October 21, 2008
In a Washington Post commentary published on Friday, October 17, Great Britain’s Prime Minister Gordon Brown tried to make the case that “The Financial Crisis Is Also an Opportunity To Create New Rules for Our Global Economy,” as the subtitle put it.
This sounds almost odd, coming from the leader of a country that has historically been closer to the United States than to Europe and the rest of the world, which explains why Britain still does not have both feet in the European Union (EU). On the other hand, Mr. Brown has made it clear that he wants to drag Britain into the EU, without resorting to the earlier promised popular referendum.
Ironically, it was “new rules” that contributed mightily to the present financial crisis. Once upon a time, banks only lent money to people who were good credit risks, which meant that poor people did not often get mortgage loans. Since the poor in the United States are made up disproportionately of minorities, the media claimed that minorities were victims of discrimination. This led Congress to pass and President Jimmy Carter to sign The Community Reinvestment Act of 1977, which forced lending institutions to grant mortgages to people whose income, credit histories, and net worth would previously have disqualified them from getting such loans. Later, the Clinton administration put pressure on Fannie Mae and Freddie Mac to get involved, whereby they bought up weak loan portfolios from banks and securitized them for sale on world markets. The seeds of the subprime meltdown were planted by these policies.
Early on in his commentary, Brown describes the formation of the International Monetary Fund and the World Bank in glowing terms, saying of the “visionaries” who created them, “They knew that for prosperity to be sustained, it had to be shared.” How the international economic order works under those two institutions is described in John Perkins’ book, Confessions of an Economic Hit Man. Developing countries are convinced to accept enormous loans based on fraudulent financial reports. The money is funneled though multinational corporations, which build the infrastructure megaprojects. When the enormous projects don’t pan out and the loans cannot be repaid, the countries backing up the international lenders and multinational corporations demand their “pound of flesh,” including access to natural resources, military cooperation, and political support. In the process, millions of poor are even further impoverished.
We now watch as the world’s largest financial institutions are being recapitalized with taxpayer money. The upshot is that the banking industry is being nationalized on a global scale. It was government interference that caused the problem and now we’ve been told that more government interference is the solution to the problem! It’s a classic example of what 19th-century French economist Frederic Bastiat referred to as “concocting the antidote and the poison in the same laboratory.”
Brown ends his commentary by stating, “Over the past week, we have shown that with political will it is possible to agree on a global multibillion-dollar package to recapitalize our banks across many continents. In the next few weeks, we need to show the same resolve and spirit of cooperation to create the rules for our new global economy. If we do this, 2008 will be remembered not just as a year of financial crisis but as the year we started to build the world anew.”
He apparently chose his words carefully, because that sounds somewhat less ominous than “build the New World Order.”