You should all read the financial times

[Zurdito]

If you want to either criticize of oppose capitalism that is. because it is the voice of the US and UK finance bourgeoisie's, i.e. the most powerful bourgeois faction in the world, and therefore the purest voice of todays system. I'll post regular gems in this thread from their "Future of Capitalism" blog (you have to have a suscription to read it online, though it works out cheaper than buying the paper). The great thing is that these people are brutally honest about their own system much of the time, as they know their audience is "their own". I just read something that made laugh out loud. First the description of the blog, then the funny part:

The credit crunch has destroyed faith in the free market ideology that has dominated Western economic thinking for a generation. But what can – and should – replace it?

<H2>A catechism for a system that endures

By Samuel Brittan
Published: April 30 2009 19:44 | Last updated: April 30 2009 19:44



Capitalism is not a system that some government decided to install, as the Soviet leaders did with “socialism”. It evolved over many years. Once established, governments of many different stripes could try to copy it, with widely varying results. There has been a long cycle among opponents, who begin by declaring it immoral, go on to predict its inevitable collapse and, when that does not happen, return to its supposed immorality. The system will continue but with a less overblown financial sector.
One of the myths about the system is that it is just about markets and prices. Visitors to the most remote villages in the developing world have often remarked on the ubiquity of market activities. Successful capitalism requires a great deal more. At a minimum it also requires:
1. A basis for long-term contracts. Such contracts in turn require:
2. The rule of law. This does not just mean judges in wigs or parliamentary assemblies. It means generally understood rules of the game so that economic agents can make plans that will not be undermined by unpredictable political intervention, criminal action or any other destabilising activity.
3. A minimum of trust so that entrepreneurs and others can undertake projects without constantly looking over their shoulder to see that undertakings are observed, and that commercial partners are not looking for ways to renege on obligations or to twist their meaning.
4. So far, what has been said only defines mercantile societies going back to medieval city-states, Shakespeare’s Venice or even earlier. The word “capitalism” was popularised by Karl Marx in the middle of the 19th century to describe a world characterised by, among other things, “roundabout” methods of production involving structures such as factories, railways and steamships.
5. Capitalism depends on private ownership of the greater part – not necessarily the whole – of the means of production, distribution and exchange. Joseph Schumpeter, in a postscript added to the UK edition of his path-breaking Capitalism, Socialism and Democracy, remarked that only the nationalisation measures of the postwar Labour government counted as genuine socialist steps. All the rest, such as wage and price controls, trade restrictions or attempted “economic planning”, whether wise or unwise, could be found in many capitalist societies. The temporary state ownership of some banks does not count as state socialism so long as private banks are not prevented from starting up.
Some reformers have envisaged a market society based on workers’ co-operatives rather than traditional private ownership. This, for example, is what John Stuart Mill meant by socialism. Whether that is correct is a semantic matter. The point of substance is that although there have been individual successful examples of employee-owned enterprise, such as Britain’s John Lewis retail partnership or the Mondragón group in Spain’s Basque Country, there have been few, if any, examples of whole societies operated on these lines, outside the very special circumstances of Tito’s Yugoslavia.
6. Capitalism works best when there is competition between producers. But the degree of competition varies immensely. Businessmen do not in practice always welcome competition and a commentator can be pro-capitalist without being pro-business. Free trade is best treated as part of the competition agenda rather than as a separate undiscussable good.
7. Successful capitalism requires a good deal of economic freedom, although not necessarily laisser faire. The defects of capitalism are often called market failures: things such as environmental overspills or inadequate provision of public services. Moreover, a market system does not even pretend to provide a just distribution of income and wealth, whatever that is. At different times observers have claimed to detect trends both to increasing concentration of income and wealth, and towards a levelling of differences. Vilfredo Pareto, the early 20th-century economist, claimed that in the very long run the pattern of pre-tax distribution is surprisingly stable. Contrary to what zealots claim, taxes and benefits can influence income and wealth distribution provided that care is taken not to kill the goose that lays the golden eggs.
8. The capitalist system requires at least the possibility of separating ownership from control. This has been facilitated by the rise of limited liability laws since about the middle of the 19th century. But the practice also give rise to what modern economists call the “principal agent problem”: how the owners can control the managers.
9. Although there is a variable and often high degree of ploughed-back profits, there must be provision for a capital market in which savers can lend to enterprises (and governments) whose investment needs exceed their own resources. Such arrangements, in turn, require a secondary market in paper titles to wealth, nowadays called stock exchanges.
10. Any market system requires a functioning money, both to avoid the wasteful complications of barter and to serve as a standard of value. It does not require literally zero inflation but cannot well cope with unpredictable wild fluctuations.
11. Capitalism also requires depositary institutions where people can store their money without hoarding it under the mattress.
“Boom and bust” has been a feature of capitalism from the beginning, originating partly in the alternation of moods of pessimism and optimism. Not all recessions originate in the financial sector but those that do have, on average, been more than twice as severe as those that do not.
The present credit crunch leaves more or less unaffected the arguments for and against the first seven principles affecting what is sometimes called the “real” side of the economy. But it calls into question present arrangements for 9, 10, 11 and aspects of 8 – what might be called the “financial side”. The mutual entanglement of savings and investment decisions, money creation and deposit banking, has caused much harm and there have been numerous ideas for separating them – my favourite being the proposal of Henry Simons, the US economist, for “narrow” banks that can hold only assets in cash, deposits with the central bank or short-term government securities and are therefore safe against a run. But it is not a panacea.
Clearly there will now be a trend back towards a more regulated type of capitalism, as in the 1930s. But not all the regulation will be very wise. The perennial problem of regulation is the concentration of producer interests, which makes for successful lobbying, and dispersion of consumer and general citizen interests, which are therefore more difficult to organise. Moreover, much discussion is vitiated by the assumption of omniscient and benevolent government instead of balancing market failure against government failure. There is a vast body of US writing on the subject known as “public choice” ignored by authors of fashionable critiques such as Nudge or Animal Spirits.
Another problem is that capitalism is nowadays global but regulation is still at the national level. The most difficult issues, however, arise on the moral side. The assumption that the pursuit of self-interest within the rules and conventions of society will also promote the public interest is not likely to survive – if only because the content of these rules is up for grabs. But it is all too likely to be succeeded by a mushy collectivist pseudo-altruism, in which jealousy and envy are given a free ride.
Perhaps something is to be learnt from the social market theorists of the postwar “German economic miracle”, who were by no means opposed to government intervention but had firm principles regarding its nature, purpose and duration. Personally, I would go further back still. I know that some financial types hate their subject being mixed up with alien topics such as the study of English literature. Yet more is to be learnt from the novelist Jane Austen, who took for granted the legitimacy of property titles but insisted that such rights had their obligations, than from modern tomes on business ethics.
www.samuelbrittan.co.uk

Get that? A writer taken so seriously by the bourgeoisie that he is invited to opine in the world's most serious capitalist daily in the section where it debates the very future of its system, in the face of the worst crisis in 70 years and charged with the question of how to come out the other side, recommends reading Jane Austen and admits that this is of more use than anything the bourgeoisie is currently producing on ethics (remember that he sees ethics as the central problem here, in which case the central answer to capitalism's deepest flaws lie in Jane Austen).

Speechless.

[MikeSC]

He talks like the intended audience is toddlers- how many capitalists do we think know the system outside of their own short-term dealings? It's an article teaching capitalists the basics of their own system.

[Bud Struggle]

He talks like the intended audience is toddlers- how many capitalists do we think know the system outside of their own short-term dealings? It's an article teaching capitalists the basics of their own system.

That's pretty true. I'm a businessman and I know lots of other business people--and I'd venture to say that almost none of us really even come close to understanding the Capitalist system. We all know our respective businesses of course, but I doubt anyone I know really understands how all of the capital markets work. As a matter of fact if you explained the system to most business people very few of them would think that it could actually function.

Actually from hanging around here--I probably understand Communism better than Capitalism.

[IcarusAngel]

"Financial Times - only paper that tells the truth." --Noam Chomsky in the documentary Manufacturing Consent.

http://en.wikipedia.org/wiki/Financial_Times

Chomsky


Anyway, the gist of that article is that capitalism also requies the rule of law, copyrights, a judicial system to rule accoridng to the principles of capitalism? etc.? and works best when it's "mostly free." I've said this many times. I kind of got lost in the article so I'll have to re-read it.

The thing I disagree with the idea that a laissez-faire market is ever truly "unregulated" - it is always regulated so as to favor (give more power to) those who have somehow acquired property in the market.

[IcarusAngel]

Manufacturing Consent.

Have you seen this yet TomK? Highly recommended.

[Zurdito]

He talks like the intended audience is toddlers- how many capitalists do we think know the system outside of their own short-term dealings? It's an article teaching capitalists the basics of their own system.

yeah the tone is amazingly condescending, and it is not unique but quite normal to this paper (there are some much better writers than this one but they tend to be the exception - most are honestly no more insightful in their defence of capitalism than the average OI member, despite being paid generously and hailed as intellectuals).

[Bud Struggle]

Have you seen this yet TomK? Highly recommended.

No, but I'll look it up. Thanks.

[Robert]

A writer taken so seriously by the bourgeoisie that he is invited to opine in the world's most serious capitalist daily in the section where it debates the very future of its system, in the face of the worst crisis in 70 years and charged with the question of how to come out the other side, recommends reading Jane Austen and admits that this is of more use than anything the bourgeoisie is currently producing on ethics (remember that he sees ethics as the central problem here, in which case the central answer to capitalism's deepest flaws lie in Jane Austen).

I cannot remember ever seeing so much hyperbole crammed into one sentence.

If you re-read the writer's actual statement:

Personally, I would go further back still. I know that some financial types hate their subject being mixed up with alien topics such as the study of English literature. Yet more is to be learnt from the novelist Jane Austen, who took for granted the legitimacy of property titles but insisted that such rights had their obligations, than from modern tomes on business ethics.

He's just offering his opinion on what might be a good, non-traditional source on business ethics. So what are you so worked up about?

Pride and Prejudice is one of Jane Austen's more miraculous accomplishments, considering her age, her time, and her sex. Have you read it? Good for the writer for encouraging financiers to get out of their bubbles (make a note there, Marxists) and look for inspiration from unorthodox places.

And thanks for the link. Very interesting reading.

[Zurdito]

I read it a long time ago. Though it is not really my style, I am sure Jane Austen is very praiseworthy, that is not in question.

just to reiterate: the writer thinks lack of ethics are capitalisms main problem today - a laughable claim in itself. he then recommends the best answer to this as Jane Austen.

I am not worked up, I just have great fun reading the trash that passes ofr bourgeois analysis. It is quite sad that bourgeois economics has degenerated from Ricardo and Smith to this mumbo jumbo (as Francis Wheen would call it, I recommend reading him, he draws a comparison between Reganomics - blind faith in the market - and a general rise in blind faith and rejection of rationality in society) - but then I suppose this is not surprising, as an ever more decadent economic system will require ever more decadent intellectual justifications.

to reiterate further, this man, and the others who write similarly appaling articles, are considered capitalisms best intelelctuals. Doesn't that scare you? Because it scares me to live under such an ideology, and it would scare me even more if communisms best intellectuals suggested that the reason the Soviet Union ended was that its leaders hadn't read Jane Austen.

[Robert]

he then recommends the best answer to this as Jane Austen.

I would think it humorous too (I don't know about ROTFLMAO [???]) ... if that were what he said. He didn't. Austen is not an "answer"; she is in his view a (as in one) source for the non-controversial idea that rights have obligations. She's a great, pioneering feminist and I demand that you quit beating up on her! (Kidding.)

I wish he had fleshed it out a little more and said what obligations he's referring to that are not already generally acknowledged.

In any event, I am sure we agree that "for every right there is a duty" sounds better than a "mushy collectivist pseudo-altruism, in which jealousy and envy are given a free ride."

I am impressed that you read the Financial Times so closely. Odd that you claim it is "trash." You wouldn't rather read something a little more revolutionary?

[Robert]

deleted

[Zurdito]

I don't think the Financial Times is trash, I just think that it publishes a lot of trashy opinion peices on its "future of capitalism" blog. it's economic news is very informative and useful, and its analysis within the logic of capitalism is ok.

but when asked to defend capitalism in itself, it tends to resort to trash, as can be seen by its attempts to do so. this is because it is a very hard task. I have read many acceptable articles on the FT blogs, but none that was really profound in any sense. However, I cannot escape the conclusion that the more defensive the blog has been forced to become by the coninued loss of ground in the public discourse of free market ideas and the continued demonstrations of the bankrupcy of the entire system, - i.e. the more unanswerable the problems posed by the crisis become, the more it resorts to assertion and blind denunciation of "mushy altruists" with no engagement at all with opposing ideas - then I cannot help coming to the confusion that the majority of the article spublished there are trash.

I have a great one by Edmund Phelps, a Nobel prize winner whose answer to "the future of capitalism" was so juvenile that I wouldn't even finish the thread if an OIer posted it - however I cannot copy and paste it from my microsoft works document, as my computer freezes every time I try, and my subscription ot the FT site has been cancelled because apparently there is a problem with my card details. Maybe I need Samuel Brittan to give me some tips after all

PS you seem to be missing the point here that these writers are not just writing a blog post - which would be bad enough - but are being charged with writing a defence of the market in arguably the world's most respected publication on bourgeois eocnomics, which has posed the question that it is mortal danger and lacks all credibility, and that it has failed, and who have invited anti-market writers to pose their agruments. So it is be assumed that these writers give us "the best they have got" in these articles. It might be comforting to think that Brittan had something else qualitatively better up his sleeve which he was just too lazy to offer up, but after reading countless superficial arguments based completely on assertion and pseudo-arrogant dismissal of anti-market heretics, then you start to think otherwise - especially as these people know their system is in danger and would therefore not be likely to scorn the opportunity to give a good argument if they actually had one.

[Robert]

are being charged with writing a defence of the market

Are you sure about that? I thought it was just a blog with prognoses of how capitalism will evolve -- or not -- in the wake of the subprime mortgage crisis. That's a narrower point than debating, as we do here, whether capitalism, or as you say "the market (?)" is good or bad.

Here's another, and I suspect more representative, post from the blog:

Just as the crash was inevitable, so will be the swing the other way – capitalism will escape from its deathbed but with a more human face and we will see the return of forms of state corporatism familiar to those of us who remember the 1970s, writes Sir Martin Sorrell - Apr 8 2009.

What annoys me about all this is the sense that the subprime crisis (that's what they're talking about) was an inevitable product of "capitalism." It wasn't. It was I think a consequence of cheap and easy, and government facilitated, credit. We're going to put a more human face on that? How? By making credit even more easy?

Consumers have some share of the blame, too. Who says you have to have a 3,000 sq. foot house to raise your tw0-child family in, when families in the 40's and 50's did it with more kids and half the space?

Here's an interesting example: one of the "victims" of the crisis Edmund Andrews. I give him credit for blaming no one but his own greedy ass:
Here's a quote then a link below:

The New York Times Magazine features a long article, My Personal Credit Crisis, by Edmund L. Andrews about America's least sympathetic-sounding deadbeat, himself:

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.

Yeah, some were greedy. Like him.

http://isteve.blogspot.com/

[Zurdito]

Robert: what "subprime mortgage crisis"? Do you mean the global economic crisis which has bankrupted many of the giants of western capitalism, not to mention the minor capitalists and the weak countries?

I agree that the blog is not there to "debate" the merits of the market, but to aggressively and deseperately defend a system for which all the justification which these intellectuals previously had, have disappeared. These intellectuals being the intelelctuals of the US and UK finance bourgeoisie's the most important bourgeosiie's in the world, and for whom the FT is a mouthpeice.

very sadly, because it is recommendable, I cannot copy and paste this article from my Works into revleft, because my computer crashes. however, as you seem to be able to read blog posts, I direct you to this link. If you like, feel free to post it here if you can, so all can enjoy (a rare example of good writing on that blog - when contrasted iwth the problems the FT editorial team poses int his article, maybe you will see why Brittan's response is so pitiful):

http://www.ft.com/cms/s/0/b85b3572-0...0779fd2ac.html

[Zurdito]

A survival plan for global capitalism
March 9, 2009 11:17am
FT Editorial
J.K. Galbraith wrote that 1929 stood alongside 1066, 1776, 1914, 1945 and 1989 in its importance. The world today was shaped by the efforts of governments to overcome the economic meltdown of the 1930s – and the consequences of their failures. Even if this economic crisis is not as bad as the Great Depression, it will have epoch-moulding consequences. This week the Financial Times starts a series on the Future of Capitalism. Much, however, depends on the success of next month’s meeting of the Group of 20 in London and how successful governments are at ending this worldwide crisis.
The intellectual impact of the crisis has already been colossal. The "Greenspanist" doctrine in monetary policy is in retreat. It no longer seems clear that it is easier for central banks to clean up after asset price bubbles burst than to prick them when they are small. Monetary authorities will need to be more concerned both about financial stability and global imbalances which allowed a few countries to build up vast surpluses while a few others ran yawning deficits.
Finance has already changed irrevocably. The grand investment banks which once strode alone have either collapsed, or joined the flock of retail banks. Governments are now borrowers, lenders, investors and insurers of last resort for much of the financial system. The future of finance will be determined by their efforts to disentangle themselves from the thickets of guarantees they have been forced to make. The depth of the crisis will determine how easily they manage it.
The fiscal cost of this episode is unclear. In some countries, it may be state-busting. Some nations will need to cope with extraordinary fiscal tightenings in the coming years. The domestic impact of government spending – and its geopolitical ramifications – could yet be colossal. Again, much depends on how soon the downturn ends.
There is one certainty. While recessions are inevitable, deep depressions or slumps – or whatever you call them – are neither necessary nor welcome. They destroy wealth, sap happiness and crush old certainties. What is more, increasing poverty is a grave threat to world stability and democracy. Revolutions often start as bread riots, and economically-stagnant countries make belligerent neighbours. Growth must be restarted.


[FONT=Arial]http://www.anonym.to/?http://www.ft....0779fd2ac.html[/FONT]

[FONT=Arial]read the rest on that link. apaprently revleft does not like the font I was using. emphasis mine. Add to this that the CIA now defines the number one threat to global security as social unrest due to the effects of the crisis, displacing "global terrorism" for the first time in years.[/FONT]

[Bud Struggle]

Robert: what "subprime mortgage crisis"? Do you mean the global economic crisis which has bankrupted many of the giants of western capitalism, not to mention the minor capitalists and the weak countries?

As Robert says the subprime mortage crisis was the root of it all. There are two problems first the mortage business is HUGE. Hundreds of millions of people "own" houses and even a small percentage of these defaulting causes a huge ripple effect. The second problem isn't just the mortages themselves but the "bets" placed my certain investors that certain mortages would fail. for a small amount of money in bets some people made billions betting that people couldn't py what they owed. This was further coupled with the fact that the US Government FORCED banks to lend money to people that were in the eyes of banks were substantial risks.

If the government regulated the credit default swaps and other derivitives there wouldn't have been any crisis OR if the government didn't try to make public policy on the backs of private financial institutions there wouldn't have been any problems.

But in the end it's all not a bad thing. A lot of the institutions that are failing were rotten in their core and needed to be brought down. Most were badly run businesses.

Bad businesses should fail to make room for good businesses to grow.

[Robert]

Do you mean the global economic crisis which has bankrupted many of the giants of western capitalism, not to mention the minor capitalists and the weak countries?

Yes, that's what I mean. That's how it got started.

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis.

(Don't laugh at Wiki: it is a very informed synopsis of the problem.)

I think it is generally accepted that this whole global mess started when individuals like the NYT reporter above, along with many other otherwise unqualified borrowers, started speculating in real estate. The commercial paper (the promissory note and mortgage guaranteeing same) that he signed did not stay with his local bank. It got assigned (transferred) to government created agencies like Fannie Mae and Freddie Mac. In order to attract more capital into the system, those agencies with the encouragement of government started offering securities (rights to income streams backed by mortgages like the one the reporter signed) to the open market, and therefore to every bank and everybody in the world, from your granny in Des Moines, IA to a laborer in Australia. Everybody was invited to play. And they did play.

The money poured in to Freddie and Fannie, from everywhere, to finance more and more and bigger and bigger stupid, brain dead U.S. home purchases (no, not by me) , and brokers, appraisers and realtors all stood in line to make a fast buck. This money didn't stay at the agencies: it got funneled down to your local bank and then finally settled in the accounts of people selling their houses at the height of the boom, unless those sellers went and bought an evn bigger house themselves. And many did. And they did make fast bucks. Of course, the bubble burst as it eventually had to when the borrowers started defaulting and the market was running out of unqualified suckers to whom the houses could be flipped and re-flipped, and here we are. And so is everybody else that bought and is now stuck with all those loan backed securities, including banks and investment houses from here to Hong Kong.

I can't seem to access that link. Who is the author of that blog post you recommend and I'll try to get it some other way.

Why did you quote this: There is one certainty. While recessions are inevitable, deep depressions or slumps – or whatever you call them – are neither necessary nor welcome. They destroy wealth, sap happiness and crush old certainties. What is more, increasing poverty is a grave threat to world stability and democracy. Revolutions often start as bread riots (?)

I fully admit revolutions start as bread riots. But re-read the second sentence.

I hope you realize this debate is eating into my Jane Austen time. I had my whole day planned with a book, a nice wee pot of Earl Gray tea, and some English biscuits on a little table in the parlor. Sigh.

[Zurdito]

Robert: the copied article was the one I linked to, eventually it worked. it is an FT editorial and not available free. just for you I will copy and paste it into a new document, change the font so that it doesn't crash my internet,a and post it here. I hope you appreciate the article now

I know how the crisis began, I just thought calling it that seems inadequate now, and seemed to be ideologically motivated, i.e. downplaying the importance of the crisis. maybe that was not the intention. however I do not think "subprime crisis"is an adequate description any more, as clearly the mortgage defaults were only the spark which unleashed a structural crisis (for example why did the Fed have to raise interest rates in 2006 causing the first defaults on loans? - precisely because of inflationary pressures, especially caused by China's demand for natural resources to sustain its growth. yet this same growth was subsidising the US economy and had previously allowed them to keep inflationary rates low by flooding the US market with cheap goods).

Here is the FT editorial in full:

A survival plan for global capitalism
March 9, 2009 11:17am
FT EditorialJ.K. Galbraith wrote that 1929 stood alongside 1066, 1776, 1914, 1945 and 1989 in its importance. The world today was shaped by the efforts of governments to overcome the economic meltdown of the 1930s – and the consequences of their failures. Even if this economic crisis is not as bad as the Great Depression, it will have epoch-moulding consequences. This week the Financial Times starts a series on the Future of Capitalism. Much, however, depends on the success of next month’s meeting of the Group of 20 in London and how successful governments are at ending this worldwide crisis.
The intellectual impact of the crisis has already been colossal. The "Greenspanist" doctrine in monetary policy is in retreat. It no longer seems clear that it is easier for central banks to clean up after asset price bubbles burst than to prick them when they are small.
Monetary authorities will need to be more concerned both about financial stability and global imbalances which allowed a few countries to build up vast surpluses while a few others ran yawning deficits.
Finance has already changed irrevocably. The grand investment banks which once strode alone have either collapsed, or joined the flock of retail banks. Governments are now borrowers, lenders, investors and insurers of last resort for much of the financial system. The future of finance will be determined by their efforts to disentangle themselves from the thickets of guarantees they have been forced to make. The depth of the crisis will determine how easily they manage it.
The fiscal cost of this episode is unclear. In some countries, it may be state-busting. Some nations will need to cope with extraordinary fiscal tightenings in the coming years. The domestic impact of government spending – and its geopolitical ramifications – could yet be colossal. Again, much depends on how soon the downturn ends.
There is one certainty. While recessions are inevitable, deep depressions or slumps – or whatever you call them – are neither necessary nor welcome. They destroy wealth, sap happiness and crush old certainties. What is more, increasing poverty is a grave threat to world stability and democracy. Revolutions often start as bread riots, and economically-stagnant countries make belligerent neighbours. Growth must be restarted.
In 1933, during the last comparable fight to restart the world economy, 66 governments met in London with tariffs and hackles raised. Franklin Roosevelt, newly-elected as US president, sent delegates to the "Economic and Monetary Conference". But rather than being a staging post for recovery, the conference collapsed. The London G20 meeting must not suffer the same fate. Participants must agree on three points.
First, world demand is in freefall. Stimulus is necessary. The surplus countries with the most leeway to increase domestic spending – Japan and Germany, in particular – are not yet doing enough. They can afford to encourage serious spending and are, in any case, suffering the steepest contractions. In addition, if these habitual exporters were to become serious importers, it would be politically easier to hold back protectionism.
Second, governments must take responsibility for dealing with their financial systems. The toxicity which started in mortgage-backed securities is spreading through the world’s banks as ever more assets go bad in the recession. Politicians must make sure that their banking systems are adequately capitalised and deal with the illiquid securities at the heart of this crisis.
Third, governments must agree to put aside more money for the International Monetary Fund. The recession would enter a new, dreadful chapter if a rash of financial crises broke out across eastern Europe, Asia or South America. The fund’s current funds are clearly inadequate. The idea of a large issuance of SDRs – the IMF’s own reserve asset – is an excellent one. Changes in voting-weights, to raise Asia’s share and lower Europe’s, are also both inevitable and desirable.
What matters is that there is agreement on these three issues so that politicians – even those in weak governments, as in Japan – are given the political cover to do what is necessary. A united front is, therefore, essential. Big questions about the shape of the broad future of the world economy can wait until we are certain that there is a future for globalisation. An impartial commission could be appointed to mull them over. If spats over minutiae – such as the regulation of tax havens or bankers’ pay – were to stand in the way of a deal, the verdict of history would be damning. Electorates are unlikely to be more forgiving. The aim now is simple: end this brutal recession.

If you are looking for a read, I recommend Jack London. Especially The Iron Heel. It is available free online.

[Trystan]

[QUOTE=IcarusAngel;1444475]"Financial Times - only paper that tells the truth." --Noam Chomsky in the documentary Manufacturing Consent.


I think he's right. The paper is going a little down hill, though. They're filling it with more 'opinion' from a bunch of plonkers. Not as bad as the Guardian, though.

[Robert]

Z, thanks for the article. I don't know why you would post an article by J.K. Galbraith; isn't he calling for reform of capitalism instead of revolution? If so, I'm with him all the way.