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Friday, October 24, 2008

The Fall

posted by on October 24 at 9:13 AM

The critic and philosopher Steven Shaviro is often right about the causes or consequences of cultural events/emergences/happenings in the domain of postmodern/global society. Recently, however, he got something wrong:

…I donít think the current crisis [in the markets] marks the end of neoliberalism and market fundamentalism. For the sole aim of all the government intervention that is happening now is precisely to restart (reboot) the currently clogged market.
Agreed, what Bush is trying to do is simply restore the neoliberal order with blasts or shocks of government cash. But it’s not working. The system will not stabilize. The happy business of unregulated markets is over.

Even the guru of neoliberalism, Alan Greenspan, is sobering up to this reality:

But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

ďThose of us who have looked to the self-interest of lending institutions to protect shareholdersí equity, myself included, are in a state of shocked disbelief,Ē he told the House Committee on Oversight and Government Reform.

It’s not the end of the world. It’s the end of a form of economic exploitation.

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I saw the video of Greenspan last night. Iím glad he is able to see the flaws in his assumptions Ė especially for someone who has held a such firm belief in the free market for so long (and indeed, was essentially the poster child for it), itís really impressive that he is able to admit that he was wrong.

Iíve never really understood people who believe so strongly in the power of the free market (U of C, Iím looking at you). Individuals in a system generally are most likely to act in their own self-interest (which sometimes corresponds to the best interests of shareholders and/or broader society and sometimes not), and if there is no regulation at the individual or the system level, what results is something like what has happened in the recent mortgage crisis.

Posted by Julie in Chicago | October 24, 2008 9:34 AM

Unspecific and rather vague pronouncements are so easy to make...

The happy business of unregulated markets is over.

The markets have never been unregulated. Although I would agree that an era of overly loose regulation and extremely poor oversight MAY now be over.

In this period of extreme uncertainty I think it's premature to predict anything. But I would definitely bet that free-market capitalism is not going anywhere.

And by the way - Greenspan was just putting on a show for lawmakers. He is not shocked at all at what happened. He's a free-market fundie. He knows that just because a market is free it doesn't mean that every actor in the market manages risk correctly. Those that don't evaluate risk correctly die (which, btw, is exactly what we didn't let happen).

But Greenspan knows that right now what lawmakers and the public want to hear is a slap on the wrist of free-market fundamentalism. So he put on a show.

Posted by pffft | October 24, 2008 9:45 AM

It really is the last days of Coolidge. Ushering in the Neodeal after dismantling the New Deal. Wanton greed, bad lending and borrowing. It's always the same.The Republicans are always decades behind in their thinking.

Posted by Vince | October 24, 2008 2:03 PM

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