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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

standing on the sidelines watching « Previous | |Next »
September 19, 2008

I watched a bit of Q+A on ABC last night on the global financial crisis. Robert Manne reckoned it signified the end of neo-liberalism, Tony Abbott said Manne's talk of the end of capitalism was silly since capitalism would survive as it was a resilient beast, whilst Maxine McKew dismissed all apocalyptic talk as unwarranted given the weathering of the Credit and Loan's collapse in the US in the 1980s and the Asian crisis in the 1990s.

At no point did Manne say anything like 'capitalism will not survive these financial shocks.' (He reckoned that global warming was a far bigger issue that the global financial crisis). Neither Abbott and McKew were willing to pick up and explore Manne's point about the limits of neo-liberalism, or even mention the ways to deal with or manage the crisis.

Penn1.jpg Ingram Pinn

What the politicians did say was to highlight the interconnectedness of the global economy. What they didn't say is that there is a growing tension between global integration and a shortage of credible international governance and that governments of nation-states have been left with responsibility without power.

The significance of this is that politicians are on the sidelines watching like the rest of us despite their claim to inside information from those who really know what's going on. They really don't know what is happening or what to do about it. Abbott actually implied that it was all a bit of a glitch and was not market failure.

Given their insider information---which McKew made so much of --- they could have made reference to the transformation of the USA into a country where there is socialism for the rich, the well connected and Wall Street (i.e. where profits are privatized and losses are socialized) with the nationalization of AIG. Or they could have mentioned the need for greater international governance beyond the G7 central banks--(where's China?); or the need to quarantine the toxic bad debts; or the need to recapitalize the remaining investment banks.

Or the politicians could ghave mentioned how this financial crisis was different from the previous ones. The previous ones started on fringes of the global financial system-- in the developing or emerging economies in Latin America, Asia or Russia--- and the West (G7) worried about the contagion. This crisis was made in the US--the heart of the global financial system--- and it is the emerging powers of the east that fear contagion. Doesn't that highlight the big shift in economic power in the world?

| Posted by Gary Sauer-Thompson at 7:18 AM | | Comments (13)


I've been looking at the impact this may have on McCain's credibility. McCain's sky hasn't fallen just yet. His economic plan has been endorsed by the usual suspects - advisors to George W, and other republican presidents.

Under the first Bush administration Washington created the Resolution Trust Corporation - to hoover up devalued assets in the "savings and loan" crisis which brought down scores of banks during the late 1980s and early 1990s.

The talk in Washington under the second Bush administration is for a similar kind of organization to be established. Another example of the masters of the universe.

you might like this op ed in The Guardian by Melissa McEwan:

The hypocrisy of the personal responsibility brigade brazenly, utterly refusing to take responsibility for this mess, and the irony of these great champions of the ownership society flatly refusing to own the economic policies which have resulted in massive losses among American families, would be positively hilarious if it all weren't so goddamned tragic.

She asks: "And what of McCain in all this?" She answers:
He now stands at the front of the Republican party, poised to lead them back into the White House, given the right number of electoral votes, and he refuses, like all the rest, to accept any responsibility for the current economic crisis, or to own up to the reality that he's got nothing new up his sleeve, nothing that will effectively and significantly alter the course we are already on – a dearth of ideas that, comically, is owed to the unwavering fealty to partisan doctrine he had to affect in order to become his party's nominee, genuflecting to the precious tax cuts that no one wants to own. Not anymore.

There is a lot of anger in the UK about the financial wizards in the City.

are you saying that the pollies do not have a handle on the problem?

yes. Nor are the pollies coming clean over and above all that spin about Australia's solid financial system and fantastic regulatory regime. If the pollies acknowledge contagion in Australia from the US financial crisis then that contagion is not limited to local government buying toxic securities packaged and sliced and diced by Wall Street.

Contagion must also effect the superannuation industry and impact on the baby boomers retirement plans. What if they demand their money bank and the funds do not have enough cash? There is going to be a lot of unpleasantness.

the general consensus in Australia is that Australia will weather the storm well. The economy will not be that badly affected as Australia can ride out any difficulty.

The assumption here is that Australia depends much more directly on growth in Asia where we sell commodities than on the US. Some people---the big miners in the resources sector--- even argue that growth in China is independent of the looming mess in China. Long term market fundamentals--there's that phrase again---
will support growth in commodity demand and therefore Australia's export earnings.

So the complacency is there because they assume that China is a bulwark amid a faltering/slowing world economy. What is not explored in any depth is the externally caused downturn in the Chinese export industries. We just hear snippets about thousands of factories being closed due to rising costs, slowing demand and the appreciating yuan; China's economic growth slowing to around 9% (down three percentage points) and talk of a government fiscal and monetary stimulus package.

It was a dreadful panel.
You could read the despair in Waleed Ali's eyes.
And Manne's breathtaking capitulation involving the Benbrika affair destroyed all the credibility he had accumulated for himself earlier in the show, for this viewer.

Why the hell are Australians forced to endure the confederacy of dunces - Ali, Manne, and Maxine McClueless - on US credit derivatives? What on earth would these low-wattage Luvvies know about such things? It was so painful to watch them expose just how analytically-disabled they really are.

And as for Waleed Ali now a paid academic in "Counter Terrorism Studies". FFS, talk about Dumb and Dumber!

Ali's response to the euthanasia topic was a good one. The rest of them thought it was up to them to decide the issue, but Ali argued that, like abortion, it should be sorted out in common law. Sensible argument, I thought.

Socialism for the rich. Nicely put.

Are fanancial institutions in Australia subject to a greater degree of regulation than in the U.S.?

you forgot Tony Abbott in your list.

China's growth is slowing with the outlook for exports and domestic property prices uncertain.

Gary, John lives in some alternate reality where Tony Abbott makes sense.