by system failure
At the end of 1992, just days after
Clinton’s election as president of the , Alan
Greenspan, head of the Federal Reserve at that time, went to see the new president.
The famous economist and supporter of the neoliberal economy of deregulation,
to withdraw his campaign promises for social reform, because, as he claimed,
the deficit reached a dangerously high level. Greenspan told Clinton that he should cut government
spending, so that interest rates would go down and the markets would boom. He
believed that markets would transform Clinton , not politics. It was the
beginning of the full deregulated market for the America and the world. US
The rise of computers during 90s, brought a new idea, that machines could create a stable world without the need of political intervention. Economists and bankers viewed the world as a giant economic system that now prevailed against all western governments. They believed that the way for a global economic stability, was for nations to open themselves up to the free capital flows. The computers created mathematical models that parceled out the loans and then hedged and balanced them so that there was no risk.
The large laboratory, chosen by the gurus of the free market to conduct their new experiment, was
South-East Asia. Under the American pressure, countries like
South Korea and ,
withdrew all their restrictions allowing the inflow of capital from the West.
This helped for the so-called “Asian miracle” in the economy. Thailand
But a group of economists in the White House, headed by Joseph Stiglitz, worried that, the flood of money from the West, would fund a massive speculative bubble in property, and when the boom collapsed, the money would flee, leaving countries like Thailand and South Korea decimated. According to Stiglitz, all this flow of money was not for the interest of
or US, but for the interest of a very small group of people making money from
these medium-term capital flows, i.e. some bankers and hedge funds. Korea
But the group faced the opposition of Robert Rubin, which was the Secretary of Treasury at that time, and former co-chairman in Goldman Sachs. Rubin was preventing the warnings of the group to reach the president.
The Asian crisis began in
Hundreds of thousands of offices and apartments were built, but nobody wanted
them, and brokers went bankrupt under the weight of loans. Investors from the
West panicked and rushed to get their money out of the country. The panic began
to spread first in Thailand . Housewives formed queues to give
their surplus to the government to save country, but this was not enough. South
Then, groups of technocrats of IMF arrived and offered billions of dollars in loans to stabilize the economies. The IMF argued that the reason of the crisis was that Asian economies were not westernized enough. In exchange for loans, they should turn to free market models. This meant cuts in government spending and elimination of the corruption and nepotism of the power elites. The crisis worsened and spread to
whose president Suharto was an “emperor” enclosed by a corrupt clique of
advisors and family members. At first, he refused to do what the IMF wanted, so
the IMF turned to Rubin. Indonesia
Rubin and the Treasury were determined to press Suharto to do what they wanted. In January 1998, Suharto retreated and signed an agreement with IMF.
received a huge loan to
stabilize the economy which worked for a while. But later, the Indonesian
currency collapsed, loosing 80% of its value and destroying the economy. The
exchange rate of the country collapsed and the economy went into free fall. Indonesia was
not the only one. In every country which received loans from IMF, such as Indonesia Thailand and , the economy was stable
for a while and then the exchange rate collapsed. Billions of dollars were
given to Asian banks from the IMF, but many of them were used immediately to
rescue western investors who wanted to take their money out of the country. South Korea
Providing billions of dollars in loans, the IMF rescued western investors and pushed the taxpayers of the countries deeper into debt because they had to repay the IMF. The result of the cuts was the destruction of the area. In
, the government subsidies
were removed as instructed by the western
bankers. Prices soared and within a few months, in a country of more than 200
million, 15% of the male workforce lost their jobs. Economic output fell by
14%. The economy collapsed and ethnic and religious strife began. The same
happened in Indonesia Thailand and .
Millions of people went back into poverty from which they thought they had
escaped forever. By the mid 1998, the Asian economies collapsed. It was the
biggest disaster for countries since the big recession of the 30s. South Korea
This was the first interference from outside in the deregulated market, which is supposed that could bring automatically stability and prosperity. And of course, the intervention was for the benefit of speculators and at the expense of the vast majority of the people.
At the beginning of last decade, when the towers of the
collapsed during 9/11 attacks, the market suffered the biggest drop in history.
Two weeks later, the “Enron” scandal revealed, and quickly became clear, that
this was just the tip of the iceberg of a massive fraud from the corporations.
Since the early 90s, many major companies were presenting fake profits, hiding
their debts, with the help of the largest accounting firms. The paradox is that
in the mid 90s, Greenspan had already realized that something was wrong with
the economy, but ultimately convinced himself that computers were increasing
the productivity in novel ways, too new to be detected in the data. World
After September 11, and given the great speculative bubble that was created during the previous decade, it seemed that the American economy was about to collapse. Then Greenspan took action by cutting down the interest rates several times. The goal was simple: to encourage American consumers to borrow and spend. The consumers’ desires would become the engine that would stabilize the system. It was a huge risk, because cutting the interest rates to almost zero, Greenspan released a flood of cheap money into the economy, which in the past led always to inflation and dangerous instability. But this time it didn’t happen. A huge consuming boom began, bigger than any other in history, without inflation. Everything seemed to remain stable and the system seemed that it could manage itself without any direct political control.
But ultimately, the reason for this unusual booming was the exact opposite. It happened due to the massive exercise of political power, from an elite thousand miles away. The Chinese government kept the exchange rate of the country at a low level. Therefore, the Chinese products became cheap and flooded
. And to pay for them, the
US dollars flooded America .
But rather than spend this money for the population, the Chinese leaders loaned
them immediately back to China
by buying government bonds. It was a perfect system of cheap goods and cheap
money inflow in the America ,
all controlled by the Chinese political power. And that’s what created
stability. From this, came an orgy of lending from banks to even most
unreliable borrowers in the US .
Although this time, the deregulated market had been stabilized thanks to the
political intervention of US ,
the bankers wanted to make more money. China
So finally, in 2008 the dream collapsed. Greenspan’s vision for a new world and Gordon Brown’s promise that there will be no more bubbles and cracks, turned out to be fantasies based on a wave of financial speculation. Speculation happened, because those who controlled the economy in
promised to build a new kind of democracy, based on the markets, which could
bring stability. But again and again, it led to the opposite, in chaos and
instability around the world. And now, finally it happened in the heart of the
West. But again, like in Britain South-East Asia more than a decade ago, those who controlled the economy, triggered the political power this
time, to save and protect their sovereignty. They asked from politicians to
save them with money and politicians agreed. And again, just like in South-East Asia, the price paid by the citizens of the
And again, the outside interference in the deregulated market, which supposedly could bring stability and prosperity alone, was based on the protection of speculative interests at the expense of the vast majority of the people.
And the scenario has been played so many times, that someone could easily predict what would happen.
been praised as a model economy and the “Celtic tiger” took the place of the
“Asian miracle”. But, as expected, the tiger died. An amount equal to 22% of
the GDP of the whole country has been given to save just one bank. Today, Ireland is
under close supervision, suffering from a monstrous total debt. In 2008, the
Greek government rushed to give 28 billion to bailout banks, even before the arrival
of crisis, and this was just the beginning. Ireland
Just before the recent elections in
the banker Loukas Papadimos secured another 18 billion for just 4 banks. Many
other bailout packages have been given to the banks meanwhile. Just compare all
these billions with the 1.4 billion euros by 2015 that the European Investment
Bank announced for the whole small-medium business sector in Greece , and you
will understand. Greece
And what was the result? Increase of unemployment, lost jobs, poverty, wage and pension cuts, destruction of the social state, increased debt and deficit. Not to mention that after the burst of the real estate bubble in
, financial investors from
all over the world massively turned to the most secure investment: the basic types
of food. The result was the peaking prices in just a few days and hunger or
malnutrition for millions of people in the developing countries. America
And now, the crisis is threatening countries like
approaching the heart of the eurozone. And the banks in those countries
continuously receive bailout packages of billions, with the majority of people
paying the price again, as it happened so many times before. It seems that,
this failed economic model, must be kept alive at any cost, because it is for
the benefit of the bankers and speculators. Spain