One of the most anti-democratic and destabilising features of global capitalism is the lack of control governments have over the flow of capital and corporations; capital and corporations freely move to wherever profits are highest, costs are lowest and governments are most fearful of the way global markets will react to their policies.
So if the people of a country happen to vote in a government that implements policies largely for the benefit of the people rather than largely for the benefit of private investors and their profits, market traders will move capital to some other economy offering an environment more conducive to “business needs,” in the process inflicting devaluation, inflation and unemployment. Government policy, therefore, ends up being formulated under a grotesque framework whereby profits are sacrosanct, trumping all other considerations.
The assumption underlying all this is that the market knows best, probably one of the most damaging of ideas of our time. In fact so damaging that it could render the planet uninhabitable.
Noam Chomsky has a piece in the Irish Times today that goes into a little of the history of this in light of current events. Here’s a little taste:
Bretton Woods was the system of global financial management set up at the end of the second World War to ensure the interests of capital did not smother wider social concerns in post-war democracies. It was hated by the US neoliberals — the very people who created the banking crisis writes Noam Chomsky
Financial liberalisation has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a “virtual parliament” of investors and lenders, who closely monitor government programmes and “vote” against them if they are considered irrational: for the benefit of people, rather than concentrated private power.
The United States effectively has a one-party system, the business party, with two factions, Republicans and Democrats. There are differences between them. In his study Unequal Democracy: The Political Economy of the New Gilded Age, Larry Bartels shows that during the past six decades “real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working-poor families have grown six times as fast under Democrats as they have under Republicans”.
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Participatory economics, an economy proposed as an alternative to contemporary capitalism.