Decades-long success brings blindness to new realities. Thirty years ago it was the oil price shock that triggered a correction. Now a novel mixture of innovative financial technology and deregulated lending, an empty American piggy-bank and a full Chinese one, has brought the free-market economy to the brink of a collapse. Our growth was based on confidence in the load-carrying capacity of credit of the very lowest quality. The abyss of economic and political risk now opening up is intolerable for any society and it needs to be addressed, even at the price of radical reform.

 

'THE CHINESE ECONOMY'

[Hoje Macau, Macau]

 

Like most people, I myself am struggling to comprehend the causes and consequences of this crisis. I too, cannot imagine an answer that is anything but temporary. But the crisis makes it our duty to consider our political priorities for the next few years. Two observations are especially pressing.

 

The first concerns the content of policy. The danger of the century is that the struggle to achieve a growing economy will overshadow the battle against the growth in carbon dioxide emissions - despite all the government rhetoric being expressed in the background. The proposal put forward by environmental activists primarily in the area of climate change - which would entail an unprecedented increase in government spending - deserves serious discussion. The second observation relates to the political framework. This crisis arose out of the incapacity of an entire generation to recognize the economic consequences of the interaction of new technology, new legislation and the rise of new economic forces. This, too, could be called globalization.  

Posted by WORLDMEETS.US

 

The collective policies of all nations have failed at the task of affording the global economy a system of safeguards similar to those the nation-state once provided national economies. In defense of the honor of continental Europe, it must be said that early on, Berlin and Paris sounded the alarm about the common danger to their financial markets.

 

THE MOST SERIOUS CONSEQUENCES FOR EUROPE

 

It can no longer be denied that what is needed is the effective supra-national regulation of the financial sector. There must be institutions that can take drastic-enough measures around the world to prevent the build-up of risk to the extent that we have seen. Rather than laissez-faire, the introduction of new financial instruments merits suspicion.

 

This is the first step, but it is far from enough. What is needed is much greater macroeconomic coordination among the major economic powers. The old essentially transatlantic domination of the globe by the G7 is obsolete. The G7 didn't prevent this crisis, and they no longer have the power to combat its consequences effectively. Just like the energy producing nations, China, India and Brazil must be held more accountable. That's hard enough - and can only proceed if the old G7 powers are prepared to open a new chapter in the history of global relations.

 

The gravest consequences are in store for Europe. The danger that the crisis will prove an acid test for the euro zone and the E.U. as a whole is real. The otherwise erratic federal government has done exactly the right thing by signaling solidarity, even if the E.U. Treaty doesn't require it. But this won’t be enough to preserve the political existence of the E.U. if it intends to be an extra as the new global stage is erected. The Americans and Chinese long ago lost their patience with the institutional monkey-dance of the E.U., with its biannual rotation of presidents, confused political signals and the tug-of-war between governments and institutions in Brussels. The clock is ticking. If we Europeans still can't manage to confront the world in the next year with a representative who speaks credibly for all 27 members, you can get used to seeing one or the other [Americans or Chinese] arguing about the great issues - without us.

 

*Thomas Klau is a FTD columnist and heads the Paris Office of the European Council on Foreign Relations.

 

CLICK HERE FOR GERMAN VERSION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Posted by WORLDMEETS.US March 8, 8:25pm]