WorldCom's filing for bankruptcy last week sent a shock wave through world financial markets that has hit Russia, causing the Russian stock market to dip sharply.
To most Russians, the stock market is still a very abstract concept. The Russian market, unlike its U.S. counterpart, is hardly the engine of our capitalist system. For better or worse, the 1998 financial crisis seriously undermined the position of the capital markets. The oligarchs' strength lies
not in the share prices of the companies they own, but in the oil, natural gas and mineral deposits under their control, which they have no intention of sharing with anyone. The price of crude in London and Amsterdam concerns them a lot more than stock prices in New York and Moscow -- even the prices of their own stocks.
Mikhail Delyagin, an economic adviser to Prime Minister Mikhail Kasyanov, recently explained to me over cups of green tea that, "[the markets] are something very distant from us. Do I really need to know how many hairs are in God's beard? Even bald and cleanshaven, he would still be unfathomable to
me." But mortals cannot be entirely indifferent to God's doings. And what goes on in the United States affects everyone in the world one way or another.
In Russia, where some remnants of a social welfare net are still in place, few can really appreciate just how dire a threat a stock market crash poses for the American middle class. For when stock prices drop, pension funds suffer. The first to feel the pinch were the legions of Americans who agreed
to work for less money in exchange for stock options in their companies. The
U.S. financial system has turned a huge number of average citizens, people who would otherwise have no interest in the markets whatsoever, into small-time capitalists, as pension funds and insurance companies invested their money in the stock market. And now, through no fault of their own, these people have come up losers.
More than just pensions and savings are shrinking. The myths of neo-liberalism are falling apart. Not long ago the U.S. fully funded pension
system was held up as a model for reforming "outdated" European schemes under which people still relied on government guarantees and solidarity between generations. Year after year we were told that the financial crises in Asia and Russia were the result of strictly local factors and that nothing of the
sort could happen in the United States.
And the Asians and Russians weren't alone. Even the Finns and the Germans were lectured on the superiority of U.S. corporate culture, based on transparency and accountability. All companies were supposed to restructure along the lines of Enron, WorldCom and Xerox. Indeed, these were among the very corporations held up as exemplary.
The problem is that the United States became a symbol for those in Western Europe, Asia and Russia who were transforming their own countries in accordance with free-market ideology.
America's success was an article of faith not only for the right, but also for social democrats. Now we learn to our surprise that U.S. corporations, freed from "unnecessary" government regulation, have not increased production as advertised. Instead, they set out to rip off consumers and small investors. The world's No. 1 free-market economy gave rise to such an orgy of cooked books and falsified audits that even Gosplan veterans could only step
back in wonder.
This is not to say, of course, that all is well in Western Europe (not to mention Russia). The point is that America has lost the appearance of an ideological model. America itself was no god, but the ideologists made it into one. The New York Stock Exchange and Harvard University economics department became the Mecca of neo-liberalism. Apologists for the free market are now going through what committed communists endured after the death of Stalin and again after the Soviet Union's collapse. God has faltered.
Schadenfreude is unethical, to say the least. America's troubles should not feed a sense of malicious pleasure in Europe and Russia. For the United States' troubles will sooner or later be our own.
The collapse of the neo-liberal model is fast becoming a historical fact. The ruined middle class, stripped of its savings, will start demanding change. It might turn to the left, but there's no guarantee that it won't prove fertile
ground for a new outbreak of fascism.
We've been here before. At this point, there's no new Roosevelt on the horizon; fortunately, there's no new Hitler either.
Boris Kagarlitsky is a Moscow-based sociologist.