Tuesday, June 09, 2009

Quoting Chomsky: Crisis in the US


"the IMF is more or less a branch of the US Treasury, even though it has a European director. Its past role has been extremely destructive. In fact, its American US executive director captured its role when she described it as “the credit community’s enforcer,” meaning if a third world dictator incurs a huge debt—people didn’t, but the dictator did; say, Suharto in Indonesia—and then the debt defaults, the lenders, who have made plenty of money because it was a risky loan so they get high interest and so on, they have to be protected, meaning not by the dictator, by the people of Indonesia, who are subjected to harsh structural adjustment programs so that they can pay back the debt, which they didn’t incur, so that we can be compensated, rich Westerners can be compensated. So that’s the IMF, the credit community’s enforcer, a very destructive role in the third world. Now it’s to be recapitalized."


So, say, take Indonesia again. Indonesia had a huge financial crisis about ten years ago, and the instructions were the standard ones: “Here is what you have to do. First, pay off your debts to us. Second, privatize, so that we can then pick up your assets on the cheap. Third, raise interest rates to slow down the economy and force the population to suffer, you know, to pay us back.” Those are the regular instructions the IMF is still giving them.

What do we do? Exactly the opposite. We forget about the debt, let it explode. We reduce interest rates to zero to stimulate the economy. We pour money into the economy to get even bigger debts. We don’t privatize; we nationalize, except we don’t call it nationalization. We give it some other name, like “bailout” or something. It’s essentially nationalization without control. So we pour money into the institutions. We lectured the third world that they must accept free trade, though we accept protectionism.

Take the “too big to fail” principle, which the House committee is discussing today. But what does “too big to fail” mean? “Too big to fail” is an insurance policy. It’s a government insurance policy. Government means the public pays, which says, “You can take huge risks and make plenty of profit, and if anything goes wrong, we’ll bail you out.” That’s “too big to fail.” Well, that’s extreme protectionism. It gives US corporations like Citigroup an enormous advantage over others, like any other kind of protection.

But we don’t allow the third world to do that. I mean, they’ve got to privatize, so that we can pick up their assets. Now, these are happening side by side. Now, here’s the instructions for you, the poor people; here’s the policies for us, the rich people. Exactly the opposite. "

"The public pays the costs and takes the risk of economic development, and if anything works, maybe decades later, it’s handed over to private enterprise to make the profits. And that’s a core element of the economy. Of course, we don’t permit the third world to do that. That’s considered a violation of free trade when they do it. But it’s the way our economy works. And it’s kind of complementary to the “too big to fail” doctrine of protectionism for financial institutions. But the general—we do not have a capitalist economy. We have kind of a state capitalist economy in which the public has a role: pay the costs, take the risks, bail out if they get into trouble. And the private sector has a role: make profit, and then turn to the public if you get into trouble."

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