Panic Rules!

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by Robin Hahnel

Boom and Bust

Among economic systems, capitalism is the manic-depressive patient. Exuberance, unbridled optimism, and euphoria are followed by gloom, listlessness, and depression. But no matter how often the cycle is repeated the patient always believes the latest boom will last forever, only to feel foolish again when the bubble bursts. And no matter how often the patient reverts to manic behavior when taken off medication, the economic "psychiatric" establishment eventually succumbs to the patient's pleas to be taken off medication during the "ups"-freeing the exuberant economy from policy restraints-only to insist on placing the patient back on meds-re-application of necessary policy protections-when the unmedicated patient "crashes."

The Latest Boom

The truth is that neither part of capitalism's manic-depressive boom-and-bust cycle is "healthy." Like most capitalist booms, the benefits of global liberalization during the 1980s and 1990s were not all they were made out to be. In fact, most people in the world were worse off economically at the end of the latest boom than they had been when it began-that is, even before the over-hyped boom metamorphosed into the global economic crisis of 1997-98. How is this possible, you ask? We were told "the world economy grew at 3 percent a year in the 1980s and 2 percent in the first half of the 1990s," and that "low- and middle-income economies grew more rapidly, averaging 3.4 percent growth in the 1980s and 5 percent in the 1990s." We were assured that "growth in trade from increased trade liberalization that has gone hand-in-hand with increased private capital flows and financial integration,"

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— Robin Hahnel, Panic Rules!