WTO and value

Rakesh Bhandari bhandari at phoenix.princeton.edu
Tue Nov 16 13:38:27 PST 1999

Hi George Not only do states interfere with the operation of markets, states sometimes impose markets where other institutions had been expected to solve allocation problems. That is, the use of markets is no less political than authoritative allocation.

David Spiro whom Doug will be interviewing this Thursday notes in his outstanding book The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets: "Allowing the system to work however can be quite different from allowing markets to work (which is called laissez faire economics). For example, if the conventions of the Bretton Woods system call for a political institution (such as the IMF) to allocate balance of payments adjustment financing, and if instead the US forces nations to compete for funds in the private capital markets, then allowing the market to work directly contradicts letting the system work."

The consequence of letting markets work after the oil shocks was, Spiro argues, the LDC debt crisis.

At any rate, this point is key to Spiro's analysis of the assertion of US hegemony: "When relative decline does take its toll and the the future of hegemonic rule becomes less certain, the hegemonic power may being to intervene more actively in the system, perhaps by leaving outcomes to international markets (if that serves it purpose). THis produces outcomes favorable to the hegemon because of its relative size, despite its decline."

Neoliberalism appears then as the face of US hegemony.

Spiro argues however at the closing that with the US federal budget now balanced, the US relies less on foreign savings for indebted prosperity! I thought household consumption and business investment were presently driven more than ever by foreign debt, itself ever more in private hands. But this does not seem to make the operations of govts any less central. It would seem to me more than ever that the US govt will need to enlist foreign govts to prevent private flight from the dollar. Whether the US has the power resources to do so or whether such interventions would be effective are of course another question.

Yours, Rakesh

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