Heretics in the Temples of Market Fundamentalism

Robert Borosage

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the center cannot hold

– William Butler Yeats

Washington is frozen even before winter, with the fierce Tea Party resistance to President Obama’s re-election producing gridlock, manufactured crises, and congressional paralysis.  Everything – from the needless government shutdown to the botched launch of health care reform – is immediately grist for political posturing.

But beneath the fireworks, something far more profound is taking place. The elite consensus on economic policy is breaking apart. Faith in market fundamentalism is shaken at the very temples of the faith.

The International Monetary Fund, apostle of austerity, warns about the dangers of budget-cutting and tight money. Its recent review of the continuing economic stagnation essentially admits that the old remedies don’t work anymore. Even the old commandments against currency management or capital controls are questioned and increasingly ignored.

It’s no longer just Occupy Wall Street railing at the big banks for their crime spree. Now William Dudley, president of the New York Federal Reserve, indicts Wall Street for the “apparent lack of respect for law, regulation and the public trust.” It isn’t just liberal senators Sherrod Brown or Jeff Merkley calling for breaking up the big banks. Sanford “Sandy” Weill, who forged the mergers that created the modern Citibank and led to the repeal the Glass-Steagall Act limits on banks, now joins many other retired Wall Street bankers in calling for breaking up the big banks, which have become simply too big to manage.

Unions and progressive economists have called for action on currency manipulation for years, and warned about the trade accords that have racked up record deficits, undermined wages and devastated U.S. manufacturing.

Now the G-20 calls for more a balanced and sustainable global trade regime. Fred Bergsten, director emeritus of the Peterson Institute for International Economics and a star in the corporate trade chorus, joins Republican Senator Lindsay Graham and Democratic Rep. Sandy Levin in calling for defeat of the Trans-Pacific Partnership trade accord unless it includes measures banning currency manipulation. 60 Senators and 200 legislators have written letters to Obama on the issue.

Occupy Wall Street put inequality on the national agenda.  Now the Wall Street Journal reports hilariously that Wall Street is worried about excessive inequality, quoting hedge fund manager James Chanos that people think the “game isn’t fair.”  This is like reporting that Willy Sutton is distressed about excessive bank robberies.

Billionaire Bill Gross, co founder of PIMCO and manager of the biggest bond fund in the world, tells the rich that they have to pay more in taxes. “It’s time to kick out and share some of your good fortune by paying higher taxes and reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions,” Gross wrote his investors.

Faith in market fundamentalism is shaken at its core. The pillars of bipartisan economic agreement – free trade, deregulation, trickle down, focus on opportunity not inequality, austerity and the strong dollar – all are being questioned by heretics from inside the temple.

The reason is apparent.  We are, as Paul Krugman puts it, halfway through a lost decade  (Only it should be noted the Japanese managed their lost decade with less than half the unemployment that we suffer.)  And the economy emerging from the rubble isn’t looking much different from the one that collapsed. Once more we witness growing and extreme inequality, declining wages, record trade deficits with China, bigger and more concentrated banks that seem little more than organized criminal rackets in virtually every area of their activity.

The bipartisan center in Washington – such as it is – remains impervious to this reality.  Blue Dog Democrats join corporate Republicans in advocating more budget austerity.  Wall Street Democrats join conservative Republicans in resisting breaking up the big banks.  New Democrats join establishment Republicans in touting more free trade accords.  The Fix the Debt crowd keeps peddling austerity in the face of mass unemployment.

And the wingnuts that terrorize the House Republican leadership block any common sense, much less creative reforms.  Instead, they are about to drive Congress into another manufactured crisis over the budget, while continuing their relentless efforts to repeal or sabotage health care reform, now emboldened by its fouled up launch.

But the continuing failure of this economy to work for most people means the heresies against the old consensus will spread, and the debate about what comes next is only beginning.

 

 

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