Unregulated markets donít work because some market participants can parasitize others with less power, information, or fewer resources. Regulated markets donít work because parasites with political influence will lobby for rules that favor their narrow interests. Perhaps we just canít win?
The best regulations are the fewest and simplest to do the job. What we need is not regulation per se, but free markets with shock absorbers. Talk of regulation sounds great, until you realize nobody really knows how to do it, and it just winds up protecting one type of crook rather than another. Openness, transparency, and a serious effort to upgrade the underdeveloped worldís human capital is what we need for the long term health of the world economy.
I really did enjoy your latest program. However, I am sort of confused about the conclusion reached at the end of the film. It seems to me that the first 50 minutes explained why government intervention, such as the IMF propping up countries, is destructive. It makes perfect sense that the kind of corporate welfare that the government doles out takes away the risk factor for investors while leaving foreign countries in ruins as the panic spreads. With the government causing so much trouble, why then did your piece end with a string of "experts" insisting that MORE government regulation was needed? That just seems a little inconsistent.
los angeles, ca
"Will it happen again?" Of course it will. Capitalism has no values but creating more. The debate over regulation will no doubt generate lots of heat, but that's theater for those of us who don't engage in money-obsession, Greed as perfection.
It reminds that there is only one other thing in human experience that must grow sans limits..., and it too metastisizes, just like the "98" collapse. Try reading Lewis Lapham's Agony of Mammon for a little deeper comprehension of this problem. They serve only themselves and mouth platitudes about "human suffering." A true democracy would not allow such wanton profligacy, that of privatizing the profit and socializing the cost, their clear "raison d'etre." There will be unforseen consequences on a scale unimaginable now.
1.Maybe it's about time someone made a comment about the 'real economy', meaning the common people who are too poor, uneducated, or unconcerned to invest in the easy money portrayed by the stock market, yet work their bones off to make an honest buck for their families. It infuriates me that decisions made in the Dow Jones, Nikkei, and elsewhere could ruin and disrupt the lives of these common people overnight. At least Frontline gave us at least a glance of the consenquences that followed. 2. Next time you people at Frontline should do a lot more to portray what these people are going through even today, especially in Thailand, Indonesia, Korea, Russia, and Brazil, maybe Japan. As one econmist said, the Asian stock markets are betting better, but the real economy....
3. It's utterly- how do I say it nicely- terrifying to learn that I live in a city and a country that cares more about scandals and celebs than the 800 million people all over the world who are suffering because of events totally beyond their control. Indonesia alone has newly impoverished people- more than 60 million- and that's only the most conservative estimte. At the same time people here are yelling and doing backflips over sports 'stars', super'models', and teen 'idols'.
4.Why does this country have an openly negative savings rate? What will happen when or maybe if the next contagion spreads to Wall Street and millions of people find themselves utterly bankrupt? Of course if America collapses, it will probably take the entire world down with it.
5. The fact that short-term speculators exist at all is something I will never fully understand. Many are honestly trying to make money, but there are some who are eager to take the money and run. That's how Thailand got wrecked when its currency was devalued. It simply could not pay its debt to the speculators in the first place, and the plunge in the currency made it even less possible. Maybe a little government regulation is in order....
6. And why does the IMF force impossible conditions on countries already damaged by recession just so that it can make another bad loan in order to prop up their currencies? The inevitable tax increases and spending cuts then hammer the real economies, and millions of people suffer. No wonder Malysia and China turned protectionist.
Thank you for listening. And thank Frontline for bringing the other side of the story (The Contagion should be the program's proper name) to light. May God Bless Frontline!
I'm a student of history and one thing that I know about empires--American or not--is that they come to an end and that they are amoral. The IMF bailout of the so-called debt crisis countries has allowed American companies to move into autonomous states and seize control of entire economies. This has been undoubtedly to their benefit. Yet, time will claim the American slavemasters too. Though through imperial force they have ensalved untold millions to their banks and stock markets, they will one day fade into the dust. This gives me some hope!
I was deeply concerned to hear so many of Wall Street's elite advocate increased controls as method of solving the current global currency crisis. Although the problem was presented as an economic one, the reactions of these individuals leads me to believe that it is in fact another symptom of the global intellectual crisis we are now facing. The fundamental philosophy of these individuals is flawed.
There has never been a truly capitalistic economy in history. What we have today is a mixture of controls and freedom. The closest an economy ever came to being truly free was that of early to mid 19th century America. In this period America enjoyed an economic and intellectual boom, the likes of which have never occurred since. The opponents who claim that capitalism has been given a chance but failed are simply ignoring that what brought to an end the boom of the 19th century was increased government regulation, namely anti-trust laws and New Deal legistlation(which turned a recession into the Great Depression). In the same era as the New Deal, the true root of today's currency crisis began with the US's elimination of the gold standard. The subjective value of currency is the real problem. An objective currency backed by a suitable good, usually gold, would not be subject to the whims of billionaires, nor the unthinking masses that blindly follow their lead. It is the Wall Street leaders' unquestioning acceptance of these ideas, i.e. a controlled economy and no gold standard, as axioms in the discussion and their willingness to work within these flawed rules that one should find most disturbing.
I was impressed with the intelligent and broad focus "Frontline" shined onto this financial crisis. Again, we are reminded that financial markets, and all their pompous ranting that self regulation can correct the fiscal black holes developing countries continuously find themselves jumping into, another illusive fabrication. More proof that Darwinism is alive and prospering on Wall Street.
Dear Frontline: It somewhat pointless to push for a "solution" as if one existed. The free market system currently prevailing has brought more prosperity to more people ever in history. You did not provide your viewers with a background on the state-of- the- arts in international finance. Corruption, greed, conspiracy, etc do not explain these phenomena. Shame on you. Please explain to your audience where we are in Int'l Finance and then discuss the art of the possible. Not everything is known - not all solutions exist.
san francisco, ca
Your report was a facinating course in international investment capitalism. Western investors inject what amounts to high interest loans into foreign markets. These loans can be called it in all at once, devastating economies. Wall Street is plundering these nations, and getting bailed out when their investment strategies backfire.
So, why do we bail out these Western investors who cause the problem? Because they finance elections. The first step toward ending financial imperialism is campaign finance reform. If we get Wall Street money out of Washington, then our government can protect these countries from Wall Street.
baton rouge, la
Economic predatory practices are as old as time. It's just that in this instance it's "official" negotiations between two governments. Capital will always flow to its state of highest return. It's just unfortunate that it's the small investor and citizen who typically take the hit while government's are bailed out, even though they have to now operate with imposed austerity measures.
Would somebody please tell me where I can go get 30 percent returns and then when my investment fails I can count on somebody bailing me out? A solid, unnerving, piece of reporting... enjoyed it!
Your show "The Crash" could have been summarized in one simple statement: 'the world needs more government intervention to control greedy capitalists.' The underlying reasons for the global meltdown was simple: the "developing markets" crashed due to their government's (and the U.S. as well) attempt to stabilize corrupt and unwise investments. The IMF, an appendage of governments on an international scale, was complicit in propping-up these unstable markets, thereby ensuring even more pain on the populace when the inevitable crashes occurred.
Rather than promote more Keynsian control over developing markets, let's learn from our mistakes and let the invisible hand of market competition rule. Though the fat-cats on Wall Street (who buy-off the politicians in Washington) may prefer an unlevel playing field (dictated by their friends at the IMF and the Fed), the little guys in the real world will benefit in markets that depend solely on concrete economies.
The tonight June 29 program has clearly shown how the government intervention (regadless, of which national government - the US, Mexican, Thai, Russian, Brazilian or the international one - the IMF) into the financial markets (the foreign exchange or government debt one) inevitably leads to the widespread economic and social calamities and eventual financial crash. The main conclusion and unexpected recommendation from that made by the authors, nevertheless, turned out to be an appeal to more and more persistent government regulation. You should not be thus very much surprised that if the authorities would bagin to follow your prescriptions, the world economy would face many more severe crises with even more devastating consequences. P.S. Also, the repetitive statement in the program that the half or almost half of the world today is in the dire depression is completely baseless. As of June 29, nearly all countries affected by the so-called "Asian contagion" (with only exception for Brazil) are experiencing impressive ndustrial output growth ranging from 2.6% in Malaysia up to 17.1% in Korea. Even the Russian industry started to grow showing amazing 6.1% increase in May 1999 on the year-to-year basis. The all world economy in 1998 grew at pace 2.5%, that is higher than during recessions of 1974-75, 1981-82, and 1990-91. The economic growth today proved to be so robust that it forced the IMF and the World Bank to adjust their 1999 forecasts substantially upward.
One point that I would like to touch on is that of the difference between the naturally "grown" afluence of the G7's and the more or less instantenous desire for the same on the part of coutries like Russia, Brazil or some of the Asian states. Countries like the US, being the traditional wealth-producing centers, have strong economic foundations, greatly diminishing Russia-size capital outflaws. On the other hand, states such as Russia, are mostly fueled not by any sustainable and tangible economic foundations, but by pure speculation. As long as that continues to be the case, the question of another financial crisis in Russia is not the one of 'if' but 'when.'
Another point which was also not raised was that Russia does not have significant (or hardly any) experience with democracy, be it political or economic. Let us not forget, that up until 1917 it was ruled by one totalitarian form of government, which was then replaced by another such system. Just setting up some rudimentary free market financial institutions with some seed (ie. IMF) money, is not going to jump start their economy, much like throwing wheat grains around an Arizona desert is not going to turn it into a farm.
Capitalism is the separation of state and economics; but that is not what we saw. Government regulators had their hands in every significant decision that caused the world crisis. They, not investors, are the ones to blame for their crimes against humanity.
Billy Clinton and his commerce department experts seriously believe that if we only entertain their lies and illusions that somehow investor confidence will stay strong. Quite the opposite. Only reality, the facts, could be the basis for investor confidence. But they have the power to change the facts, i.e., the values of currencies. That must end. The solution is capitalism and the gold standard. Gold can't be devalued. Ayn Rand was right. We should glorify capitalism and stick to it.
It came as no surprise that everyone interviewed at the end of the show called for more regulation. Nor was it any surprise that US and IMF officials, who largely precipitated the crisis through state intervention, would blame free market capitalism. The fact is that the IMF and various national treasuries largely responsible for the global crisis (and the corrupt states who borrowed all that money) having nothing whatsoever to do with capitalism. Watch for new regulations to be imposed as a result of the crisis. Watch for these new regulations to precipitate even more problems.