In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again)...
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Glenn Greenwald at Salon also mentions the Russia/Argentina angle:
Desmond Lachman -- the former chief strategist for emerging markets at Salomon Smith Barney and a long-time official with the IMF (no raving socialist he) --argues today that the most apt comparison for the U.S. now is not Japan's "lost decade," but rather, "that the United States is coming to resemble Argentina, Russia and other so-called emerging markets, both in what led us to the crisis, and in how we're trying to fix it."...And my personal favorite, Matt Taibbi, puts it about as bluntly as it can be put:
The key dynamic underlying all of this -- the linchpin that allows it all to happen and, historically, the primary hallmark of a deeply broken nation -- is the total elimination of the rule of law for the ruling class, with a simultaneous intensification of the law as a weapon against the citizenry. Does anyone expect there to be any widespread prosecutions for those most responsible for the looting, systematic fraud and grand-scale theft of the last decade? Identically, as more and more evidence emerges of the vast war crimes of the prior administration, the failure to enforce the law and our legal obligations against our nation's most powerful becomes even more transparent.
It's over — we're officially, royally fucked...
People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.
The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.
I listened to NPR's Planet Money podcast today, and was treated to one of the most depressing segments I've ever heard. The Special Inspector General assigned to the Troubled Assets Relief Program (the infamous TARP) is portrayed as a real tough guy, a kind of financial leg-breaker by much of the (business) press.
In reality, he only oversees 100 employees, is having trouble finding talent to work for him, and his office is a musty little hole in a basement in the capital (it was literally being fumigated when he was interviewed for Planet Money). He can't even subpoena people* - and this is the guy we're depending on to look out for waste and fraud in the vast sea of practically unregulated money that is the TARP.Things are not looking good.
* - Incidentally, the Wall Street Journal article that claims that the SIG can "carry a gun and subpoena people" is a complete fabrication, as far as I can tell from any other source. That wouldn't exactly be the first time for the WSJ, though, would it?