Whose Job is it to Solve the Problems of the World Economy?

Finance capital is the central player in the world economy. A serious problem with finance capital’s central role is that most capital continues to flow at the upper levels of world economic transactions, resulting in debt at lower levels (i.e.- corporate capital, governments, and labor). Institutions such as the World Bank and International Monetary Fund are examples of the power that finance capital holds in today’s society and how institutions perpetuate this upward flow of capital. Providing long term (IMF) and short term (World Bank) loans to nations globally, these two institutions are the heavyweights of the global market. Although these institutions were founded on the notion to provide monetary help to nation’s in crisis, the strategies they apply raise many questions about the real benefit they provided to underdeveloped nations in crisis.

The tactics utilized by the IMF and World Bank are often described as “market fundamentalist” strategies. The structural adjustment polices (SAP), an approach prescribed to developing nations whom have fallen dangerously into debt, exemplifies how market fundamentalisms has become deeply rooted into IMF and World Bank policies (Greider, 262). The SAP program promotes privatization, curtailing spending on social services, maintaining low wages, and open barriers to capital. Proponents of this program (investors and lenders) hold that such measures will stabilize the economy in crisis, and furthermore cut inflation. It is obvious that the hardest impacted by the SAP program are the working laborers that makeup the population of the country. The only hope that the working class have is that these measures will only be imposed in the short run, as SAP advocates state, because in the long run the economy should improve.

The basic idea behind the market fundamentalist strategies of the IMF and World Bank are to correct financial imbalances first. After doing so, they deal with the real economy later. Their main goal is to restore a reliable national currency so that foreign capital may safely return to lend and invest (Greider, 263). Moreover, the underlying goal is repayment of loaned funds to the financial community. These strategies satisfy the international financial community, often at the cost the nation’s citizens.

There are other plausible alternatives, other than the IMF and World Bank structural adjustment polices, when a nation is faced with financial crisis. One such alternative that Greider proposes is for “nation-states to reclaim power and responsibility from manic investors I n the marketplace” (Greider, 257). How would this be accomplished? Placing an “infinitesimal levy on capital’s cross-border movements would yield billions in new revenue” for the nation-state. Moreover, government controls on capital, specifically those on foreign exchange, may halt or slow down capital flight in times of serious financial crisis, alleviating a nation-states financial burden. Therefore, government controls on capital are a means for governments to reclaim power and restore stability to their national currency market.

Another solution for debt burden countries seeking solutions to their debt crisis is a one time write off of all failed domestic debts. “This would free up cash for both producers and consumers,” in addition to providing the stimulus needed to jump start the economy (Greider, 275). This alternative does not sit well with international lending and bank institutions, who ultimately only care about recovering loaned funds (through any means necessary). With a write off, banks and lenders will only lose in nominal terms because they would have not recovered the loaned funds anyways from the debt-burdened nation.

We are in an era where nations are trapped between two realms, that of their responsibilities to the nation-state and the fully integrated global market. A serious problem arises when nations find themselves in financial crisis. What tactics should they utilize to attempt to remedy their financial crisis? “The global system’s greatest success stories did not follow the market friendly strategies that the World Bank or the International Monetary Fund regularly prescribe for poor countries” (Greider, 276). Instead, they practiced a purposeful medley of state intervention to protect their domestic markets. Utilizing policies from only one realm in an attempt to remedy their financial burden would undoubtedly have serious negative consequences. Therefore, a combination of policies from both the global market (market fundamentalism) and domestic market (government intervention policies) would yield the most successful results, and ultimately be the most beneficial to the debt burdened nation-state, it’s citizens, and the global market.

-William Greider. 1998. One World, Ready or Not: The Manic Logic of Global Capitalism