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Finally, as to long-term solutions to global instability, there seems to be a growing gap between Bill Clinton's rhetoric and the actual policies of his administration. At a "Third Way" conference he attended with British Prime Minister Tony Blair last month in New York, and then again last week in Washington, Clinton called for a global Keynesian order: for creating social safety nets in developing nations, for creating as a monitor of global capital flows the kind of regulatory agencies that now monitor the nation's security markets. (Of course, as the saga of Long Term Capital Management makes clear, we really don't monitor many of our newer security markets at all, but that's another story.)
Clinton makes a compelling case. After all, the only nations in human history to have created middle-class majorities were the nations of Western Europe and North America during the decades following World War II, when Keynesian economic policies, social safety nets and widespread unionization combined to ensure that prosperity was widely shared. Unfortunately, many of the free-trade policies that Clinton's own administration has promoted - in particular, writing property rights but not worker rights into trade agreements - undermine the growth of the very institutions he rightly notes are needed to create economic stability. The free flow of capital that his administration champions can - and has - undercut that stability even more.
In fairness to the administration, solutions to the world economic crisis are in short supply from any source. That should come as no surprise. The creation of stable Keynesian economies at the national level required such middle-class-creating institutions as large-scale union movements and political parties promoting social-democratic policies. The force required to create a global Keynesian order - a transnational union and political movement - exists in an embryonic stage within the European Union, and elsewhere doesn't exist at all. The globalization of finance has left the political world far behind, struggling within parochial perspectives and jurisdictions while investment recognizes no borders or national allegiances. And, as of last Friday, no safe haven for investments.
The financial system - at least for now, for October - is no longer financing. While the political system - at least for now, for October - is pushing ahead with a partisan impeachment proceeding that a majority of Americans plainly oppose.