Great Sound Kutts from Bob Kuttner (9/6/98 BG C7)
The swooning stock market, the East Asian collapse, and the Russian implosion...all are casualties of the great illusion of our era - the utopian worship of free markets.... The stagnation of the 1970s, the resurgence of organized business as a political force, and finally the collapse of cummunism revived an almost lunatic credulity in pure markets and a messianic urge to spread them worldwide....
[The trouble is that free markets tend to get sabotaged by the concentration of wealth, along the lines of "the more concentration, the less circulation." Free markets have no defense against such concentration, especially when graduated income taxes are flattened and estate taxes phased out. Pure free marketeers fall into Chesteron's pan-utopian trap - the assumption that no one will want more than his fair share (and even more basic, that everyone magically knows what his fair share is in the first place). Or maybe they fall into an even more primitive trap, the assumption that the current widely skewed share definition is fair enough and indefinitely sustainable, even if it gets more skewed to the point that 1% of the population owns 99% of the wealth. Here the bolstering myth, oft-repeated in slightly varying wording, is that "concentrated wealth works just as hard as distributed wealth" even though economists admit to the "marginal efficiency of wealth" and Will Rogers (and others) remind us that "money is like manure - it's no good unless it's spread around." Timesizing solves this problem by admitting that there is at least one free-market precondition or predefinition that the market cannot do itself because it depends on its already having been done (and operates within that framework).]
East Asia has productive workers and firms, households with high rates of savings, even prudent government budgets. Some countries did suffer from business-government cronyism. But what wrecked these economies was their sudden exposure to international speculative forces beyond their control. Financial speculators first overinvested in their currencies, stocks, and businesses - and then abruptly pulled the plug. This sudden vulnerability, in turn, reflected ultra free-market norms imposed by the U.S. and our protegés at the IMF. Obviously the real value of an economy does not fluctuate by 80% in a few months. What fluctuates are the guesses of foreign speculators. But in an exposed economy, these become self-fulfilling prophecies. [Like the way "news coverage" of the 8th District race has become tantamount to election rigging - ed.]
[Clearly we're vulnerable as long as a tiny minority of know-it-alls has huge power to make discretionary investments and there is no automatic investment in the underlying fundamentals of all their paper purchases. In a word, there is no automatic reinvestment in the underlying fundamentals that maintain and grow markets, fundamentals like mass purchasing power, the kind of thing that is replenishable only via wages, which in turn are currently only pushed up by market forces during war. Timesizing sets up that automatic reinvestment for the first time on an economy-wide basis without war.]