This is from a long interview William Greider gave on PBS in 1999. Greider is a political economic reporter and analyst at The Nation. He has always been a beacon of clear headedness.
There's a few excerpts here. But if you really want to read a Big Overview of what is behind Clintonian Economics the entire interview is worth reading.
http://www-c.pbs.org/wgbh/pages/frontline/shows/crash/interviews/greider.html...What do you mean by the fundamentals?The core problem is that the world system, led by the United States, has pursued what is really a utopian idea. The idea that self-regulating markets, cut free from any moderating controls and regulations, will always correct themselves. That's a very alluring idea put out by the classical, neoclassical economists.
History has demonstrated repeatedly over 300 or 400 years of capitalism that it's wrong. That that's not what happens. Unregulated markets--their idea of equilibrium may be to swing widely back and forth at extremes. Sooner or later, they'll get caught in a period of wishful thinking or over investment, use whatever term you like. That illusion, bubble collapses and you've got ruin. General ruin.Then governments have to step in after the fact and say, "Well, we'll pick up the pieces because somebody's got to put the system back together again." That's the fallacy of the sort of liberalized system we've been pursuing. It's centrally about the global financial system, but it also is trading rules or the absence of trading rules. It's about labor rights. It's about social conditions, safety nets in poorer countries, as well as wealthy countries.
There's a rather long list of things that governments ought to be addressing. There is an argument underway. I think it's fair to say that a debate among learned economists and government policy makers, especially outside the United States has started. But, at least in the United States, rhetoric aside, this government has said, "The thing works pretty well. We had some catastrophes in Asia, but those weren't our fault. They weren't the system's fault. As soon as we get them straightened out, we'll be back on the upward path again."
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What is the "Washington consensus?"The Washington consensus is a phrase that either the World Bank or the IMF concocted not that long ago, a decade ago, to describe the world finally coming to agreement that the Washington idea--that is the American idea of how the world ought to change as one of--if not unanimity, at least an overwhelming endorsement.
The Washington idea is trade liberalization. That is, doing away with barriers and tariffs and all of that stuff. These big trade agreements, the GATT agreements that come along every few years. But also liberalizing financial systems, breaking open each nation's banking system, capital markets, stock markets, bond markets, the whole smear, to foreign investment without any barriers or rules or whatever, and basically to harmonize the whole world in its national financial system rules.
Along with that comes an economic component, which is a very conservative, finance driven economic policy and orthodoxy which says, "You have to balance your budget ... You can't have an industrial policy for development. Basically, you've got to give up your sovereign government powers to this global system and trust the global system to lift you out of poverty."
...In any case, this laissez faire--in the rest of the world, it's called the neo-liberalism of the United States--has now met its great crisis because it demonstrably led to the present moment in which not only are countries collapsing, but the IMF itself doesn't have a very good idea of what to do about it. In fact, there are some destructive things in the pursuit of maintaining its orthodoxy, the Washington consensus. So one element of the debate underway now is surely it doesn't make sense for the entire world to play out of one playbook designed out of a particular history and culture called the United States, that surely there ought to be room for some variation ...
But take the Washington consensus ... the U.S. has been the lead preacher and this administration particularly so?This administration is unique because it's a Democratic administration that totally embraced from the beginning not only the model of the Washington consensus and its principles, but the major constituencies for the Washington consensus--which are banking and finance, that is brokerages and so forth, and the multinational companies of the U.S., the Business Roundtable, the Fortune 200.
I think partly to demonstrate its sincerity, Bill Clinton and his Treasury secretary and his Commerce secretary and the whole bloody government were like cheerleaders at a football game as the booming Asian countries and others became targets for their policies.
I can't think of a single instance, of any importance anyway, in which the Clinton administration went against the desires of the private sector that it was trying to woo as constituents. That is, bankers, Wall Street finance, the Motorolas, Boeings and AT&Ts, and long list of major American multinationals. That was its trade policy. That was its global economic policy and in some ways, still is, despite the setbacks.
The Clinton administration coincided roughly with the end of the Cold War ...There's a longer history that really starts 15 or 20 years ago, but what happened is the Clinton administration came to power, is that the fruits of breaking down financial controls in other countries, liberalizing some markets and lots of things, convinced Wall Street and global investors generally that this is the moment and we have to get into those developing countries ... and seize the opportunity.
So that sets off this huge flow of overseas investment. It's doubled, tripled in a matter of four, five years. The banks and the hedge funds and all the others are going the same way. This is just beginning as Bill Clinton comes to power. I don't know the inside discussion, but I read it as those people saying, "Here's the wave of our time. Let's get aboard and we'll ride and we'll transform not only the U.S. position in the world, but we'll also transform maybe domestic politics. We'll have a whole lot of supporters the Democratic Party didn't use to have."So it's a little bit opportunistic and it's probably also quite sincere and idealistic in that they thought this was the answer that they were going to embrace.....
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Are you optimistic or pessimistic in terms of ... the part of our decision makers?I'm deeply ambivalent about our leaders. Especially the policy debate, because some things I wrote in a book two or three years ago were widely, if not universally, dismissed and disparaged at the time by economists, are now the grist for this debate and get talked about in very conventional places.
On the other hand, America, especially because of the peculiar way we have flourished amid everybody else's trouble, is in danger of its own hubris of getting lost in this sort of self congratulation that, "We're right and everybody else is wrong; therefore, we don't have to worry about this anymore. It's their problem. They'll have to be like us or they'll just suffer." I think that is so wrong, not to mention cruel, way to look at the situation. But it's an easy out for powerful people.
I mean, if you go back to how our government and Wall Street reacted to the crisis that unfolded first in Asia, they plucked a lot of good cover stories to explain this to the American people and to explain it to themselves. They said, "This is crony capitalism. It's because their banking system doesn't have good rules like our banking system. It's because their stock markets are full of fraudulent values, whereas ours is full of sound values," and so forth. The whole argument was, "It's not our fault. It's their fault. We'll just go on without them if they don't want to get with us."
First of all, you can't have been watching American politics for the last 15 or 20 years without recognizing that crony capitalism is very much part of the American system. I'm talking about the close, intimate and financial connection between Wall Street, for instance, and our government. Not just the fact that the Treasury secretary used to run Goldman Sachs, but the fact that the Congress and this president, especially, have been financed in large ways by Wall Street and it shows in their policies. Favors are awarded through the federal government all the time, not to mention state and local governments, to particular industries and sectors. That looks very much like crony capitalism to me.
The second part of that is that it allowed people not to face any of the bigger questions, to say, "Wait a minute. There's something wrong here. Let's start having a serious discussion about what's wrong and argue over how to fix it." The establishment in America, and there is an establishment, has pretty much evaded that debate in public.
Now, it's true that in private some of those people are wringing their hands and worrying sincerely about what has to be done. But I don't think you should reform this system in the back room. It's got to involve not just the American public, but the Europeans and the Japanese and all of those poorer countries that have been dragged down. I don't think we can solve this with a few conferences and discussions in Washington and New York.
But you're not seeing much of admission of our culpability in any of those ...With a couple of eccentric voices excepted, I don't think any of the elite in America, whether they're academic or government or financial or business, have been willing to face the deep implication that in some ways, despite our good intentions and our beliefs, we helped cause this crisis. By that I mean we pushed the Washington consensus on countries that weren't ready for it. We promoted the stern medicine. We promoted the illusions of these booming emerging markets that were going to make everybody rich if we just got in.
In this new global system, who has the power? Who's in charge?Once national governments have retreated from exercising power--that is, repealed their controls on capital flows in and out of their economies--the markets are in charge. That started gradually in the early 1980s and then accelerated so that by the time we got to the '90s, it was the big reality. The easy way to see this is the central banks, the biggest ones, are allegedly in control of things and that's the popular mythology.
In the early '80s, the Federal Reserve and the BundesBank and three or four other major central banks had reserve assets ready to deploy to protect currencies or do whatever they had to do. There were probably two times, three times larger than the daily market, financial market activity around the world.
By the early 1990s, the relationship is reversed. The financial activity has grown so ferociously and fast, whether it's currencies or international bonds or lending or whatever, that it now dwarfs those central banks. So that one financial expert said to me, "It's like people going out with a pea shooter to hunt elephants." The central banks have to pretend like the pea shooter is going to hurt.
But, in certain circumstances, the markets will roll over everybody, including even the Federal Reserve. That's yet another reason why we've got to put some moderating controls on this system. Because I think what events have demonstrated clearly is that, by their nature, financial markets are both unstable, that is they're prone to change this way and that.
But also they're not going to make any more political decisions for the rest of us. They can't. Again, that's not what they do. That means you've got to have a government presence, some rules, some operating rules, which at least moderate their excesses and punish them for their recklessness.
So when they all decide to act ... if everybody's in on the same bet ...Yeah. I mean, George Soros can't topple governments by himself and Citibank can't and Barclay's can't. But what happens when they're all playing in the same direction, betting against a major currency, for instance, they can even overwhelm central banks and even the Federal Reserve in the right circumstances. Because they can literally deploy more investment capital going in one direction than the major central banks have to counter them, that's an unreal situation when all the leading governments of the world have agreed to not exercise their power and turn it over to unregulated financial markets, which is essentially what's happened.
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