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By       Message Jon Cloke     Permalink
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"The aide said that guys like me were "in what we call the reality-based community," which he defined as people who "believe that solutions emerge from your judicious study of discernible reality." . . . "That's not the way the world really works anymore," he continued. "We're an empire now, and when we act, we create our own reality" (Suskind, 2004)."

"There is no use trying", said Alice. "One can't believe impossible things". "I dare say you haven't had much practice", said the Queen. "When I was your age, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast (Carroll, 1871)".

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The causes behind the current crisis are multiple, complex and are the reflection of a rapid, massive and surreal change in the culture of market governance globally a leap from a "reality-based" market system into one based on imagination. The development of such an enormous market in financial derivatives has involved the global co-optation and active participation of states, multinational and international organisations, international financial institutions, professional organisations and institutional bodies, governments, civil services, political parties and political actors over a short period of time. The willing suspension of disbelief on the part of so many important actors globally meant that this crisis was (along with others like it in the future) inevitable. It is important to remember as well, however, that this was not just a willing suspension of disbelief concerning the market in derivatives, the market in bonds, the housing market and so on, if not a willing suspension of democratic control by which the governments of the North/West gave up control over their own governance to the random vagaries of shadow markets which guaranteed disaster.

It is also highly unlikely that an ideology of such penetration and extent (in which the self-interest of so many important global actors is involved in praising the market-emperor's new clothes) will learn too much from such a crisis. There are too many vested interests in patching up the old system and willing the derivatives market back into life, even though it is extremely likely that there are more problems than the infamous "sub-prime" derivatives lurking in these muddy waters. In the light of $680,290,700,000,000-worth of global trade in derivatives, $700 billion to "rescue" the perpetrators of this market looks not only feeble but pointless.

The recession in the rich North/West is going to be made longer and harder by a refusal of responsible parties to address fundamental flaws in the system, and pessimists such as Joseph Stiglitz and Nouriel Rabini are already predicting a prolonged, L-shaped recession of the type experienced by Japan from the 1990s up to 2005 (and now again). In the meantime, those same investment banks whose collapse occasioned sundry rescue packages use those rescue packages to pay themselves pre-collapse era bonuses, continuing to behave as if nothing had happened.

The consequences of fundamentalist market fantasies have come home to roost it should be for the last time but it almost certainly will not be. The development of market bubbles facilitated by the development of ever-more sophisticated financial instruments has spawned a growth industry and a global support network based on the power of belief, a belief that no government and no multi-national or supranational institution need depend on something as boring and irritating as mere democracy. Instead, politician, minister, president, accountant and CEO alike, all will take deep breaths, close their eyes and believe six impossible things before breakfast.

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Jon Cloke is a research associate with the Globalization and World Cities Network and also Project Officer for an alternative energy network, EnergyCentral, devoted to the promotion of alternative energy links between and within Europe and Central (more...)

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