"The World Awaits its New Keynes"

That's the closing line from this good, brief article on the decline of the Washington Consensus. Harvard prof Dani Rodrik profiles the new and growing cadre of globalization critics: Not street-fighting anarchists, but members of the economic and intellectual elite.

The global economy is in danger of collapse because, he writes:

Unlike national markets, which tend to be supported by domestic regulatory and political institutions, global markets are only "weakly embedded." There is no global anti-trust authority, no global lender of last resort, no global regulator, no global safety nets, and, of course, no global democracy. In other words, global markets suffer from weak governance, and therefore from weak popular legitimacy.

It's always been a paradox of neoliberalism that it has been most thoroughly enacted via military dictatorships (think Chile and Argentina, or China). No functioning democracy has fully embraced neoliberalism for itself, only as something that other people ought to do.

So now that mainstream economists (who until recently championed neoliberal globalization) are worrying about the downsides, we can expect some moves toward re-regulation across the board. But whom will it benefit? For clues, check the new housing bill. Or read this slightly more hopeful analysis.

News Flash: CEOs Defend the New Deal!

This isn't really about the Midwest, but it is about neoliberalism, globalism, and the limits of our current economic model.

In my email today, believe it or not, arrived a note from a dozen airline CEO asking travelers to join them in demanding Congress re-regulate the economy! Kind of amazing from a group that owes their jobs and big salaries to deregulation.

The letter claims that as much as $30-$60 of the price of a barrel of oil is due to speculation on the oil futures markets. And it points to a slick website S.O.S. NOW. But what I find most interesting is that these leaders of American industry now are maligning speculation in language that sounds, well, a little social democratic. It's not just the excessive price increases, it's the fact that oil speculators "trade oil on paper with no intention of ever taking delivery." And here's the kicker from the airline execs letter:

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

Folks, we're witnessing a real turning point in neoliberal globalization. Back in the mid-1940s the socialist economist Karl Polanyi wrote about the "double movement" of the reformist state and and free markets. Capitalism needs state intervention to survive, and at certain crisis moments even free-marketeers will demand that the state step in to rebalance the scales. It's becoming obvious that the American model of "free" trade and upward redistribution of wealth doesn't work. Obvious even to CEOs.