International finance and the state | Corrente

James Galbraith interviewed in Naked Capitalism:

PP: If I understand correctly you also found that nations have very little control over their own levels of inequality. How did you come to this?conclusion?

JG: A nation?s level of inequality has a lot to do with its underlying economic structure and level of development: agrarian, industrial, or high-technology. But we also found, in examining the movement of inequality in the world economy over 40 years, that there was a very strong common pattern. This suggests that *changes* in inequality have a common source. Looking at the major turning points, which were in 1971-3, 1981 and 2000, a leading candidate for that source emerges: the changes in the world financial?system.

Until 1971, the world?s economies were largely stabilized under the Bretton Woods system. After 1973, there was a widespread commodities-and-debt boom that tended to reduce inequality in developing countries. After 1980, high interest rates and the debt crisis raised inequality almost everywhere. And finally in 2000 there was a peak; after that interest rates fell, commodity prices recovered, and inequalities around the world tended to?ease.

In the face of these global pressures, it?s possible for some countries with very stable policies and strong institutions [unlike us apparently] to resist for a time: for example Denmark does not show rising inequality in our data. Or a country may be insulated from global shocks, as China and India were from the debt crisis in the 1980s (but not in the 1990s). But these cases are very few. In most cases the global forces dominate the?picture.

PP: Right, so finance tears away any protective veils the nation-state tries to use to maintain equality and stability. Are you then implying that finance, or at least finance when it grows to a certain level and gains a certain amount of power, becomes a redistributive?mechanism?

JG: Of?course.

If we didn't already know this: For the 1%, nations are simply flags of convenience. The grossest case is Rupert Murdoch, but they're all like that. The reason the 1%, as a trans- and post-national class, never act for public purpose is that they literally cannot see a public from their vantage point. This aside from bring Randroid sociopaths who treat "human resources" like cattle and want them to?die.

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