By Santhosh Shyamsundar
The current financial turmoil has driven the global economy to the verge of total collapse. Politicians, bureaucrats, and bankers around the world have been lamenting that the global financial system proved to be faulty. Can this be swiftly swept aside as a system failure or did they all fail the very system that was never meant to fail?
The warning bells have been tolling ever since the food price started to go through the roof earlier this year. Then it was the turn of the price of crude oil – driven high by speculators to a staggering USD147 a barrel. Again, top officials attributed the spike in oil price to the high demand from China and India. Records prove that India had actually decreased the purchase of crude and the cartel was busy misinforming the world.
This financial crisis is the mother of all crises – a disaster of biblical proportions. So much so that the Archbishop of Canterbury, Rowan Williams, made quite a confession: “Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves; he was right about that, if about little else.” Even if it isn’t a quantum leap of faith by the Archbishop, acknowledging the legendary atheist is definitely an admission that wisdom can be found even in people with whom you have an ideological difference.
The conservative president of France, Nicolas Sarkozy, is a classic example of what is wrong with some of our myopic world leaders. French fries are definitely a health hazard, but Sarkozian economics is even more dangerous. In September, speaking at Toulon in France, Sarkozy declared: “Laissez-faire is finished.”
Did he really mean to say this is the end for free-market capitalism...? It isn’t Fin, Finito or Kaputski. Sarkozy wants to reinvent capitalism with a heavy dose of morality involved in it….
If the French president is all for a cosmetic cure to the financial turmoil, the British prime minister is not to be left behind. Gordon Brown wants to negotiate a new Bretton Woods agreement. It was in 1944, at a conference in Bretton Woods, New Hampshire in the US, the International Monetary Fund (IMF) and the World Bank were born – to manage over a global financial system.
Joerg Huffschmid, professor of economics at the University of Bremen in Germany has been quoted in the media, “A re-edition of Bretton Woods would not suffice to lead the world to a new welfare status for all citizens of the world. The original Bretton Woods system did not consider the welfare of the countries of the south, which were colonies or neo-colonies at the time.”
And Gordon Brown wants a new Bretton Woods.
History is very clear about how colonial rule came to an end in most parts of the world: territorial imperialism was put down by freedom struggles. Neo-colonialism, in the form of neo-capitalism, too might come face to face with mass struggles.
If the tearing down of the Berlin Wall heralded the end of communism in Europe, the collapse of the Wall Street – the holiest shrine of ‘speculative capital’ – must mean something very profound. Banks are going bust – and it all started with Lehman Brothers.
Woody Guthrie, the quintessential American folk-singer of the Great Depression [the inspiration for Bob Dylan’s first incarnation], said it best: “Some will rob you with a six-gun; some will rob you with an ink pen.”
The wisdom behind the US government’s massive USD700 billion dollar bailout plan for the failed banks is questionable. Even Barack Obama is asking for the banks to be made more accountable if they are being bailed out with public money.
In the Communist Manifesto published in 1848, Marx and his co-author Engels lists the ten essential steps to communism. The fifth step is: “Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”
Pretty much what’s happening in the US right now – the centralisation of credit!
Christopher Hitchens, writing in Vanity Fair, explains it best through his disdainful phrasing of socialism for the rich and free enterprise for the rest: “A collusion between the overweening state and certain favored monopolistic concerns, whereby the profits can be privatized and the debts conveniently socialized.”
The bankruptcies of Texas energy giant Enron in 2001 and of Worldcom in 2002 – the largest bankruptcies in American history – ought to have taught the Federal Reserve a few lessons. Large-scale corporate and financial fraud at Enron provided an insight into ‘what is wrong with free markets.’ The fraud was so big that it triggered a massive collapse; wiping out thousands of jobs, more than USD60 billion in market value and USD2 billion worth of pension funds and the closure of Enron itself.
Arthur Andersen, which was one of the “big five” global auditing firms, had lucrative consulting contracts with both companies. They were also responsible for auditing the two companies' financial statements. It was a classic case of match-fixing. The investigation that ensued brought criminal charges against the top executives of Enron and Worldcom. Arthur Andersen was also forced to shut down.
The Sarbanes-Oxley Act came into being in July 2002 as a result of the big fraud at Enron and Worldcom. It was also meant to be a new beginning in American business: the idea of Corporate Governance became a reality, but somehow the banking industry got away with it.
As far as the common man is concerned, there have been a few silver lines in the darkness of recession and economic depression. Food prices have eased somewhat. The oil price has also experienced a steady fall – pushing it below USD60 a barrel. Big funds playing in commodity futures have left the scene.
Around the globe, the Juvenal question reverberates: quis custodiet ipsos custodes? (Who will guard the guardians?). Barack Obama is all for hope and change. And change we must; but would people be patient enough to seek hope in a hopeless situation? What Americans and so many people all around the world really need, is to be able to reclaim their ‘faith’ and ‘trust’ in the system, which is the state itself.
