- js reader version
- view hidden posts
- tags and related articles
by Peter Bofinger
Friday, Oct. 10, 2008 at 4:06 AM
Free markets became wild markets. The post-socialist blessing became the turbo-capitalist curse. The state allowed the monitoring of banks to be de facto privatized. Politics allowed the markets to run wild. In turbo-capitalism, contracting debts was trendy and saving was Philistine.
“WE ARE IN AN EPOCH SHIFT”
Interview with Peter Bofinger
[The financial crisis has destroyed the myth of Wall Street and now shakes the foundations of society, says economist Peter Bofinger. In this Spiegel Online interview, he speaks about the death of turbo-capitalism, the failures of politics and the return of the strong state. This interview published September 29, 2008 is translated from the German on the World Wide Web, http://www.spiegel.de/wirtschaft/0,1518,druck-580333,00.html.]
Spiegel Online: Mr. Bofinger, did “turbo-capitalism” die in the fall of 2008?
Bofinger: Yes. It died in the last two weeks with a great bang. The age of reassessment now begins on the financial markets.
Spiegel Online: What triggered the bang?
Bofinger: Many factors came together: the collapse of Fannie Mae and Freddie Mac, AIG and then the bankruptcy of the US investment bank Lehman. Up to their declaration of bankruptcy, the hope prevailed on Wall Street that at least the bank deposits would be safe. Hardly anyone expected that the US government would let the largest investment bank of the country to go bust.
Spiegel Online: The Lehman bankruptcy destroyed the myth of Wall Street. Financial jugglers are no longer regarded as invulnerable. Was it a mistake not to save Lehman?
Bofinger: It was clearly wrong. The mutual mistrust of banks will increase even more.
Spiegel Online: How could it happen that the financial system has so fallen out of control that the danger of a core meltdown is now raised again and again?
Bofinger: In a certain regard, the triumphant advance of Anglo Saxon capitalism was a concomitant to the Cold War. New dynamic markets that brought prosperity for many people arose through the collapse of the planned economies in Eastern Europe. Free markets and unbridled speculation were equated with freedom. The belief was that all reins must be taken from the markets to solve the problems of humanity.
Spiegel Online: Was the state defined as evil and the free markets as good?
Bofinger: In the public discussion, the state fell more and more on the defensive and the power of markets grew. Hedge funds and shadow banks like the conduits of IKB (a German regional bank) and unregulated investment houses like Lehman fueled the financial system with increasingly risky speculations. An inscrutable net of mutual debts and dependencies developed worldwide. Free markets became wild markets. The post-socialist blessing became the turbo-capitalist curse.
Spiegel Online: What mistake did the state make?
Bofinger: The state allowed the monitoring of banks to be de facto privatized. Up to July 2007, the dominant idea was: when rating agencies described a loan as safe, it was safe. The state hardly examined what risks were hidden in the balance sheets of the financial houses.
Spiegel Online: Politics allowed the markets to run wild and citizens also contributed their part. More and more people financed their own life on credit.
Bofinger: In Anglo Saxon countries, turbo-capitalism has marked a lifestyle where contracting debts is trendy and saving is Philistine. Since the banks could resell the debts of their customers on the financial market, nearly everyone suddenly obtained credit in the United States and Great Britain. Many institutes did not test the incomes of their customers with documents before they granted them credit.
Spiegel Online: Is the dislocation and turbulence on the financial markets also possible on the commodity markets?
Bofinger: The danger that the market destroys itself cannot be excluded there. The globalization of the commodity markets has increased social inequality. The majority of employees no longer share in the growing national economic prosperity. The state should channel the effects of globalization through minimum wages and more education investments. Sooner or later, parties will gain power that say: Stop this@ Tighten the borders.
Spiegel Online: Do you think turbo-capitalism encourages extreme political id3eas?
Bofinger: One does not need much imagination. There will be populist politicians who exploit the growing discontent with the market economy and plead for protectionist measures. That would be fatal for an export-oriented national economy like the German economy.
Spiegel Online: What must the state do now to bridle the financial markets?
Bofinger: Three measures could be catalysors: building a global credit register, creating a state rating agency and a minimum standardization for guaranteed credits.
Spiegel Online: The hierarchy of power between politics and the economy has shifted through the US bailout package and the prohibition on short selling on stock exchanges. Are we in the West witnessing the return of the strong state?
Bofinger: It is now clear to everyone that seeing the state as the enemy of the market was wrong. In the long run, functioning markets require a stable state framework.
Spiegel Online: The relation of many citizens to the state may change through the present financial tremors. Politics assumes the role of rescuer in emergency. In the last years, people like Paul Kirchhof dominated the debate. This constitutional judge described the state as a hydra and demanded: Give back the money of the citizens!
Bofinger: Politics now has the chance of carrying on an image-campaign for the state. Too many politicians have long argued like Mr. Kirchhof. They constantly urge tax cuts. The impression arose that the state did not need the money of citizens. However the message of the state must be the exact opposite: We need your money and will use it responsibly. Whoever is for the market must also be for an efficient state with adequate financial resources.
Report this post as:
Change Links 2018 July posted
More Pix: "Families Belong Together," Pasadena
"Families Belong Together" March, Pasadena
Short Report on the Families Belong Together Protest in Los Angeles
Summer 2018 National Immigrant Solidarity Network News Alert!
Watch the Debate: Excluded Candidates for Governor of California
Change Links June 2018 posted
The Montrose Peace Vigil at 12 Years
Unity Archive Project
Dianne Feinstein's Promotion of War, Secret Animal Abuse, Military Profiteering, Censorshi
CA Senate Bill 1303 would require an independent coroner rather than being part of police
Three years after OC snitch scandal, no charges filed against sheriffs deputies
California police agencies violate Brown Act (open meetings)
Insane Company Wants To Send Nuke Plant Waste To New Mexico
Change Links May 2018
Worker-Owned Car Wash on Vermont Closed
GUIDE TO REBEL CITY LOS ANGELES AVAILABLE
lausd whistle blower
Help KCET and UCLA identify 60s-70s Chicano images
UCLA Luskin: Casting Youth Justice in a Different Light
Change Links April 2018
Nuclear Shutdown News March 2018
Join The Protest Rally in Glendale on April 10, 2018!
Spring 2018 National Immigrant Solidarity Network News Alert!
Anti-Eviction Mapping Project Shows Shocking Eviction Trends in L.A.
Steve Mnuchin video at UCLA released
Actress and Philanthropist Tanna Frederick Hosts Project Save Our Surf Beach Clean Ups
More Local News...
Fbi fears this post
Disabled Folks among the extreme poorest in US counts
Banks Enriched By Trump Deficit Increase Of 4 to 5 Trillion $
Illegal Russians Receiving Land and Homes in West Bank 2018
Un monde de pauvreté
14 Disturbing Facts About Scott Gottlieb, Trump's FDA Head
Behind the scenes at fbi National Academy
Treasury Takes Aim at Shell Companies
Paraphysique de l'intelligence
Oklahoma GOP Senator Jim Inhofe's Bloody Record
Globalization: hope on the horizon despite Fake Liberals.
Sorry President Trump,Ted Cruz Texas Judicial System,is Worse Than Many Shithole Countries
The Shortwave Report 07/20/18 Listen Globally!
The System Question as a Survival Question
Nation's Largest Voting Machine Co., ESS, Admits Lying Re Having Installed Remote Control
Du pain et des jeux
Paraphysique de martyrologie
Children Incorporated Earns 4-Star Rating on Charity Navigator
Democratic Socialists of America
Leonard Peltier Non Violent Native American Political Prisoner since 1970's
Paraphysique miscellanées de l'aggiornamento
FBI Investigated LA County Sheriff Baca,Why Not Hank Skinner's Persecution?
Updated Partial List Of Famous Vegetarians, Vegans, & Fruitarians
The Shortwave Report 07136/18 Listen Globally!
Social Policy as Social Infrastructure
Vol I: 84 Varieties Of GOP Election Fraud
Texas Can Call it An Execution,But It is A State Sponsored Murder of Hank Skinner..
June 2018 Honduras coup update
More Breaking News...