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Aftermath: A New Global Economic Order?
The global financial crisis showed deep problems with mainstream economic predictions. At the same time, it showed the vulnerability of the world's richest countries and the enormous potential of some poorer ones. China, India, Brazil and other countries are growing faster than Europe or America and they have weathered the crisis better. Will they be new world leaders? And is their growth due to following conventional economic guidelines or instead to strong state leadership and sometimes protectionism? These issues are basic not only to the question of which countries will grow in coming decades but to likely conflicts over global trade policy, currency standards, and economic cooperation.
Contributors include: Ha-Joon Chang, Piotr Dutkiewicz, Alexis Habiyaremye, James K. Galbraith, Grzegorz Gorzelak, Jomo Kwame Sundaram, Manuel Montes, Vladimir Popov, Felice Noelle Rodriguez, Dani Rodrik, Saskia Sassen, Luc Soete, and R. Bin Wong.
The three volumes can purchased individually or as a set.
Contributors include: Ha-Joon Chang, Piotr Dutkiewicz, Alexis Habiyaremye, James K. Galbraith, Grzegorz Gorzelak, Jomo Kwame Sundaram, Manuel Montes, Vladimir Popov, Felice Noelle Rodriguez, Dani Rodrik, Saskia Sassen, Luc Soete, and R. Bin Wong.
The three volumes can purchased individually or as a set.
- GenresEconomics
296 pages, Paperback
First published May 1, 2011
24 people want to read
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September 29, 2013
Aftermath:
Sassen points out that what we call the financial crisis is in fact "two very separate crises: the crisis of the people of what gotten these mortgages and the crisis of confidence in the investor community…. The crisis of home owners (called at a few hundred billion dollars) was the little tail that wagged the enormous dog of trust in the financial system." (34)
She also notes that that finance needs to constantly occupy new arenas in order to grow its profits, but that at some point when everything becomes financialized, there will be no further scope for profit making. The last frontier is the unbanked sector of the emergent global middle class. After that, the only option will be straight looting of the state's coffers.
Closes on a hopeful note that the crisis will serve as a wake-up call for the need to invest more in housing, environmental clean-up, sustainable agriculture and other liberal wish-list items. Fat fucking chance.
Ha-Joon Chang points out the financial crisis has only underscored what he has long asserted: that the rich countries do not apply the medicine to themselves that the always try to impose on the periphery. Chang's first effort in this arena focused on trade liberalization (the rich countries were never liberal in their own early days but demand it of currently peripheral nations) but he makes the same point about bailouts and austerity now, saying that for the most part the core nations refuse to apply austerity to themselves. (This might come as news to Americans and Britons.)
Chang does concede that "there was a brief period between the end of World War II and the 1970s when the developed countries took a more enlightened approach to their dealings with the developed nations." (41) At the end of the day, his key point is that the whip hand belong to the rich countries: "If these countries abandon, or at least significantly tone down, their neoliberal policies, they are more likely (although not guaranteed) to rewrite the global rules in a way that gives the developing countries a greater policy space." (59) "There is simply too much money, too much power, and too much intellectual prestige at stake for the neoliberal regimes to go quietly." (61)
Dani Rodrik provides a gloss on his major thesis, which is that there is in fact a formula for poor countries to do well in the global economy, even if it is at odds with the Washington Consensus: xplicit industrial policy (trade protection, subsidies, tax/credit incentives), undervaluation of the currency, and repression of finance. This leads to a central observation that seems counterintuitive: while high-growth countries might expect to be investment magnets, in fact they are typically net-exporters of capital. He explicitly points out for industrial policy to work the government must have (a) an ability to recognize that it has made mistakes and correct course; (b) not be (too) corrupt. Societies that have the social solidarity (or capacity for repression, he doesn't mention) that allows for wage restraint also have a signal advantage.
The most useful paper in the book is actually by the two least know academics, Piotr Dutkiewicz and Grzegorz Gorzelak, who discuss how the Eastern Europe Communist economies were actually much more diverse than they are generally characterized in the west (a characterization which tends to lump them all into the basket case category), and that the particular course of the post-1991 economy depended on the structure of the economy under Communism. "A chilly forecast is unfolding socially and politically… the welfare state is costly and lesson number one is that one can dismantle such costly machinery with no significant political costs as part of the crisis austerity measures. Second, CEE countries served as a laboratory for another test--how far can one push labor with significant protests and policy dislocations. [Third] the aftermath of the crisis will generate more populist pressure that in turn may produce anti-immigrant, isolationist, and anti-EU policies." (202)
Derlugian argues that in fact the USSR was "extraordinarily successful developmental dictatorship." Modernization has always been a central idea in the life of the Russian state, looking to other models for their own development. In the early modern period, Constantinople formed the dominant imaginary. "The results of Soviet collapse proved disastrous at all levels for the former satellite countries…. Politics receded into the hidden abode of oligarchic intrigues, occasionally bursting into the open in puzzling scandals or mysterious contract killings. Social inequalities in the meantime grew to Third World levels." (228) Ultimately, he points out "it is the impersonal structures of the capitalist world economy that generate the games in which it becomes individually rational for the peripheral elites to pursue the strategies of wealth accumulation that undermine the collective positions of their own countries." (229)
Sassen points out that what we call the financial crisis is in fact "two very separate crises: the crisis of the people of what gotten these mortgages and the crisis of confidence in the investor community…. The crisis of home owners (called at a few hundred billion dollars) was the little tail that wagged the enormous dog of trust in the financial system." (34)
She also notes that that finance needs to constantly occupy new arenas in order to grow its profits, but that at some point when everything becomes financialized, there will be no further scope for profit making. The last frontier is the unbanked sector of the emergent global middle class. After that, the only option will be straight looting of the state's coffers.
Closes on a hopeful note that the crisis will serve as a wake-up call for the need to invest more in housing, environmental clean-up, sustainable agriculture and other liberal wish-list items. Fat fucking chance.
Ha-Joon Chang points out the financial crisis has only underscored what he has long asserted: that the rich countries do not apply the medicine to themselves that the always try to impose on the periphery. Chang's first effort in this arena focused on trade liberalization (the rich countries were never liberal in their own early days but demand it of currently peripheral nations) but he makes the same point about bailouts and austerity now, saying that for the most part the core nations refuse to apply austerity to themselves. (This might come as news to Americans and Britons.)
Chang does concede that "there was a brief period between the end of World War II and the 1970s when the developed countries took a more enlightened approach to their dealings with the developed nations." (41) At the end of the day, his key point is that the whip hand belong to the rich countries: "If these countries abandon, or at least significantly tone down, their neoliberal policies, they are more likely (although not guaranteed) to rewrite the global rules in a way that gives the developing countries a greater policy space." (59) "There is simply too much money, too much power, and too much intellectual prestige at stake for the neoliberal regimes to go quietly." (61)
Dani Rodrik provides a gloss on his major thesis, which is that there is in fact a formula for poor countries to do well in the global economy, even if it is at odds with the Washington Consensus: xplicit industrial policy (trade protection, subsidies, tax/credit incentives), undervaluation of the currency, and repression of finance. This leads to a central observation that seems counterintuitive: while high-growth countries might expect to be investment magnets, in fact they are typically net-exporters of capital. He explicitly points out for industrial policy to work the government must have (a) an ability to recognize that it has made mistakes and correct course; (b) not be (too) corrupt. Societies that have the social solidarity (or capacity for repression, he doesn't mention) that allows for wage restraint also have a signal advantage.
The most useful paper in the book is actually by the two least know academics, Piotr Dutkiewicz and Grzegorz Gorzelak, who discuss how the Eastern Europe Communist economies were actually much more diverse than they are generally characterized in the west (a characterization which tends to lump them all into the basket case category), and that the particular course of the post-1991 economy depended on the structure of the economy under Communism. "A chilly forecast is unfolding socially and politically… the welfare state is costly and lesson number one is that one can dismantle such costly machinery with no significant political costs as part of the crisis austerity measures. Second, CEE countries served as a laboratory for another test--how far can one push labor with significant protests and policy dislocations. [Third] the aftermath of the crisis will generate more populist pressure that in turn may produce anti-immigrant, isolationist, and anti-EU policies." (202)
Derlugian argues that in fact the USSR was "extraordinarily successful developmental dictatorship." Modernization has always been a central idea in the life of the Russian state, looking to other models for their own development. In the early modern period, Constantinople formed the dominant imaginary. "The results of Soviet collapse proved disastrous at all levels for the former satellite countries…. Politics receded into the hidden abode of oligarchic intrigues, occasionally bursting into the open in puzzling scandals or mysterious contract killings. Social inequalities in the meantime grew to Third World levels." (228) Ultimately, he points out "it is the impersonal structures of the capitalist world economy that generate the games in which it becomes individually rational for the peripheral elites to pursue the strategies of wealth accumulation that undermine the collective positions of their own countries." (229)
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