No one yet knows the volume of the American real estate bubble or the volume of the Western financial bubble. They continue to remain partly hidden in the unfathomable slicing and dicing of securitization, which, by dint of securitizing the wind, harvest the whirlwind. On the other hand, the ideological bubble – in all its magnitude – appears in full light of day.
This ideological bubble, the religion of the all-powerful market, bears a strong resemblance to what had been Communist ideology. Each reigned alone for several decades: seven for Communism; nearly four for ultra free market neo-liberalism. The immensity of the first system’s lie was uncovered during the fall of the Berlin Wall. People had sensed it; independent and courageous spirits like Solzhenitsyn or Havel had written about it for a long time, but suddenly the empire of the lie was naked. Everyone understood that it had all been propaganda only, that it had all been nothing but adulterated dreams, intellectual swindles and just plain swindles. An ideological bubble with tragic consequences that were all too real.
The present crisis recreates a comparable scenario. Since Ronald Reagan and Margaret Thatcher implemented Milton Friedman’s doctrine, the neo-liberal free market ideological steam-roller swept everything out of its path. A great many company and university heads, editorialists and political officials swore only – and with what arrogance! – by the sovereign market. They had succeeded in obsolescing Keynes to the point of making people believe that even his famous aphorism that trees do not shoot up to the sky was wrong. Any dissonant, timidly social-democratic voice that recalled the virtues of a minimum of public regulation passed for a Jurassic Park holdover. And now, all of a sudden, the truth emerges. Market self-regulation is an ideological myth, the play of economic actors emancipated from all rules does not converge, but, quite the opposite, seriously diverges, abetted by the ethical shipwreck of certain financial elites. In short, the Friedman doctrine is erroneous because any human mechanism with no counter-weight tends not toward equilibrium, but toward speculation, that is, toward irrationality. It’s the wise Montesquieu and his theory of the balance of powers – not the market fundamentalist theoreticians – who got it right.
So the markets’ collapse figures as the fall of the Wall for free market fundamentalists. Their doctrinal bubble is as naked as the Communist bubble was in 1989. When – after so much ideological arrogance, productive of so much excess – the time comes to rebuild, it will be appropriate to correctly proportion the right mix of freedoms, rules, controls and oversight, while being careful to avoid any systemic ideology, since it’s with systems that we create the most insane dreams and the greatest misfortunes.
Milton Friedman (July 31, 1912 – November 16, 2006) was an American Nobel Laureate economist and public intellectual. He is best known among scholars for his theoretical and empirical research, especially consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy. A global public followed his restatement of a libertarian political philosophy that insisted on minimizing the role of government in favor of the private sector. As a leader of the Chicago School of economics, based at the University of Chicago, he had a widespread influence in shaping the research agenda of the entire profession. Friedman’s many monographs, books, scholarly articles, papers, magazine columns, television programs, videos and lectures cover a broad range of topics in microeconomics, macroeconomics, economic history, and public policy issues. The Economist hailed him as "the most influential economist of the second half of the 20th century…possibly of all of it".
Originally a Keynesian supporter of the New Deal and advocate of high taxes, in the 1950s his reinterpretation of the Keynesian consumption function challenged the basic Keynesian model. In the 1960s he promoted an alternative macroeconomic policy called monetarism. He theorized there existed a "natural rate of unemployment" and he argued the central government could not micromanage the economy because people would realize what the government was doing and shift their behavior to neutralize the impact of policies. He rejected the Phillips Curve and predicted that Keynesian policies would cause "stagflation" (high inflation and low growth). He argued that a steady expansion of the money supply was the only wise policy, and warned against efforts by the treasury or central bank to do otherwise.
Influenced by his close friend George Stigler, Friedman opposed government regulation of all sorts, as well as public schooling. Friedman’s political philosophy, which he considered classically liberal and libertarian, stressed the advantages of the marketplace and the disadvantages of government intervention and regulation, strongly influencing the outlook of American conservatives and libertarians. In his 1962 book Capitalism and Freedom, Friedman advocated minimizing the role of government in a free market as a means of creating political and social freedom. His books and essays were widely read and even circulated underground behind the Iron Curtain
Friedman’s methodological innovations were widely accepted by economists, but his policy prescriptions were highly controversial. Most economists in the 1960s rejected them, but since then they had a growing international influence (especially in the U.S. and Britain), and in the 21st century have gained wide acceptance among many economists. He thus lived to see some of his laissez-faire ideas embraced by the mainstream, especially during the 1980s. His views of monetary policy, taxation, privatization and deregulation informed the policy of governments around the globe, especially the administrations of Ronald Reagan in the U.S., Brian Mulroney in Canada, Margaret Thatcher in Britain, and Augusto Pinochet in Chile, and (after 1989) in Eastern Europe.
Sorry, the comment form is closed at this time.