Washington consensus and current ‘meltdown’

Dr. Mervyn D. De Silva

The current “meltdown” as I said in an earlier post has root causes as in the case of poverty, and terrorism, and must be clinically examined and then treated.

The current meltdown and world chaos and disorder is not due to Popes, Mullahs, and Mahanayakes or, Christian ethic but, to over production and over capacity that has plagued Capitalism. That is poppy cock.

I understand why Third World immigrants are reluctant to get to the root causes of the crisis because, if they do, they will find that the originators of Anglo-American Capitalism are the natives of their new homes.

Wealth

Together with them, they enjoy the fruits of 80 per cent of the total world’s wealth, while 80 per cent of the rest of the world (80 per cent of total world population) has to make do with 20 per cent of world’s wealth! Any serious reformation of the dominating ( Dominant) capitalist economic system means that they too will have to come down from their wasteful, consumeristic style of living.

So, better not get to the root and be shocked a can of worms. There is enough in the world for man’s needs, but not for man’s greeds. Does Victor agree with the creators of the HIV virus when it was used to control hepatitis in Africa?

Even Kofi Annan, hinted that it was a technique of getting rid of “useless eaters”, what a great world will there be without Popes, Mullahs, and Mahanayakes control the population by all means and then we will have a world with a few to gorge 100 per cent of the world’s wealth!

The real Popes, Mullahs, and Mahanayakes who created the current dismal situation are the greedy industrialised countries that framed the Bretton Woods principles and subsequently, the Washington Consensus.

This is the Truth, and let us not be so crippled in mind to trace all the ills of the world to Christian beliefs and enjoy an intellectually perverted form of solace. Bribery and corruption did no begin because Judas Iscariot who Betrayed Jesus for 30 pieces of silver!

Now, What caused the collapse of global capitalism’s nerve centre? Yes greed, yes banks over smarting themselves by creating complex financial instruments, and also, government certainly capable of regulating refrained from doing so because, of its neo-liberal laissez-faire attitude. What we see is the central contradiction of global capitalism which Is The Crisis Of Over Production, Also Known As Over Accumulation or Over Production.

Social Iniquities

And the world population’s capacity to consume Because of social iniquities had a limited popular purchasing power, thus, eroding Profit.

The so-called golden age of contemporary capitalism (1945-1975) was due to reconstruction of Europe and East Asia etc.

What went wrong, briefly, the reconstruction of Germany and Japan and the rapid growth of industrialising economies like Brazil, Taiwan, South Korea added tremendously new productive capacity resulting in Global Competition, while societies within countries and between countries globally, had limited growth of purchasing power and demand, This reduced profitability. It was aggravated by the massive rise in oil prices.

How did the fathers of the Bretton Wood twins and the Washington Causes and leaders of the industrialised countries meet this challenge? The escape route from this pickle of over-production was Neo-liberal restructuring, Globalisation, and Financialisation.

I shall treat this as briefly as possible because most of you may have read on these subjects and are aware of the ravages and damage they have done to Third World countries. I have covered it exhaustively in an article entitled “Globalisation or Pauperisation of the Third World.

What was Neo- liberalisation?

-Remove state constraints on the growth, use, and flow of capital and wealth

-Redistribute income from poor and middle classes to the rich on the theory that the rich would invest and reignite growth.

-With lower incomes the poor and middle class purchased less and demand dropped, besides, the rich did not necessarily invest in more production. Neoliberalisation could not shake off stagflation that set in from 1975.

Market Economy

The next escape route was globalisation-Integration with the pre-capitalist, non-capitalist and even pre-capitalist areas into the global market economy. The IMF and World Bank, whip in hand, (stiff conditionalities and repayment schedules and all manner of pressures) To increase profits they had to gain access to cheap labour, access to even limited markets, gaining new sources of cheap agricultural and raw material products, investment in infrastructure, trade liberalisation, and removing barriers to the mobility of global capital etc. etc.

Why did not globalisation work? The problem with this escape route from stagflation was that it exacerbated the problem of overproduction (China, India, South Korea, Japan Brazil etc. etc) by adding to the productive capacity.

A tremendous amount of manufacturing capacity has been added in China over the past 25 years and this has had a depressing effect on prices and profits, According to the profit rate of the four times 500 the profits of US corporations stopped growing by around 1997.

Now comes financialisation - Given the limited gains in countering the depressive impact of overproduction via neo-liberal structuring and globalisation, the third, and may be final route, became absolutely critical for maintaining and raising profitability.

Because of low profits owing to overcapacity, large amounts of surplus funds were circulating and being invested in the financial sector, that is how the financial sector began to turn on itself.

The result has been an increased bifurcation between a hyperactive financial economy and a stagnant real economy.

Overproduction

The financial economy has exploded precisely to make up for the stagnation because, of overproduction of the real economy. What is unfolding from the beginning of crash is known to most of you.

To sum up, and to put it in a nut shell The Wall Street melt down is not only due to greed and to a lack of government regulation of a hyperactive sector, the Wall Street collapse originates ultimately from the crisis of overproduction that has plagued global capitalism since the mid-seventies.

One post writer who addressed the good doctors has much reading to do on the history of recent economic history. There is much more in heaven and earth than is found in your philosophy.