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The following article appeared in Left Business Observer #102, September 2002. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.


Bubble accounting

Fortunately for the administration, Iraq is driving bear market news off the front pages (even LBO's). But fallout from the bubble's bursting continues to float earthwards, and the question of who will pay, politically or financially, has barely been asked.

An editorial in the August 19 issue of The Nation asked some questions, and answered a few too. It blamed the bubble on "conservatives" and proposed a new New Deal as a solution. It's more complicated than that.

In the (anonymous) editorial, "conservative" is used interchangeably with Republican, especially the hard ideological right kind. But that isn't fair: Bill Clinton and Robert Rubin deserve lots of blame too. But Clinton's name appears only for his marginal repair of Reagan-era gutting of antitrust enforcement (as if the promotion of competition weren't hard on workers). The name of Robert Rubin, who served as Treasury Secretary between jobs at Goldman Sachs and Citigroup, and who pressed the liberalization of capital flows on a reluctant outside world, doesn't appear at all. The Mexican, Asian, and Russian crises - global bubbles that hurt millions when they burst - were all Clinton era disasters, to which administration policy (like the capital account liberalization that Stiglitz talks about on p. 4 of this issue) contributed generously.

Sir Bubble

Which isn't to deny that the bubble's most important promoter, more important even than Jack Grubman, was a real movement conservative - Alan Greenspan, Ayn Rand's most famous disciple.

It's gratifying to see Greenspan's stock sinking. Several analysts have written up his embarrassing speech at the Federal Reserve Bank of Kansas City's annual elite retreat at Jackson Hol