Deep Reflecting on the G20 Accord: The Cowboy Crackdown

Global Cowboys…Bewareno cowboys

No more Cowboy Economics, “they” declare from on high.

I’ve been reflecting on this global recession for the last few posts, and now we have globally ruminated over it through the fascinating G20 WTO Summit in London.

As widely reported, a lot of the involved parties went away happy from the G20. CNN’s consensus was that the biggest winner from the G20 was, without a doubt, the International Monetary Fund. The IMF will see it financial resources triple. It flagging legitimacy is going to be propped up, and “suddenly it’s being viewed as a savior of countries large and small.” Financial lending condition will be related, the money is going to flow.

The G20 was all about adapting to financial crisis by increasing government financing. It was about stimulating the free market by offering government incentives. It was about healing capitalism by altering capitalism. It was about quietly burying University of Chicago style free market financial governance models.

In some ways, it was an officiating ceremony over the death of one global economic mode of governance, and the birth of another.

  • Australia’s Prime Minister Kevin Rudd captured this idea nicely when he said, “We’re beginning to crack down on cowboys in global markets.”

Cowboys are free marketeers, lone wolves, snatch-and-grabbers, exploiters. What do you do with uncivilized rebels causing a major ruckus? Well, I reckon y’all restrain ’em. Y’all rope ’em in. Y’all regulate ’em, y’all.

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A book I read during my Ph.D. program was very influential on my thinking. It was called Capitalism vs. Capitalism: How America’s Obsession with Individual Achievement and Short-Term Profit has Led It to the Brink of Collapse. That’s seems like a pretty self-explanatory title, but I”ll tell you a little bit more.

In the book, the author, Michel Albert, a French business executive, talks about two basic models of capitalism at play in the world today.

  • The first is the “Anglo-American model” where greed is good, individual gain is rewarded, the stakes are determined by risk-and-reward, and the government is generally free-market-positive or laissez-faire. This is the kind of economic governance suggested for years by the school of thought that has come to be known as Chicago School of Economics-stule governance.
  • Albert then talks about “the Rhine model.” This model originated in the Swiss, German insurance industries, where risk had to be shared by communities, and which was later followed in the post WW2 periods by Germany and, to a large extent, Japan. That is a more communal form of capitalism, where the government attempts to manage the economy for the long-term success of the entire society. He emphasizes that this is a communally-oriented capitalism, capitalism run for the common good, not, as it has been ideologically termed, “Welfare State” or “Nanny State” Economics.

Both models have their origins and their main definition elements in the world of finance. Both had strong ideological elements. And, in the post-Communist world, both had global aspirations. Albert proposed that the Anglo-American model was spreading, and was disastrous and would fail. And that we needed to look at the Rhine model as the ideal.

The book was originally published in 1991, 18 years ago. It’s ideas hold up fairly well today.

I think this is the big shift we are seeing. The Anglo-American model has been ascendant through the 1990s and up until about 2005, and then we’ve seen the pendulum turn to a more Rhine-like model (meanwhile, all his classifications have been complicated by the alterations in global politics). Politically, big parts of the world have seemingly moved from extreme right to center to left.

Economically, we have moved from increasingly emphasizing openness and free-markets governing themselves, to increasingly emphasizing the governmental regulation of markets. We are now carefully considering the management of markets for the common good. And that common good is increasingly complex, requiring increasingly delicate and sophisticated governance bodies.

Related side note: Isn’t it interesting that the biggest protests take place at the WTO meetings, not at the UN? Perhaps the WTO is really the major global regulatory body that direct the investment of resources today.

I think we are definitely moving in the right direction. Overall, I like the directions President Obama is taking the country. I think the WTO is clearly thinking clearly about global capitalism and the need for its regulation.

But there’s more, much more that can be done.

Not just the Great Cowboy Crackdown. We need clearer assessments of our past and present. And we urgently need new models, new ways of thinking about where we are, and where we want to Be.

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