Time for new world order

[Heracles 417]

Steven I found an article for you. Keep in mind the term liberal used in this article refers to right wing conservatives in Australia.

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Time for a new world order: PM

Phillip Coorey Chief Political Correspondent

January 31, 2009

KEVIN RUDD has denounced the unfettered capitalism of the past three decades and called for a new era of "social capitalism" in which government intervention and regulation feature heavily.

In an essay to be published next week, the Prime Minister is scathing of the neo-liberals who began refashioning the market system in the 1970s, and ultimately brought about the global financial crisis.

"The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes," he writes of those who placed their faith in the corrective powers of the market.

"Neo-liberalism and the free-market fundamentalism it has produced has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself."

Mr Rudd writes in The Monthly that just as Franklin Roosevelt rebuilt US capitalism after the Great Depression, modern-day "social democrats" such as himself and the US President, Barack Obama, must do the same again. But he argues that "minor tweakings of long-established orthodoxies will not do" and advocates a new system that reaches beyond the 70-year-old interventionist principles of John Maynard Keynes.

"A system of open markets, unambiguously regulated by an activist state, and one in which the state intervenes to reduce the greater inequalities that competitive markets will inevitably generate," he writes.

He urges "a new contract for the future that eschews the extremism of both the left and right".

He mocks neo-liberals "who now find themselves tied in ideological knots in being forced to rely on the state they fundamentally despise to save financial markets from collapse".

He advocates tighter regulation and policing of global finances, and identifies the immediate challenge as restoring global growth by 3 per cent of gross domestic product, the amount it is expected to fall in 2009. Next week, as Parliament resumes, his Government will chip in with a second economic stimulus package.

Mr Rudd commits to keeping budgets in surplus "over the cycle", meaning deficits should be temporary. In a further sign the Government is not contemplating additional tax cuts, which would deliver a permanent hit to revenue, he stresses that stimulus measures have to be paid for when the economy recovers.

Mr Rudd singles out Thatcherism as a culprit, as well as the former Howard government. His essay implicitly attacks the Opposition Leader, Malcolm Turnbull, who this week urged the free market be allowed to dictate commercial property values as he slammed a Government measure to prop them up.

Mr Rudd's essay follows the blast Mr Obama gave Wall Street bankers yesterday for awarding themselves $28 billion in bonuses last year at the same time as they were being bailed out by taxpayers.

In a message to Mr Obama and the US Congress, Mr Rudd counselled against erecting trade barriers. "Soft or hard, protectionism is a sure-fire way of turning recession into depression as it exacerbates the collapse in global demand."

The message was reinforced in Davos yesterday when the Trade Minister, Simon Crean, described the "buy American" provisions of the new Obama stimulus package as "very worrying". "On the face of it, it looks like it contravenes commitments made to the World Trade Organisation," he said.

with Paola Totaro

This story was found at: http://www.smh.com.au/articles/2009/01/30/1232818725574.html

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Edited January 30, 2009 by Aficionado

[Trumplestiltskin 5,791]

Well with the foundation of the old economies relying largely on credit, its clear something needs to be addressed at a fundamental level in the way that our countries do business.

[Heracles 417]

I have to say some interesting points and I don't even like this prime minister. I agree that anything unregulated almost always leads to greed and jungle rules. Which as a civilized society is not acceptable. Screwing someone over to make a profit is not acceptable and should be regulated against. As well as preventing bubbles, or economies, built on a house of cards.

Edited January 30, 2009 by Aficionado

[Trumplestiltskin 5,791]

My understanding of the current economy isn't very good but I believe the arguments for intervention (as it pertains to the stimulus bailouts) are that the mechanisms that should theoretically right themselves by deregulation aren't correcting themselves - because financial institutions are lumbered with toxic assets that they can't get rid of.

[alienlovechild 75]

I agree that anything unregulated almost always leads to greed and jungle rules. Which as a civilized society is not acceptable. Screwing someone over to make a profit is not acceptable and should be regulated against.

What leads to disaster is unregulation combined with government commitment to cover private debts with public money. Not why invest in worthless sectors? If it pays off, profit, if it deosn't the government will cover the losses.

Who determines who's getting screwed on a private deal between buyer and seller? We can assume both parties are acting in their own self interests. I think the CEOs that got big payoffs while killing their companies don't deserve what they got but could there be a change in bankruptcy laws stating CEO's take a cut like everyone else to reorganize? That's not the main issue but it looks bad in the media.

[Heracles 417]

I don't even know if they should have given the banks any money. I would have thought a better choice would have been to use that money to start a few federal banks from the ground up and have them buy the salvageable assets / debts. Buying bad mortgages from the banks to allow them to lend again will only get us into this same situation. If anything, the most reckless banks should go under so the rest realize that you should not just lend without knowing whether this person is capable of paying things off.

In some cases the banks lent to people who they very well knew would not be able to pay it off. In one case mentioned in the documentary Maxed Out a person actually got a Mentally retarded individual to sign a loan. She basically spelled out his name on a piece of paper and had him copy it on a loan application. Under English law this whole contract would have been null and void and the person who did it would have been fined and probably gone to gaol. Also under English law the courts have the final say regardless of what a contract says and a signature on it. A judge will take a contract into consideration but does not have to honor it and can nullify it. Whereas here you can pretty much sign your life away and the courts have almost no power to throw it out.

VodAfone was fined in Australia a few years back for coning parents / grandparents to sign up for cell phones under their names. Even though and adult signed the contract, they found that Vodafone was verbally telling people the kids would be responsible for the debt. Due to the abuse, the federal court overruled the contracts and nullified them. The carrier was also fund by the FCC equivalent for each individual case. Something that would never happen here without some sort of class action and even then, very hard to get around once someone has signed on the dotted line. That is the power of regulation and the benefit of the government looking our for 'we the people' who have absolutely no leverage against a large business.

Edited January 30, 2009 by Aficionado

[Heracles 417]

I agree that anything unregulated almost always leads to greed and jungle rules. Which as a civilized society is not acceptable. Screwing someone over to make a profit is not acceptable and should be regulated against.

What leads to disaster is unregulation combined with government commitment to cover private debts with public money. Not why invest in worthless sectors? If it pays off, profit, if it deosn't the government will cover the losses.

Who determines who's getting screwed on a private deal between buyer and seller? We can assume both parties are acting in their own self interests. I think the CEOs that got big payoffs while killing their companies don't deserve what they got but could there be a change in bankruptcy laws stating CEO's take a cut like everyone else to reorganize? That's not the main issue but it looks bad in the media.

If a business fails the government should be able to go after a CEO or executives and their personal assets. Ever since the collapse of Enron I know in Australia CEOs and Executives are now personally responsible for a company. Meaning if a company goes belly up for no legitimate reason, they are personally liable for it. If they try to hide their assets under their spouses or whoever else, they government has the authority to reverse all transactions. Just look at the Merryil CEO who sold his $13,000,000 home for $100 to his wife.

In all fairness though CEO are being scapegoated. What about all of the Realtors who irresponsibly pushed sales. Or loan officers who fudged the paperwork or pushed ingenious loans to get people approved that they very well knew could not afford. Regulation needs to occur from the top down. Not just at the top. What ever happened to the United States that cared about one another. Now its a case of jungle rules where it's every man for themselves, dog eat dog rules. That is the underlying problem here.

Edited January 30, 2009 by Aficionado

[Trumplestiltskin 5,791]

The US has always been like this - at least ever since the Reagan years (though probably before too).

I mean we have this health system that puts profit above patient care - proponents of which imply that quality, accessible patient care should be a natural result of market forces.

[one...two...tree 2,762]

"Neo-liberalism and the free-market fundamentalism it has produced has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself."

.....

I agree with that assessment.