This is the text of an interview with William Greider on PBS in the late 90's when the Asian economies were going through a rough time.
It gives a larger context of the critics of neoliberal free trade, which NAFTA represents. It is long and dense, but worth reading in full.
http://www.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."
...
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."
The U.S. government and the IMF and the World Bank were wildly premature in suggesting that the rest of the world bought into the so-called "Washington consensus." It's true that Mexico and Latin American debtors and a lot of others, because they were in these desperate debt default situations, agreed under duress to do a lot of what the Washington consensus wanted. Mexico led the way in that and so did Brazil and some others. In Asia, there was more of a desire to cooperate with the Washington model of how things ought to work. But they were not so keen on surrendering their governing controls over economy and governing policy over which way the economy ought to go.
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.
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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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