The international market system’s collapse and slow recovery has provided an opportunity to individuals interested in transforming government’s role in America’s domestic affairs – from social programs and taxation to defense and security. Anti-government sentiment (similar to the animus directed at trans- and multi-national corporations) has been pervasive, for generations, throughout American history; however, the last decade has witnessed an exponential rise in seditious rhetoric. One of the catalysts for the recent shift against public officials came about twelve years ago with the collapse of the Asian market system. As can be expected during global turmoil, misinformation and disinformation clouded the truth causing much of the public’s anger to be misplaced.
In their article The East Asian Financial Crisis: Diagnosis, Remedies, Prospects, Steven Radelet and Jeffrey Sachs state that what transpired during this collapse was unlike anything the international community had witnessed in the past. They assert that the market’s failure was brought about by the “intrinsic instability in international lending…in which individual creditors may act rationally…yet market outcomes produce sharp, costly, and fundamentally unnecessary panicked reversals of capital flows”. The issues at hand were created by the widening divide between “illiquidity and solvency”, which was caused by numerous companies being incapable of repaying the loans needed to fund daily operations. The exhaustively studied Asian market collapse was caused by insolvency due to not only the disastrous incentives doled out as rewards for highly-suspect financial practices, but also the failure of regulators to contain the effects of the financial market’s policies.
The deregulation of the world’s financial markets (symbolized by the Bank of Japan Act, the Single Market Act, and the Gramm-Leach-Bliley Act) provided incentive for financial institutions to acquire riskier portfolios. This impetus reinforced institutional perceptions that private financial corporations were necessary for national stability and should be allowed to function unabated. Operating with the notion that private financial institutions are essential for national security, many institutions conducted business with the belief that private sector assistance would be available if difficulties arose. By the crisis’ end, “governments”, as stated by Mark Beeson and Andrew Rosser in The East Asian Economic Crisis: A brief overview of the facts, the issues and the future, “not only found themselves unable to manage the domestic economic and international economic relations, but they [had] also lost a good deal of moral and political authority”. It had become quite apparent that “economics cannot be separated from an overreaching political context”. With the regulatory safety-nets removed, the financial sector collapsed and (similar to the U.S. Savings and Loan Scandals of the late-1980s) the public sector was blamed for both the cause (lack of proper regulation) and medium-term effect (the slow growth post-collapse was said to be due to too much regulation).
The collective amnesia that affects numerous people throughout the West, particularly in the United States, coupled with misinformation, directed by corporate and political interests, has caused individuals interested in reforming the current system to continually focus on the wrong dynamics that undermine stable society. Fast-forward to the contemporary world crisis and governments are once again being blamed for the skyrocketing deficits and economic strain caused by the once seemingly invincible capitalist economy. Governments (taxpayers) were able to stave off a complete collapse by injecting markets with enough capital to steady their balance-sheets, yet 2011 will usher in renewed antipathy for anything government, as individuals willingly run back to the very system that nearly destroyed their way of life.
Unlike the private sector (which is in the midst of further gouging consumers for higher profits margins and obscene bonuses), Western nations have already made the decision to cut their deficits by 1% of GDP, in 2011. The decision to make these cuts will have a drastic effect on the stability and security of nation-states in the coming years. When the private sector fails, citizens decry perceived inaction from public officials, who tend to be blamed for “falling asleep at the switch” or concealing a deep seated hatred for capitalism. The initial failure is inevitably followed by the public sector’s initiation of a series of spending cuts and tax increases to pay for the private sector’s misdeeds, causing the citizenry’s vocalized discontent to become civil unrest.
The Financial Crisis Inquiry Commission issued its report at the end of last month attempting to answer the important question as to who is responsible for this mess; their analysis - the private sector failed. As can be expected, though the answers were in front of everyone, the finger-pointing was split down ideological lines and nothing was truly resolved, for the right-wing (concerned more with protecting private business from the 'Leviathan') were able to pick and choose which parts of the report to acknowledge or ignore. What created the collapse is an important aspect that should be studied so as to not be repeated.
The fact remains that many Americans seemed to have already forgotten what had transpired in 2008. Moreover, it is quite apparent, through action, as to which sector is taking it upon itself to stabilize the lives of Americans and which has failed to heed any lessons that should have been learned. The anger currently directed at the government and public-sector unions needs to be focused back on the individuals that deserve the ire of the masses and the scrutiny of the media.