Listening To The Wrong Economic Pundits

by David Morris

Some predicted this economic state of affairs. But when we turn on the nightly news and NPR or open the New York Times, we don't get the opportunity to learn from them. Instead, we are treated to the same crew of economists, securities analysts and treasury department officials who for so long missed the crisis brewing.

Where, for example, is Walden Bello? Bello, a professor at the University of the Philippines and a frequent visitor to the United States, blew the whistle on the wrong-headed economic policies of the so-called Asian tigers back in the early 1990s with his prescient book, Dragons in Distress and has been vocal ever since.

While the World Bank and the IMF were applauding the soundness of the Asian economies, Bello was arguing that IMF policies were strangling Asian economies and encouraging more and more destabilizing capital flows. Bello's predictions about unemployment rates, inflation rates, and currency values have been far more accurate than those of officialdom.

Where is Doug Henwood? Editor of the Left Business Observer newsletter and author of Wall Street, Henwood predicted the Dow could well plunge to 7000. And he convincingly argued that in any case, a soaring market does not lift all boats. Indeed, he challenged the conventional wisdom that the stock market is a key instrument for raising capital for businesses. Almost all investment funds corporations use for capital expenditures are raised internally through their own profits and depreciation. In fact, from 1981 to 1996 American firms actually retired $700 billion more in stock than they issued. For Henwood, the stock market is part of a financial system that debilitates rather than strengthens the real, productive economy.

Where is William Greider? His book, One World, Ready or Not: The Manic Logic of Global Capitalism, predicted a glut of goods chasing stagnating wages, leading to global deflation and economic crisis. Reviewers laughed at his prediction. Since their guffaws, commodity prices have plunged. Deflation is now an acceptable word in economic circles.

Given their well-documented prescience, why have these articulate, learned analysts not been called on by the media to explain the current crisis and offer remedies? Maybe it is because none of them worship at the church of free enterprise the way conventional pundits do. All three, for example, think that the much-maligned John Maynard Keynes, who after all lived through another period of boom and bust, still can teach us a thing or two about managing economies.

This kind of thinking is anathema in America, circa 1998. Our leaders are still positive that unrestrained capitalism is the best system. The Asians just didn't get it right. Neither have the Europeans. Nor the Russians. Nor the Africans. Nor the Mexicans. And maybe, truth be told, we're beginning to stumble ourselves. But that simply means we need to do it better.

This fall, the Administration, with Republican support, will request tens of billions of dollars more for the IMF. The White House and the Republicans will try to smooth the way for passage of an international treaty that would give capital rights under international law that even governments lack. They will try to enact legislation that makes aid to Africa contingent on its adopting IMF-like policies. And of course, they will continue to cling to the notion that a balanced budget should be the highest priority of any government.

For Bello and Henwood and Greider, this is madness. To them failed policies should be abandoned, not intensified. And it is their predictions, not those of the Republican leadership or the Administration or the IMF that have stood the test of time. When the news shows reach out for someone to explain our present dilemma, why not choose those who were right?