The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers by Michael Perelman Page A
Authors: Michael Perelman
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funds, or trading from their basements on the Internet. And it consists of the big multinational corporations who now spread their factories around the world, constantly shifting them to the most efficient, low-cost producers…. [The leaders of the Electronic Herd] don’t tell you that they feel your pain, or that they understand your grievance because of your colonial experience. They don’t tell you that you are so unique, so important to stability in the region, that they won’t lay a finger on you. They just have their way with you and move on. The Electronic Herd turns the whole world into a parliamentary system, in which every government lives under the fear of a no-confidence vote from the herd. 5
Walter Wriston, as former chief executive officer of Citibank, had actually been, unlike Friedman, at the center of the Electronic Herd. A few years before Friedman, in a book tellingly titled
The Twilight of Sovereignty
, Wriston described the power that people like him enjoyed:
Today information about the diplomatic, fiscal, and monetary policies of all nations is instantly transmitted to electronic screens in hundreds of trading rooms in dozens of countries. As the screens light up with the latest statement of the president or the chairman of the Federal Reserve, traders make a judgment about the effect of the new policies on currency values and buy or sell accordingly. The entire globe is now tied together in a single electronic market moving at the speed of light. There is no place to hide.
This enormous flow of data has created a new world monetary standard, an Information Standard, which has replaced the gold standard and the Bretton Woods agreements. The electronic global market has produced what amounts to a giant vote-counting machine that conducts a running tally on what the world thinks of a government’s diplomatic, fiscal, and monetary policies. That opinion is immediately reflected in the value the market places on a country’s currency.
In this new world order capital will go where it is wanted and stay where it is well treated…. It will flee from manipulation or onerous regulation of its value or use, and no government can restrain it for long. 6
Wriston and Friedman are correct that governments that refuse to don the Golden Straitjacket risk seeing their economy shredded. They fail to include the caveat that their own country, which wields hegemonic power, is immune from such consequences. Nor do they explain that other countries without sufficient resources and courage might not have the wherewithal to take the necessary measures to protect themselves.
However, people unfamiliar with Wriston’s career might not fully appreciate the delicious irony in his promotion of the wisdom of the marketplace. Wriston had already capped his career at Citibank when this book appeared. Under his leadership, Citibank had been intent on “selling”—many used the more accurate term “pushing” 7 —as much credit as possible to Latin America, so much so that Citibank had been getting nearly 50 percent of its revenue from its loans to Latin America.
The bank made these loans without much thought about the ability of Latin America to repay them or without putting adequatereserves aside to cover potential defaults. As a result, the company became deeply enmeshed in the Latin American debt crisis. By 1991, some Citicorp debt had been reduced to junk-bond status. Public figures as diverse as Representative John Dingell and Ross Perot described Citibank as insolvent. 8
Matters became so dire that the president of the New York branch of the Federal Reserve Bank had to fly to Saudi Arabia to arrange for Prince Alwaleed Bin Talal Alsaud to invest an additional $1.2 billion in the bank in late 1990. The Federal Reserve also had to be sure to keep interest rates down long enough to salvage the bank. 9 The Electronic Herd did not serve Citicorp very well. The bank, now rebranded as Citigroup, tottered
Walter Wriston, as former chief executive officer of Citibank, had actually been, unlike Friedman, at the center of the Electronic Herd. A few years before Friedman, in a book tellingly titled
The Twilight of Sovereignty
, Wriston described the power that people like him enjoyed:
Today information about the diplomatic, fiscal, and monetary policies of all nations is instantly transmitted to electronic screens in hundreds of trading rooms in dozens of countries. As the screens light up with the latest statement of the president or the chairman of the Federal Reserve, traders make a judgment about the effect of the new policies on currency values and buy or sell accordingly. The entire globe is now tied together in a single electronic market moving at the speed of light. There is no place to hide.
This enormous flow of data has created a new world monetary standard, an Information Standard, which has replaced the gold standard and the Bretton Woods agreements. The electronic global market has produced what amounts to a giant vote-counting machine that conducts a running tally on what the world thinks of a government’s diplomatic, fiscal, and monetary policies. That opinion is immediately reflected in the value the market places on a country’s currency.
In this new world order capital will go where it is wanted and stay where it is well treated…. It will flee from manipulation or onerous regulation of its value or use, and no government can restrain it for long. 6
Wriston and Friedman are correct that governments that refuse to don the Golden Straitjacket risk seeing their economy shredded. They fail to include the caveat that their own country, which wields hegemonic power, is immune from such consequences. Nor do they explain that other countries without sufficient resources and courage might not have the wherewithal to take the necessary measures to protect themselves.
However, people unfamiliar with Wriston’s career might not fully appreciate the delicious irony in his promotion of the wisdom of the marketplace. Wriston had already capped his career at Citibank when this book appeared. Under his leadership, Citibank had been intent on “selling”—many used the more accurate term “pushing” 7 —as much credit as possible to Latin America, so much so that Citibank had been getting nearly 50 percent of its revenue from its loans to Latin America.
The bank made these loans without much thought about the ability of Latin America to repay them or without putting adequatereserves aside to cover potential defaults. As a result, the company became deeply enmeshed in the Latin American debt crisis. By 1991, some Citicorp debt had been reduced to junk-bond status. Public figures as diverse as Representative John Dingell and Ross Perot described Citibank as insolvent. 8
Matters became so dire that the president of the New York branch of the Federal Reserve Bank had to fly to Saudi Arabia to arrange for Prince Alwaleed Bin Talal Alsaud to invest an additional $1.2 billion in the bank in late 1990. The Federal Reserve also had to be sure to keep interest rates down long enough to salvage the bank. 9 The Electronic Herd did not serve Citicorp very well. The bank, now rebranded as Citigroup, tottered
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