Free Market Freefall
Paul Krugman notes that the Bush administration has succeeded in guaranteeing that much of the world rejects the idea that the free market is a good way to structure economies. Iraq was supposed to be the example of how the free market could unleash an economic boom that would demonstrate how wonderful free markets are in that formally somewhat socialistic state. Yet as Krugman so crisply puts it, rather than showing the greatness of having an economy ruled by the free market, Iraq is now seen as proof positive that the free market ideologues were flat out wrong.
Nonetheless, the attempt to turn Iraq into a laissez-faire showpiece was, in its own way, as much an in-your-face rejection of world opinion as the decision to go to war. Dogmatic views about the universal superiority of free markets have been losing ground around the world.
Latin Americans are the most disillusioned. Through much of the 1990's, they bought into the "Washington consensus" - which we should note came from Clinton administration officials as well as from Wall Street economists and conservative think tanks - which said that privatization, deregulation and free trade would lead to economic takeoff. Instead, growth remained sluggish, inequality increased, and the region was struck by a series of economic crises.
The result has been the rise of governments that, to varying degrees, reject policies they perceive as made in America. Venezuela's leader is the most obstreperous. But the most dramatic example of the backlash is Argentina, once the darling of Wall Street and the think tanks. Today, after a devastating recession, the country is run by a populist who often blames foreigners for the country's economic problems, and has forced Argentina's foreign creditors to accept a settlement that gives them only 32 cents on the dollar.
...Not long ago, the growing alienation of Latin America from the United States would have been considered a major foreign policy setback. So much has gone wrong lately that we've defined disaster down, but it's still not a good thing.
Krugman ends by noting that when Wolfowitz proclaims the wisdom of the invisible hand from his post at the World Bank, watch the world turn its back on his advice.