In Defense of Paleface Capitalism.(International Edition; POINT OF VIEW)(global financial crises created by "white-skinned people with blue eyes")(Viewpoint essay)

The truth is often shocking, and when Brazilian President Luiz Inacio Lula Da Silva told a shocked British Prime Minister Gordon Brown--and the world press--that the financial crisis had been created by "white-skinned people with blue eyes," he spoke the truth. Actually, it's even worse than what Lula said. "White-skinned people with blue eyes" aren't just responsible for the current crisis; the blue-eyed palefaces are responsible for saddling the world with a financial system that has a built-in tendency to crash. The modern financial system grows out of a series of innovations in 17th-century Netherlands, and the Dutch were, on the whole, as Lula describes them. From the Netherlands, what the English called "Dutch finance" traveled over the English Channel, as the English borrowed Dutch ideas to build a stock market, promote global trade and establish the Bank of England, going on to build a maritime empire of commerce and sea power that dominated the world until World War II. Dutch finance became "Anglo-Saxon capitalism," but otherwise went on as before. When the British system fell apart, the center of world finance crossed the water again, and New York and Washington replaced London and Amsterdam as centers of global politics and finance.

This financial and political system is the operating system on which the world runs; the Dutch introduced version 1.0 in about 1620; the British introduced 2.0 in about 1700; the Americans upgraded to version 3.0 in 1945, and as an operating system, it works pretty well--most of the time. The 300 years of liberal, global capitalism have seen an extraordinary explosion in knowledge and human affluence. Not everybody shares in these benefits, and there are environmental and social costs to the rapid progress. Still, not many of us would like to turn the clock back to 1610.

But the system has bugs--among them, a tendency to crash. Ever since the great Dutch tulip bubble of 1637, the economic system has been prey to roller-coaster-style booms and busts. From the South Sea bubble of 1720 to the subprime loan bubble of our own time, the financial system leads people into irrational behavior and fever dreams of wealth and of eternally rising prices for stocks, houses--and tulips. These episodes never end well, and as time passes and the financial system grows more complex, more global and more interdependent, the cost of these periodic crashes gets worse. Today's is one of the worst; millions of people are losing their jobs, and millions of families once on the edge of prosperity are falling back into poverty--not just in America and Europe but in China, India, Africa and, as Lula knows all too well, Brazil.

At moments like this, even "Anglo-Saxons" have doubts about the system; but much of the world doesn't like Anglo-Saxon capitalism even when it works. Liberal ...