Swear Off Market Fundamentalism

(Editor's Note: This op-ed was originally published in the Seattle Post-Intelligencer and on the IPS website.)

With the global economy facing severe recession, lame-duck President Bush is hosting the leaders of 19 other major countries in Washington this weekend to try to prepare a coordinated response.

A noble goal. But, alas, Bush is the wrong host. Washington is the wrong venue. His guest list is too selective. And Bush has already made it clear he is still clinging to erroneous policies that created the crisis in the first place.

The United Nations offered to host the summit, which would have been appropriate. This crisis has truly gone global, hitting not just financial markets but also workers, businesses and consumers in all countries — rich and poor alike.

But Bush opted instead for his own turf and his own invitees, which include leaders from rich countries and some larger developing countries. It is not quite the "Coalition of the Willing" that Bush used to try to rationalize his buildup to the Iraq War, but it's certainly not a fully global coalition either.

Bush's reluctance to face a more representative group reflects his elitism as well as his discredited views on how to solve the crisis. In a recent statement, he actually stated with a straight face that the goal of the summit should be to preserve "free markets, free enterprise and free trade."

Yes, while his own Treasury secretary is busily nationalizing much of the U.S. banking sector, Bush is suggesting that the solution somehow remains the further deregulation of financial and trade markets.

The outgoing president appears unable to give up his belief in the "market fundamentalism" that has dominated the U.S. policy agenda for the past 30 years. With strong U.S. backing, institutions such as the World Bank, International Monetary Fund and the World Trade Organization have pushed governments to lift regulations on trade, finance and investment and sell off state enterprises throughout most of the developing world.

The results of this free-market theology have been devastating for poor people, farmers, workers and the environment, and made the world more vulnerable to financial volatility.

In the midst of the current crisis, the IMF has already approved new loans to crisis-ridden Hungary and Ukraine, and is deep in negotiations with Pakistan. All these loans contain some of the failed "free market" conditions.

This is outrageous, not only because of the double standard (the IMF doesn't suggest such policies for richer nations), but also because the agency knows better: Recently released IMF data show that countries like China and India that have kept some government controls on the financial sector and limited the extent to which their economies are tied to global markets are weathering the storm relatively well.

On the other hand, the IMF data shows that countries such as Mexico, which opened their market to U.S. and global markets, are hard hit.

So what's to be done? Hundreds of citizen groups across the globe — none of them invited to Bush's party — have released a statement that calls for a whole new global economic architecture, built upon fundamentally different foundations.

We are calling for rules that would reconnect finance to the long-term productive and green investments that make economies strong and healthy, and for democratic checks and balances aimed at preventing future financial crises. As some of the first steps, we propose regulation of derivatives and a transactions tax to curb speculation.

As long as U.S. officials continue to refuse to face the reality of a post-market fundamentalist world, they will further contribute to the crisis. The Bush administration should start working with President-elect Obama's advisors immediately to open up a genuine global dialogue aimed at closing down the financial casino and replacing it with rules and institutions that put people and the planet first.