I just re-read Susan Strange’s article, “The Westfailure System” in the Review of International Studies 25, 3 (July 1999). In either early 1999 or late 1998 (depending on the editorial schedule of RIS), she wrote:
“I have put the financial failures of the state-based system first because my current research has convinced me that it is the most acute and urgent of the current threats-without-enemies. If we do not find ways to safeguard the world economy before a succession of stockmarket collapses and bank failures eventually lands us all in a 20-year economic recession — as the history of the 1930s suggests it might — then no one is going to be in the mood to worry overmuch about the longterm problems of the environment.”
I doubt she would be rejoicing at the accuracy of her predictions about the fate of the Copenhagen climate talks in the face of the global financial crisis. OK, maybe not a 20 year recession, but the insight is still pretty good.
What I find less satisfying in the article, but only because the argument is only sketchily developed, is her “What is to be done?” section. She asks for the emergence of a viable opposition to the hegemony of a transnational corporate class (TCC), an opposition grounded in “an emerging global civil society”. Not anti-market or anti-business (she draws a distinction between small and medium-sized firms and the TCC), but transcending the state and existing multilateral institutions. She concludes with a message to academics:
“We have to escape and resist the state-centrism inherent in the analysis of conventional international relations. The study of globalisation has to embrace the study of firms no less than of other forms of political authority. International political economy has to be recombined with comparative political economy at the sub-state as well as the state level. It is not our job, in short, to defend or excuse the Westphalian system.”
Go Susan. Which is why the sort of increasingly rare investigative journalism evident in today’s Washington Post story about AIG
is worth highlighting — great material for tracing the inner workings of the inciters of the herd, the “animal spirits” in action…
I suspect you enlightened readers of the Duck already know this stuff (Strange herself repeatedly says that the ideas she is presenting are “kids-stuff”), but I would be interested to hear comments on whether the global civil society approach has really gained any traction in the last decade.
A longstanding plan in my circle at Columbia was to take a large number of existing game-theoretic models, apply an infinite discount rate (rendering the value of future gains and losses effectively zero), and submit our findings to Rationality and Society as an article entitled “The Impact of Belief in the End Times on Common Non-Cooperative Games.”
So I’m sad to report that anecdotal evidence suggests our findings, had we proceeded with the plan, might have lacked any empirical validity. Tim Burke:
The scene: the supermarket checkout line this afternoon. The woman ahead of me and the clerk are having an animated conversation.
Clerk: “I’ve read the Left Behind books, you know. It makes you think, it really does.”
Woman: “Yes, it’s just like Revelation now.”
Woman: “You know Our Lady of Guadalupe? Well, she’s from Mexico City too. So it makes sense that it would start there.”
Clerk: “Though I thought it wouldn’t be until 2012.”
Woman: “You have to be ready to meet Our Maker anytime. I think this is it, though.”
Clerk: “The Aztec calendar is more accurate than ours, isn’t that true.”
Woman finishes paying, walks away. As I leave the store, she’s looking over her receipt carefully and heads back into the store, looking to question something on the bill. As I head out the door, I look back and she’s energetically showing the receipt to the manager.
But I can’t help wondering.
Perhaps the woman was simply hedging her bets? She might, after all, worry about being one of those left behind….
Cases in Israel and New Zealand.
Back to clearing the writing and reviewing assignments on my desk….
Tim Burke expresses his outrage at the oversized sense of entitlement reflected in Jake DeSantis’ letter of resignation from AIG. Next, two commentators show up and demonstrate not only a sense of entitlement, but a total disconnect from the way the economy works for most Americans, that makes DeSantis look like Francis of Assisi.
All worth reading, except for my own comment. Tim wrote a better one, apparently at the same exact time I crafted mine.
And just complete the nationalization process.
In return for the bailout, the government took an 80 percent ownership stake in the company. Liddy was recruited by former Treasury secretary Henry M. Paulson Jr. to run the company. Since then, the rescue package has ballooned. But both the Bush and Obama administrations have been reluctant to completely and explicitly nationalize the company, though this could have avoided the current flap over bonus payments….
I know the administration is worried about the political backlash, but the backlash will ultimately be worse if they don’t do it.
Or sic Robin Hood on ’em.
If I were to speculate on what circumstances might lead to a significant curtailment of central bank autonomy in the United States, I imagine I would come up with a scenario that looks something like this one. If Josh Marshall’s informant is right, it might be pitchfork time for the Federal Reserve:
Josh, your reporting on the AIG credit default swap/counterparties issue has been spot-on. But to understand what happened there, you have to understand the Fed’s “Maiden Lane” vehicles and how it’s used them to avoid what Congress intended with TARP, which was the real story that came out of Dodd’s hearing on the AIG mess today. And the roots of it go back to the Bear Stearns rescue last year.
Image source: https://www.finestprospect.org.uk/Mediaeval/Med.htm
John Dickerson asks “Is it Obama’s Fault the Dow Is Tanking?” and provides “yes” and “no” talking points. Josh Marshall thinks the answer is no:
I was just watching Chris Matthews explaining how the Dow is President Obama’s “scoreboard” and how people are going to start getting angry at him soon if he’s not able to get the Dow to stabilized and start going up soon… There does seem to be a certain lack of comprehension of the fact that there are economic realities, actual losses, underlying the steep stock market decline.
I don’t watch much any cable news these days, yet I can guess that some number of talking heads are nattering on about how “the market” is passing judgment on Obama’s plans, and finding them wanting.
What I want to know is: why we should care? Of course I don’t like seeing my last ten years of savings getting hammered; I’d be rather pleased, in fact, if the stock market rallied for a very long time. But shouldn’t it be pretty obvious by now that the collective judgment of “the market” isn’t worth sh*t?
I’d hoped that at least one positive externality of the implosion of our financial system would be an end to all the blather about how we should look to Wall Street’s group mind for useful assessments of just about anything, let alone the best way to clean up the mess it made for us. After all, these are the same people who watch CNBC and think “moral hazard” means spending money on people making less than $250K a year.
Steven Mufson and Lori Montgomery report in The Washington Post:
Despite a growing sense of urgency, economists across the political spectrum continue to criticize the congressional stimulus plans. Most economists agree that the Senate alterations in the plan would undermine stimulus aims. Taxpayers who fall under the AMT are generally well-off enough to be able to save some of the tax cuts they receive, delaying any positive effect on the economy. By comparison, school aid to states would probably be spent immediately to prevent layoffs of teachers.
Let’s hope the reconciliation process restores some sanity to the Senate bill.
Thousands of people have held rallies across Russia protesting against what they describe as the government’s mismanagement of the economy.
The biggest demonstration took place in the eastern city of Vladivostok, where protesters demanded the resignation of Prime Minister Vladimir Putin.
In the capital Moscow, police arrested a number of people at an unauthorised gathering by a radical party.
Meanwhile, government supporters also held their rallies across the country.
Protests on such a large scale were unthinkable just a few months ago as the economy boomed with record high oil prices and as the Kremlin tightened its grip over almost all aspects of society, the BBC’s Richard Galpin in Moscow says.
But now with the economy in deep trouble, there is real fear amongst ordinary people about what the future will hold, he says.
He adds that unemployment is rising rapidly, as are the prices of basic food and utilities.
I cannot emphasize enough how much of the Kremlin’s legitimacy rests–either directly or indirectly–on good economic performance.
There’s a lot more to write about recent developments involving the Russians. I hope to get around to it soon.
I’ve been buried under a lot of work, but I want to surface long enough to say:
At least we’re drawing the line at the UAW. Can’t have those guys pulling in an extra few bucks at taxpayer expense.
The Chinese Communist Party has sunk all of its legitimacy, understandably, into the continued growth of the Chinese economy and a steady increase in their citizens’ standard of living.
One of the “nightmare” scenarios for China watchers is that, faced with an inability to generate enough jobs to satisfy domestic needs, the party turns to aggressive nationalism as an alternative means of staying in power. But with thawing relations between Taiwan and China, the party’s targets are more limited than they once were.
So what to do? How about force companies to continue employing workers?
Companies in two Chinese provinces, Shandong and Hubei, have been told they must seek official consent if they want to lay off more than 40 people.
The order highlights the Chinese authorities’ concern over mounting job losses.
As China’s main external markets plunge into recession and export orders shrink, layoffs have multiplied in the country’s big manufacturing regions.
In Shandong alone, nearly 700,000 people have lost their jobs this year.
In southern Guangdong, tens of thousands of firms have closed, sparking off reverse migration to the countryside by redundant workers.
China’s economic growth has slowed sharply this year to around 8 percent – high by world standards, but much less than the double-digit figures seen for years.
If the one-off boost from the Olympics is factored in, even that number may be further reduced.
Binyamin Appelbaum writes in the Washington Post that:
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.
The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don’t serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program.
I don’t know why anyone thought putting the Crony-Capitalism-‘R’-Us administration in charge of $750 billion in slush money to shore up the financial system was a good idea.
Let’s stop pretending that the banks are doing us a favor and just nationalize them already, okay?
Nothing like a global financial crisis to make the IMF relevant again.
In all seriousness, though, after the 1997 East Asian financial crisis it seemed that the IMF was in danger of irrelevance. Very few countries were willing to accept the conditions required by the IMF for loans. But with the world only a few steps back from the brink, that appears to be changing. And with the outcome of the Ukraine-IMF negotiations pending, we may soon get a sense of how much the IMF is willing to require in exchange for cash infusions.
If British Prime Minister Gordon Brown and French President Nicolas Sarkozy have their way, the advanced industrialized nations will come together to negotiate a new economic order. But they will do so in a world in which the US and the European Union enjoy roughly equal GDP (with a slight advantage for the EU right now). When Bretton Woods was negotiated, in contrast, the US controlled about half of global economic production.
In other words, any such bargain would be the product less of US hegemony than US-EU comity, with China, Japan, and India as important players in the mix. This is, whatever one thinks of its merits or chances, a bold call to build a multipolar economic institutional order. It signals how much the world has changed not only since 1945, but also since the “unipolar moment” of the 1990s.
Switzerland is bailing out UBS, but some say the banking system won’t melt down. The lead story on the Financial Times website?
IMF ready to help stabilise Ukraine
The credit crisis deepened as Hungary and Ukraine turned to international institutions in an effort to avoid following Iceland into financial turmoil and US industrial production suffered its largest monthly decline since 1974.
I don’t think this is what McCain meant when he told us to “watch Ukraine.”
When Obama’s participation in an anti-redlining lawsuit is characterized as a “smoking gun” for his culpability in the current crisis, I know that we’re through the looking glass.
The bizarreness of attempts to blame the Community Reinvestment Act (CRA) and ACORN for the current subprime crisis is so totally bizarre that it raises an important question: is the point of all of this to (1) simply find some way, no matter how warped, to blame Obama for the crisis or (2) also to plant the seeds for a campaign to bring back discriminatory lending practices?
the peoples of the advanced industrial countries could live in Zimbabwe.
Zimbabwe’s annual inflation rate – already the world’s highest – has soared to 231,000,000%, newly released official figures for July show.
The rise – from 11,200,000% last month – was largely due to increases in the prices of bread and cereals.
A landmark power-sharing deal between President Robert Mugabe and opposition leader Morgan Tsvangirai has failed to ease the country’s economic crisis.
I bet the Icelanders didn’t realize that they had it so good.
Brad DeLong finds… uh… fault with McCain’s “game changer.”
There’s a big difference here: Democrats want to prevent depression and support the financial markets by investing taxpayer money in banks with troubled assets. Republicans want to give taxpayers money away to the shareholders and managers of banks with troubled assets.
I would say that this is unbelievable, but I do believe it.
My guess, however, is that most Republicans don’t want to do this. Those “reaction meters” took a nosedive among Republicans when McCain proposed the plan at last night’s debate.
Anyway, I get the sense that a great many of the People Who Know What They’re Talking AboutTM think the United States should be doing something along the lines of what the Labour government in the UK has proposed. And there’s even some indication Treasury may be heading in that direction. So why can’t we just explicitly adopt such a policy?
I think there’s a good argument to be made here for the importance of norms and discourse in understanding political economy. “Material incentives” can’t easily explain the way that most people “just assume” explicit and comprehensive nationalization “isn’t politically viable.” Those hurdles have everything to do with current cultural constraints.
Image source: Damn Interesting