Chapter Ten
186
the growth of productivity. According to this argument, deregulation and
privatization encourage new creative energies. The so-called Washington
Consensus (privatization, liberalization, and fiscal and monetary
discipline) has become the dominant set of recommendations and models,
which arose from the Bretton Woods institutions. They were imposed
around the world in developing countries which, due to high debts, were
forced to accept them. Paradoxically, as a result of the global financial
crisis in 2008, the United States and Great Britain appear to also be
significantly indebted countries, but, of course, they did not continue to
follow the strict discipline of the Washington Consensus, which had
typically been recommended in such cases. For nearly two decades, the
United States had strong growth through massive credit expansion. The
consequences were a high trade deficit and a dramatic increase in total
debt. However, as the dollar remains the reserve currency, based on
political, military, and economic power, the U.S.A. is always able to cover
the deficit by borrowing. They were able to use their special status to suck
out the necessary capital from the rest of the world, ensuring the flow of
capital from poor countries to wealthier ones.
As this continued into the early years of the twenty first century, the
United States and its supporters were unable to detect problems in their
economic performance in a timely manner. Instead, many experts viewing
the new situation have blamed so-called “Asian frugality,” or the
appearance of a glut of savings and increased energy, by which the United
States has accellerated the global recession.
Deregulation of the financial sector has enabled a number of financial
innovations. It has also led to the mobilization of capital for new sectors,
which could potentially lead to an increase in productivity. Yet, the
enthusiasm for the new technology was higher than the manufacturing
capabilities allowed, as a result of the intensive production of energy
(primarily for the military industry) and income inequality. At the
beginning of the twenty-first century, after the IT bubble burst, the
financial sector began to develop “creative” ways of functioning. There
was an overloading of the financial sector through interbank loans and the
fact that, in the financial markets, more exotic financial instruments/
derivatives could be found.
The immediate cause of the global financial crisis in 2008 was related
to mortgages. Nevertheless, we should not forget the debt of the United
States and Great Britain, which had grown even further due to
involvement in expensive wars and to the tax cuts that the Bush
administration had enacted. In this sense, when you look at the U.S.A.’s
budget for defense, even when we cut the additional costs of war, we see