Globalization of Crises and/or the Crisis of Globalization
185(former Chair of the U.S. Federal Reserve from 1987 to 2006) states: “The
conventional method of predicting macroeconomic developments–
econometric modeling, the roots of which lie in the work of John Maynard
Keynes–had failed when it was needed most, much to the chargin of
economists.”^6 Why has neoliberal ideology become the dominant ideology
during the 1980s and the 1990s? Why did it have as an effect the collapse
of the existing pillars of power at both the national and international
levels? What are the alternatives?
It is important to understand that money and money management are
the expressions of the fundamental relations between abilities and power
in the world. The dollar became the world reserve currency in 1945,
replacing the British pound in a period of fewer than five years. In fact, the
American economy had grown extremely and had already become the
largest in the world by 1872, but the “Great Depression” and the two
World Wars had initially prevented the dollar from becoming a new world
currency and dethroning the pound. Since then, American political and
economic power has been partly based on the role of the dollar, and partly
on the model of liberal capitalism. This successful American economic
model has enabled a large increase in productivity based on mass
production and intensive use of energy, especially of oil. However, just
after the Second World War–by which time the United States was able to
increase aggregate demand by increasing spending (especially military
spending)–the spread of the American model to many parts of the world
began. This happened in a period when the United States became a
powerful political and military actor, who was able to shape the international
monetary system through the Bretton Woods agreement, and boost the
world economic growth by providing economic and military aid.
However, that model began to fall into difficulties beginning in the
early 1970s. Like other countries that were under the strong influence of
the United States, the trade surplus began to decline and at the same time
there was a decline in revenue and it was more and more difficult to
sustain productivity growth. The situation became even more complicated
when in 1971 the U.S. balance of trade plunged into deficit due to
increased spending during the Vietnam War. Even the American military
superiority was at stake. That same year, the system of fixed exchange
rates ended, and two years later there was a dramatic increase in oil prices.
This is the context in which the new wave of neoliberalism should be
considered. Representatives of the market economy claim that the
excessive interference of the state in the economy caused a slowdown in
(^6) Greenspan, “Newer Saw It Coming.“