Friedman on the Fast World we live in
August 21st, 2008 • Development
I’ve been reading this 1999 article by Friedman in the New York Times on globalisation. It’s quite a good read, even if you don’t agree with everything he writes.
I tell these two stories because they capture in microcosm the two biggest threats to today’s global financial system — crises triggered by “bad lenders” and crises triggered by “bad borrowers.” Just as there are drug users and drug pushers, in global economics there are bad borrowers, like Russia, and bad lenders, like myself. We need to address both.
People talk about Indonesia or Russia or Thailand as if they had these charming, efficient and equitable financial systems before big bad globalization came along. Hogwash! Globalization simply exposed a bunch of flimflam regimes and crony-capitalist systems that were not up to the demands of the global system. The real crisis in these countries is not economic, it’s political.
The tragedy is that globalization flattened not only the crony capitalists but also a lot of little folks who were just working hard and playing by the local rules (however flawed)…
I like to compare countries to computers. Today, for the first time in history, we all have the same basic piece of hardware — free markets. The question is, which countries will get the economic operating systems (neoliberal macroeconomics) and software (regulatory institutions and laws) to get the most out of those free markets and cushion them from the worst surges coming from the “electronic herd” of global investors.
Russia is the egregious example of a country that plugged into the herd with no operating system and no software, with predictably horrendous results. Thailand, South Korea and Indonesia plugged into the herd, but with a slow operating system: what I call “DOScapital 2.0″ (crony capitalism). It was great for getting these countries from an average income of $500 per capita to $5,000. But when they wanted to move from $5,000 to $15,000, and the speed of the electronic herd moved from a 286 chip to a Pentium III, and they were still using DOScapital 2.0, a message came up on their screens: “You Have Performed a Series of Irrational Investments. Cannot Save Items. Delete Memory of All Inefficient Banks and Firms, and Download New Software and Operating System.”
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