The US Economy, a Balkan Backwater, the IMF and the EU, and a Disclaimer on Clairvoyance
Posted by Stephen Lewis on April 4, 2008
Last August, in an entry entitled Balkan-Wards: Falling Dollar, Faulty Infrastructure, and the Lessons of the Bulgarian Lev, I noted that the US dollar had not only sunk below the Euro but was plummeting towards parity with, of all things, the Bulgarian Lev, the currency of a corrupt, partly-criminal, agricultural-based Balkan country with a population of less than 7 million. I described the prospect of US Dollar/BG Lev parity as symbolic of the similarities between government policies and behavior of business elites in the two countries: wholesale looting of companies and public coffers, insufficient investment in infrastructure and human resources, get-rich-quick real estate booms, economies geared toward speculation rather than production, banks entangled with insurance companies and property developers, and contempt and disregard for the poor. I also pointed out that while the US dollar heads south at high-speed, Bulgaria’s currency happens to be holding its own — the latter the result of long-term intervention in the country’s fiscal affairs by the International Monetary Fund and, more recently, the massive and seemingly inexhaustible influx of infrastructural, development, and investment capital from Brussels aimed at bringing Bulgaria up to some semblance of par with fellow EU member states. In the face of this, my own modest proposal was that the US should consider following Bulgaria’s lead, i.e. to invite in the IMF to take over fiscal affairs and to consider applying for membership in the European Union.
Back in August, when I wrote the piece, one US dollar bought 1.40 Lev. Yesterday, one dollar bought only 1.20 Lev, a marked step forward towards US equivalence with Bulgaria. Indeed, over the past eight months, the US economy has continued to sink under the weight of the sub-prime loan, mortgage, and housing market fiasco and the ongoing lunacy of Bush’s (and Hillary’s and McCain’s!) war in Iraq, casting an-ever-more-grim pall over life in the US and causing havoc amongst investors worldwide. Last month, in this story in the New York Times, Paul Krugman reported that a senior IMF official now suggests that it may be time for a “bail-out,” a public-financed rescue of the US financial system. My questions remain: Is the US competent to run its own financial affairs and might it not be time for a massive rescue package from Europe?
That I was able to foresee the continued fall of the dollar and beat the experts in suggesting the need for intervention in America’s financial system and policy-making is anything but clairvoyance. A life of regular work stints abroad and of regular returns to New York has given me a “stop-motion”-like overview of developments in the US and of changes in the post-war world. Not least, visiting and working in Bulgaria on-and-off since the fall of Communism provided me with my own bench-scale surrogate for the US economy, a laboratory mock-up of the application and effects of deregulation, economic liberalism, and US Republican-style values and policies on the one hand, and fiscal intervention and massive infrastructural investment on the other.