02 January 2008

Short-sell democracy

A couple of weeks ago, former Fed chairman and Ayn Rand fanboy Alan Greenspan delivered an attack on John Edwards' populism on ABC's This Week. Greenspan and others are were reacting to a then-recent poll showing Edwards with a brief lead in the Iowa caucus (which has since flipped back) by reminding the proles who's running the ship, and too much democracy makes the rich white guys uncomfortable.

This story reminded me of another tale from The Shock Doctrine, where Klein writes about post-apartheid South Africa and how the ANC found itself hog-tied to the neoliberal program of the Washington Consensus despite its history of reform and nationalization.

As soon as [Mandela] was released, the South African stock market collapsed in panic. South Africa's currency, the rand, dropped by 10 percent. A few weeks later, De Beers, the diamond corporation, moved its headquarters from South Africa to Switzerland. This kind of instant punishment from the markets would have been unimaginable three decades earlier, when Mandela was first imprisoned. In the sixties, it was unheard of for multinationals to switch nationalities on a whim and, back then, the world money system was firmly linked to the gold standard. Now, South Africa's currency had been stripped of controls; trade barriers were down and most trading was short-term speculation.

Not only did the volatile market not like the idea of a liberated Mandela, but just a few words from him or one of his fellow ANC leaders could lead to an earth-shaking stampede by what the New York Times columnist Thomas Friedman has aptly termed "the electronic herd." The stampede that greeted Mandela's release was just the start of what became a call-and-response between the ANC leadership and the financial markets--a shock dialogue that trained the party on the new rules of the game. Every time a top party official said something that hinted that the ominous Freedom Charter might still become policy, the market responded with a shock, sending the rand into freefall. The rules were simple and crude; the electronic equivalent of monosyllabic grunts: justice--expensive, sell; status quo--good, buy. When, shortly after his release, Mandela once again spoke out in favor of nationalization at a private lunch with leading businessmen, "the All-Gold index plunged by 5 per cent."
The increased viability of the populist candidates Edwards and Huckabee may explain why the wheels are starting to turn faster on Michael Bloombeg's Unity08 run, more truthfully titled the Rich White Guy Emergency Plan. This group certainly fears Edwards more than Huckabee, since the former has the much better chance at winning the general election, and I suspect that, once he has been disposed of by the Corporate Dems, Bloomberg's backers will magically dissolve into the ether. (It's certainly hard to see where Bloomberg fits in a race that includes Hillary Clinton, who's basically pulling the same roots.)