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The following article appeared in Left Business Observer #64, June 1994. It was written by Doug Henwood, editor and publisher. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anyt hing - without the permission of LBO.

Anti-market forces

This is an edited transcript of a talk given by Doug Henwood to the Grant's Interest Rate Observer spring political conference, New York City, June 8, 1994. Grant's is an elegant, thoughtful, and quite right-wing newsletter focusing on the credi t markets.


When Jim Grant called to invite me to speak here, I gasped a bit before saying yes. I'm never one to shrink from argument, or a chance to propagandize for my cause -- and as a free-lance left-wing journalist, I need the money too -- but I had the feeling that I was walking into a lion's den. When Jim told me the topic, political threats to the laissez-faire ascendancy, I immediately thought of Alexander Cockburn's description of his appearances on Nightline -- that he was invited not for his opinio ns, but as the embodiment of the evil under discussion. So here I am, horns, pitchfork, and sulfurous aura.

Yes, the laissez-faire ascendancy, which I'm sure was never pure enough for you, is under challenge, both from its own internal economic and social contradictions and from the political realm as well. The bad news, from my side, and the good news, from yo urs, is that the challenge is weak, diffuse, and uncertain. While a "No" to the fading orthodoxy is gathering force, there's not much of an idea of a "Yes" to put in its place.

So a review of some of those challenges would be a good place to start. Let me start close to home, with the theory and practice of Wall Street. Since I'm writing a book on the economics and politics of finance, some of these issues are at the front of my mind right now, so I'll share some of them with you.

The political revolution that we can date to 1979, when Margaret Thatcher moved into 10 Downing Street and Paul Volcker into the Federal Reserve -- though in the U.S. the deregulatory movement really got going under Jimmy Carter -- drew great inspiration from a number of developments in economic and financial theory. Monetarism moved from being a marginal doctrine promoted by oddballs to one broadly accepted by the mainstream. And a set of interrelated financial dogmas, like the Modigliani-Miller theorem and the efficient market hypothesis, lent enormous prestige to the wonders of self-regulating markets. This new orthodoxy replaced one promulgated by John Maynard Keynes 40 years earlier -- though Keynes's original ideas were banalized by the very mainstr eam that was now turning on him. Unleashing what Reagan called the magic of the marketplace would cure stagflation and propel us into a new era of growth.


Dead dogmas

These doctrines, which seemed so fresh not 20 years ago, now lie broken. Take