I thought the believers in the market accepted the logic of shock
therapy. You know, when country stray too far from market fundamentals
they need tough medicine to make their economy strong.
Consider the case of Jeffrey Sachs writing in his recent book, The End
of Poverty. Looking back on his first prescription of shock therapy in
the destitute nation of Bolivia Sachs had a revelation. He realized
that "Bolivia's physical geography was a fundamental feature of its
economic situation, not merely an incidental fact .... Of course I knew
that Bolivia was landlocked and mountainous .... Yet I had not
reflected on how these conditions were key geographical factors, perhaps
the overriding factors, in Bolivia's chronic poverty .... Almost all
the international commentary and academic economic writing about Bolivia
neglected this very basic point. It bothered me greatly that the most
basic and central features of economic reality could be overlooked by
academic economists spinning their theories from thousands of miles
away." Yet, he concluded: "Monetary theory, thank goodness, still
worked at thirteen thousand feet."
Sachs, Jeffrey D. 2005. The End of Poverty (London: Penguin): p. 105.
Jeffrey Sachs is relatively liberal, as far as economists go. After
all, economists today confidently tell us that Keynes is dead. Everyone
has to accept the discipline of the market: the unemployed, people
without medical insurance, and students facing high tuition. If workers
wages fall short, they are at fault for lacking the skills of a
financial manager.
But wait! Now that the financial managers are in trouble, boy do they
need help.
I only have one question for market fundamentalists. If these bailouts
succeed in putting Humpty Dumpty together again, will our
fundamentalists agree to tax the fat cats or will they revise history
and tell us that their rebuilt wealth owes everything to their hard work
and intelligence?
Or, what I'm afraid is more likely, is that market fundamentalism is
applicable only in impoverished countries 13,000 feet above sea level.
--
Michael Perelman
Economics Department
California State University
Chico, CA
95929
530 898 5321
fax 530 898 5901
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