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Imad A. Moosa

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Imad A. Moosa

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Imad A. Moosa

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Edited by Nikolaos Karagiannis and John E. King

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Gerald Epstein

As Jerry Ford left the White House he handed Jimmy Carter three envelopes, instructing him to open them one at a time as problems became overwhelming. After a year, Carter opened the first envelope. It said, "attack Jerry Ford." He did. A year later, Carter opened the second envelope. It said, "attack the Federal Reserve." He did. Three years into his term, and even more overwhelmed by the economy, Iran, Afghanistan and so forth, Carter opened the third envelope. It said: "prepare three envelopes." Paul Volcker, January 1981

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Gerald Epstein

The Great Financial Crisis of 2007–2008, like the Great Depression of the 1930s, focused the American public’s attention – and ire – not just on Wall Street, but also on the Federal Reserve (the Fed) – the US central bank. In normal times, the Fed operates under the radar, generating intense interest from investors, and mostly yawns from everyone else. But at times of financial crisis, like 1929, or 2007–2008, or even 1979 when the Fed raised interest rates sky high, piercing scrutiny and conflict breaks out regarding the Fed’s policy. Indeed, at times like that, more than just this or that policy is up for grabs. The Fed’s whole institutional structure and its very raison d’être comes under attack. Why did the Fed let the economy crash? Why did it raise interest rates so high? Why did it bail out Wall Street while leaving ‘main street’ high and dry? Who benefits from the Fed’s policies? Who really pulls the strings there? Do we even need a Federal Reserve?

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Trent J. MacDonald

Much has been said about the vices and virtues of democracy. Democracy, said Benjamin Franklin, is two wolves and a sheep voting on what to have for dinner. Lord Acton warned that democracy is susceptible to a ‘tyranny of the majority’. Winston Churchill told us that democracy is actually the worst form of government . . . except for every other form that has been tried. Not without irony, he also said that the best argument against democracy is a five-minute conversation with the average voter. H. L. Mencken described democracy as the theory that people know what they want, and deserve to get it good and hard. These quotes speak to the majoritarian dimension of democracy and the reality that even in the best-of-functioning systems 49 per cent of the people can remain unhappy. To be sure, in most modern democracies even a less-than-majority popular vote can carry an election, due to the peculiarities of electoral systems.5 Democracy, in other words, is a system to ensure that some people get what they want; it is not a system to allow everyone to do so.

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Trent J. MacDonald

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Peter A.G. van Bergeijk

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Jonathan Michie

Since the 1980s it had been fashionable to suggest that there was little that individual countries could do in the face of global economic forces, and any attempt to pursue independent policies would be doomed to failure. ‘Even China’, it was often said, was embracing the global free market. The idea that developing countries, such as India, could promote their own developmental interests by sheltering behind exchange controls or national planning had been swept away along with the Berlin Wall. In the globalized economy of the twenty-first century, it was argued, national governments had to go with the flow of global markets. As the 2008 international financial crisis was breaking, the global strategy firm Oxford Analytica held one of its usual daily analysis sessions, but open to those attending its annual conference. The chair briefly summarised the unfolding global crisis, and then went round the table asking the various national experts to report. Despite the consensus referred to above, the reports did not paint a picture of a uniform globalised market to which each country related in the same way. The US and UK had been referred to in the opening statement, being very much at the centre of whatever it was that had caused the worst economic crisis since the 1930s. But when the expert on Brazil was called, he reported that the socialist President Lula had kept its financial sector rather independent of the global markets. Next India, and here too it was reported that it actually hadn’t opened itself up to the global market quite as much as might have been thought. Then China, where, it was reported, the Communist Party had maintained rather a firm grip.