The Sleeping Volcano of Global Finance

The rejection of the European Union’s Constitutional Treaty by French and Dutch voters was, according to all evidence, more a rejection of unregulated globalization than it was a rejection of Europe. The general instability of social relations – most importantly, but not only, of employment – is slowly becoming intolerable for a growing part of the population in many developed countries, not just in Europe. And there cannot be a stable economic order – at least not in democratic countries – if electorates reject its underpinnings.

Capitalism could be reconstructed after World War II because it was buttressed by three necessary types of regulation: social security, which served as a principal stabilizer, at least in the developed countries; Keynesian tools to fight domestic cyclical downturns; and a universal high-wage policy aimed at stimulating general consumption, without which the genius of capitalism – mass production – does not work.

But the realignment of the rich, developed countries around the monetarist policies promoted by economists like Milton Friedman, which began around 1970, broke with all that. Not long after, the dollar was detached from the gold standard. Ever since, the international financial system has endured almost constant instability. Crises have multiplied, with each seemingly worse than the one that came before.

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