The toppling economies are big news because rather than only the poor suffering this time
those of ample means are suffering too. Indeed, if the value of stocks declined while
other prices and wages went unchanged and economic activity proceeded unabated, only those
owning stocks would lose, and the share of total wealth in elite hands would decline. If
your house doesn’t change in value and your wage doesn’t fall and your job doesn’t
disappear, but Bill Gate’s stock drops, you improve relative to him. That kind of
revaluation would be redistributive and we could legitimately celebrate it. Regrettably,
however, the current crises go beyond just revaluing stocks to also afflict the poor with
devastating unemployment, horrible wage reductions, unexpected foreclosures, life
threatening food and goods shortages, and even increased starvation and disease. For
growing numbers, these are the worst of times.

After World War Two, following the lead of the
U.S. and Britain, the Bretton Woods system was established for international economic
coordination. It utilized new institutions such as the World Bank and the IMF and had two
basic principles. (1) Liberalize trade of goods, making it easy to transact. (2) Manage
capital flow, making it hard for capital investment to leap from country to country
without attention to consequences. It was understood that capitalist economies running
full steam ahead with no oversight of their machinations, would yield horrible by-products
not only for the poor, but for the rich as well. Bretton Woods limited short-run plunges
for profit to preserve long-run profit possibilities.

There were two important observations behind all
this. First, investors being able to move their monies where and when they please would
lead to fluctuations in the relative value of currencies and other dislocations
undermining trade and investment—in worst case scenarios inducing recession or even
depression. Second, the free flow of capital would undermine democracy and the welfare
state. Capital controls, ala Bretton Woods, not only guard against dislocation and crisis,
but also allow governments to carry out monetary and tax policies, unemployment benefits,
and social programs, and maintain public goods, all without fear of capital flight, which
would, if allowed, limit such behavior. To foreshadow, it isn’t hard to guess the
punch-line of our story. When capitalists got firmly in the saddle after beating back post
World War II advocates of social democracy, in their zeal to eliminate the social
protections afforded by Bretton Woods, they also eliminated its economic guards against
financial crises.

The Bretton Woods system operated as intended for
about a quarter century engendering the golden age of capitalism through the 1950s and
1960s. Then capitalists began to thirst anew for untrammeled profitability. On their
behalf, Nixon unilaterally abrogated Bretton Woods in the early 1970s. By the 1980s
capital controls were mostly gone in rich countries with the smaller economies like South
Korea dropping them in turn. Now the IMF no longer regulates capital flows, but instead
systematically forces countries to eliminate restrictions on international investment as a
condition of bailouts.

And what has been the result? In rich countries,
growth of productivity has slowed. Incomes have stagnated or declined for the great
majority, conditions at work have deteriorated. social services have been gutted,
infrastructure has decayed, and the welfare state has been eroded. At the top of the heap,
in the U.S., the top one per cent of households own about half the stock and other assets
that have increased in value, and the top 10 per cent own most of the rest. They are the
ones enjoying the elimination of Bretton Woods. The next 10 per cent, the 80th to the 90th
percentile has seen their net worth decline in the 1990s. And it gets worse as you go
down, with few families maintaining their living standards of 1973–when the new economy
really began to take hold, and many falling behind. In poor countries, the same has
occurred, but worse.

Why would anyone favor such outcomes in place of
the economic growth and social stability of Bretton Woods? Growth isn’t what
capitalists seek. Capitalists seek profits. And throughout the post Bretton Woods period
profits have soared, particularly in the 1990s. Indeed, the current jitters on Wall Street
have nothing to do with the plight of the poor, which is simply not part of Wall Street’s
agenda, but only involve fears that there may be an end to their post-Bretton Woods
stupendous growth in profits. In short, the 25 years post-Bretton Woods have been a
disaster for humanity, but a joyous fairy tale for the rich.

The reason for the fairy tale for the rich is
frankly explained by the all-powerful Allan Greenspan. He fingers significant wage
restraint and greater worker insecurity. That is, eliminating Bretton Woods and thereby
allowing capital flight to undercut social support systems zapped labor big time. The
Clinton administration attributes high profits to salutary changes in labor market
institutions, which is a delicate way of saying the same thing. The business press points
out that workers are too intimidated to seek some share in the good times. Business
Week recently reported that 60 percent of workers are very concerned about job
security and 30 percent somewhat concerned. When 90 percent of the work force is insecure,
that’s a fairy tale economy for the rich.

So the bottom line is that we have accelerating
untrammeled profit-seeking for the few with derivative reduction of the well being of the
many, and, alongside that, increasing destabilization, finally threatening even the rich.
Digging economies out of recessions certainly benefits the poor. Nonetheless, for radicals
to spend their time telling elites how to return to saner profit-seeking has a potential
downside. It can turn radicals into doctors of capitalism—not educating and acting to
raise anti-capitalist sentiment and commitment, but giving the impression that while a
“sick capitalism” is horrible, a “healthy capitalism” is fine.
Radicals shouldn’t ignore the current crisis or entirely forego thinking about
policies to correct the travail it imposes. Instead while we act to ameliorate immediate
suffering, we should also act in ways that lead beyond capitalist ideology and
institutions. If we propose an end to the IMF and World Bank, we should also indicate what
equitable international economic exchange ought to look like and what kinds of
institutions can safeguard it. A movement to end the IMF and World Bank has to lead to a
movement for better institutions in their place. When we decry the dislocations of crisis,
we need to explain what structural changes will attain true justice (not just less extreme
injustice): how workplaces must be reorganized, how remuneration should be determined, how
allocation should transpire. We need to oppose sick capitalism in a way that opposes
healthy capitalism too, and we need to favor immediate reforms not as ends in themselves,
but in a way that fosters ever more changes and ultimately a whole new economic system.