By Wang Yusheng
Remarks that the US President George W. Bush blurted out in mid-September to describe his country's financial crisis are so appropriate. "There's no question about it. Wall Street got drunk," the president said. "It got drunk and now it's got a hangover. The question is, how long will it sober up and not try to do all these fancy financial instruments?"
Fundamentally speaking, it's a financial storm caused by the US' Mr "Money" in his search for the most beautiful lady - Miss "Profit". Or in words of economics, it has just been ruled by the irrefutable truth that capital always chases the maximum profits.
There are two major strategic initiatives taken by the US since the end of the Cold War:
The first one is to take advantage of the fast-growing trend of economic globalization. It intentionally stirred up concepts of the trend with something it alleged as integration of the global economy and peddled the latter everywhere.
What it wants, by doing so, is to universalize its own mode of absolute liberal market economy, so that US capital and its commodities with comparative advantages can go to every corner of the planet freely. And as a result, profits will be maximized.
Secondly, as the world's unique superpower with the dollar's dominant stance, the US pushed forward the so-called "financial innovation" as it created a bunch of financial derivatives.
For all of those collapsed sectors in the crisis like Fannie Mae and Freddie Mac are good examples produced by these seductively packaged financial tools, and many countries were also fascinated by such specially-made US products. But the logic was, in fact, to use limited funds to mobilize money from the entire world for "unlimited appreciation".
According to a report by the Bank for International Settlement (BIS) in 2007, the volume of global financial derivative transactions in the fourth quarter of 2006 reached an astoundingly 431 trillion dollars - a number almost tenfold the world's GDP then.
Late last year, the two US housing giants owned core capitals of $83.2 billion, but at the same time, they were loaded by $5.2 trillion of mortgage (1.5 trillion of it were held by foreign countries), which accounted for 42 percent of the total in that country.
Before bursting in the end, these inciting bubbles had been inflating in the dark concealed by packages of boasted capital miracles, but the end just comes, anyway.
Mr "Money" may never have dreamed of ending up like this, but what he should have understood is that he might lose hearts of every one of the many Miss "Profit" if he tried to choose who was the most beautiful among them.
Still Mr "Money" can choose to cast a blind eye to the financial disaster caused by his greediness, if thanks to the mechanisms of profit privatization, losing nationalization and crisis globalization, but there are just millions of sufferers who have no way but to pay for the disastrous lesson.
This lesson has made it clear that market economy is not omnipotent, let alone the one under the so-call absolute liberalism.
When I served in the APEC as a high-ranking official, my colleagues constantly told me how mighty the absolute liberal market economy was and how much it would benefit developing countries.
However, it was those developing countries, which followed the US direction that collapsed at first in the 1997 financial crisis. Some colleagues from Chile and Mexico also said that the "Washington Consensus" brought severe harm to their countries, too. Latin America lost at least ten years of development as none of those suits made by the US fit the body.
If it was the developing countries that suffered in the past decade, it is now the turn of the US this time. The crisis broke every miracle puffed up by Uncle Sam himself, especially things like the "Washington Consensus", "the US is the safest harbor for foreign exchanges", "the US banks are the most credible", and "the US has the most strict financial surveillance".
For no doubt, developing countries have been affected by the crisis as part of the mess's trash has been shifted elsewhere, but may the crisis be taken as a chance for a long-term strategy for establishing a new international financial system with more fairness, justice and soundness.
Many countries, especially the booming economies, are getting increasingly familiar with the US' rules for financial games. They will simply not follow the US mode, though they will continue to encourage the development of financial derivatives - on preconditions such as being based on real economy and strict monitoring over the market so that Mr "Money" won't fool it again.
It's also reasonable for the emerging powers to establish more sovereign wealth funds and make them more active. As these funds were meant to establish a different financial order under which developing countries can enjoy more freedom and independence, then it's predicable that these countries will put "funds' security" as top priority and not place all eggs in one basket.
It needs time to see whether the US' bailout works. But before that is ascertained, it's already sure that the dollar does not have many options but to abdicate in the currency world. To deal with this irreversible tide, other countries need the US to be more pragmatic so that all parties can cooperate to improve the international financial system. Otherwise, it's got to be much more painful for all, especially if the Wall Street plunges faster.
The author is a Beijing-based researcher in international relations.
(China Daily October 23, 2008)
