3 February 2004

Globalisation - lopsided generator of wealth

Second, countries at the centre of the global capitalist system enjoy far too many advantages over countries at the periphery. Perhaps their greatest advantage is that they can borrow in their own currencies. This allows them to engage in counter-cyclical policies, that is, they can lower interest rates and raise government expenditures to fight recessions. The countries at the centre are also in control of the IMF and the international financial system, which gives them much greater influence over their own destiny than peripheral countries, which are in a much more dependent position.

Contrary to the tenets of market fundamentalism, financial markets do not tend toward equilibrium; they are crisis prone. Since 1980, there have been several devastating financial crises but whenever the centre is threatened, the authorities take decisive action in order to protect the system. As a consequence, the devastation is confined to the periphery. This has made countries at the centre not only wealthier but also more stable. It has encouraged capitalists in peripheral countries to hold their accumulated wealth at the centre.

Soros' views should not actually be controversial because they are so obvious, but for some reason admitting that power has anything to do with the way markets work makes people hysterical.

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