Death of a Dogma

An obituary to the Washington Consensus

Editorial, November 25. The New Age. Dhaka


In an ethical liberal democratic system, the state is expected to determine the boundaries of market and citizens are expected to determine the boundaries of the state. But the dogma reiterated that ‘market knows the best’. Thus, market began to determine the boundaries of the state and the state began to determine the boundaries of the citizens. Then markets were captured by speculative finance capitalists and investment banks. The finance market got increasingly detached from real people, real wealth and real economy. Market was driving the governments, writes John Samuel


‘IT IS over’ – a succinct way of informing the death of a dogma;the greed-driven neoliberal capitalism. That is how one of the Wall Street analysts on September 15, 2008 described the fall of the Lehman Brothers. The fall of Lehman was a visible signifier of the tsunami that hit the base of a turbulent sea called the Wall Street – the world of high-pitched financial trade and investment.

It was the story of a disaster foretold.

That morning a painter called Geoffrey Raynold landed up in Manhattan and unveiled a large canvass painting – The Annotated Fuld – showing Richard Fuld, the beaten chairman and CEO of the Lehman Brothers, with sunken eyes. The painter invited Lehman employees and others to scrawl their message on the canvass; someone scribbled: ‘This sucks.’ The next day the painting was sold for $100,000.
The rise and fall of the Lehman Brothers is symbolic of the rise and fall of the neoliberal economic policy paradigm. When the financial market roared in glory, the speculators, traders and typical financial intermediaries played in the global casino, like those in Atlanta city, as if there is no end to the good days. The rich laughed their way to the bank every day – dined, wined and partied – with perpetual cheers as the stock market index climbed to the sky. Sensex has become too sexy to sustain. And many got seduced to the red hot stock market. The percentage of Americans owing stock rose from 16 per cent in the 1970s to more than 50 per cent by 2005. Everyone wanted a piece of the cake.

It is true that the Lehman Brothers is a 158-year-old brand. However, it is actually a 14-year-old company that was spun off by the American Express in 1994. In 1994, the Lehman Brothers only had a relatively smaller capital base. But the ambitious captains of Lehman were thirsty for profit and capital. To make more profits, they borrowed huge sums in relation to its real size. Its debt became 35 times more than its capital – an unsustainable ratio. But they were making profits and they jumped in to the lucrative real estate markets with new financial instruments – derivatives – to make more quick money.

Credit-rating agencies too played the casino game. The top credit-rating agency Moody and Standard and Poor gave AAA rating – the top one – to those greedy nexus playing the game all along. It was a clear conflict of interest when the same bankers paid Moody and S&P to give them a good credit rating to their respective banks. It was a lie waiting to be exploded in the scandal of subprime lending – easy mortgage given away to anyone ready to buy real estate, unmindful of their economic capacity to repay the loans.

These intermediaries were betting someone else’s money – if they gain, they make a huge bonus. If they lose it is someone else’s money that is lost. No wonder that Richard Fuld made $490 million as the CEO of the Lehman Brothers, making the best use of stock options. Those whiz kids, called investment bankers, went for risky deals and quickie profits, as they too could make their millions through the stock options. Many of them made their millions and moved on. And now the party is over. More than a trillion dollars worth stock market wealth vanished in a single day. They call it financial meltdown. That was the beginning of the end.

Dogmas are authoritarian doctrines. Neo-liberalism emerged in the early 1980s, became a dogma over a period of ten years. The dogma was that ‘market knows the best.’ It consisted of tax cuts for the rich, more indirect taxes, which affect the ordinary people, deregulated financial markets, easy money with less interest rates and free market with forced liberalisation of the economy, market and financial sectors across the world. Anyone who questioned the dogma got marginalised as heretics.

In fact, by the late-1970s, the market got saturated in the US and Europe. They required new market for the movement of the finance capital as well as manufactured goods. Unless the market was expanded to the emerging economies and unless there was a free flow of capital, the Anglo-Saxon capitalism in the early 1980s would have faced a deep crisis. The state too was saturated and fat. That is how the neoliberal agenda, along with neoconservative politics of the Reagan era entered the scene.
Many of the developing and poor countries were in the debt trap resulting from the oil price shock in the 1970s. So the US and its allies used the World Bank and the International Monetary Fund as strategic institutions to force many of the debt-driven countries to open up their markets and deregulate their economies. By the early 1990s they called it the ‘Washington Consensus’ – a neat packaging of the neoliberal dogma, pedalled across the world by the Word Bank and the IMF. The charismatic face of Bill Clinton and the glib talks of Tony Blair painted the neoliberal dogma with a ‘human face’.

Investment bankers looked like sexy guys with lots of money. Globalisation became a fashion statement for many countries. Those who challenged it were simply ignored and sidelined. The World Economic Forum became the fashion street – an extension of the Wall Street. Political leaders and corporate executives went there for annual pilgrimage. The deadly dogma preached growth and growth, toasted for the new billionaires. Newspaper told the rags-to-riches stories of the new billionaires. Billons of poor were put under the carpet. Poverty and inequality did not make it to the front page. Bill Gates, Warren Buffet and Laxmi Mittals smiled at us from the TV channels and front page of newspapers. The upward mobile, upper cast and urban class in the metros of India celebrated it with a saffron glow – India Shining. Governments competed to show how much they are committed to the neoliberal dogma. Any sceptics were dumped as the relics of the past or the residues of the left.

When neoliberal finance capitalism, initiated by the Anglo-American axis of Reagan-Thatcher combine, pushed to us the new order of the day, their wholesale agents, the Word Bank and the IMF, pedalled neo-liberal policies as medicines for all ills in all countries. By the early-1990s, the neoliberal globalisation and deregulation became the dogmatic ‘mantra’ of the day. Politicians wanted to be in the good books of Uncle Sam and bureaucrats wanted to be in the good books of the Brettonwoods. When the Soviet model too collapsed, the neoconservative intellectuals began to pedal old wine in new bottles – ‘The End of History’, ‘Clash of Civilisation’ and ‘There are no Alternatives’.

There emerged a deep nexus between the Wall Street and the US treasury. It is not a mere accident that Hank Paulson, the treasury Secretary, was the former chief executive of Goldman Sachs. Many of the top executives in the government and the Word Bank came from the Wall Street. The money-driven corporate politics and the agents of investment banks in the corridors of power and their media minions created the myth of the growth engine driven by unbridled finance capital.

Everyone in the corridors of power all over the world was sold to the idea of the inevitability of neoliberal capitalism. Neo-liberalism was signified as the politics of economic elites. During the last twenty-five years, the politics in many countries got corporatised, primarily driven by money and media and fund managers and agents of big corporations. The policymaking too was subcontracted to the votaries of neoliberal dogma. Though many of them talked about ‘freedom’ they were actually in the business denying dignity and fudging freedom. Meanwhile, the Forbes Magazine kept celebrating the increasing number of billionaires in the midst of a billion who went to bed hungry every day.

Many warned that the wolf was on the way – but who got time in the midst of the party? George Soros, one of those original gurus in the financial capital market, warned about ‘market fundamentalism’. Warren Buffet, the old hand at the Wall Street, called derivatives as the ‘financial weapons of mass destruction’. But everybody was busy partying, making the quick bucks, till the wolf was at the door.


In an ethical liberal democratic system, the state is expected to determine the boundaries of market and citizens are expected to determine the boundaries of the state. But the dogma reiterated that ‘market knows the best’. Thus, market began to determine the boundaries of the state and the state began to determine the boundaries of the citizens. Then markets were captured by speculative finance capitalists and investment banks. The finance market got increasingly detached from real people, real wealth and real economy. Market was driving the governments. And now the governments are forced to bail out and nationalise the losses, while the rich few got away with their fat profit. The federal government had to take the huge burden of two big mortgage companies and dumped more than $5 trillion of the debt of the companies to the lap of taxpayers – almost doubling the amount that the US owes to its lenders. This is termed as the biggest transfer of debt in the history of money. Almost a couple of trillion dollars is pumped into the economic system to keep those sinking ships afloat. Ultimately, it is the people who end up paying for the indulgent excess of the rich and powerful in the global casino of the so-called free market. Free market was never free and now the toxic burden is dumped on the people.

Bush presided over a brutal war and a deadly financial casino. The US unilateral militarisation prostituted the term ‘democracy’ and ‘freedom’ by bombing people and countries – first in the name of the so-called weapons of mass destruction and then in the name of ‘freedom’ – spending $3 trillion. The unbridled neoliberal finance capitalism bulldozed ahead with greed till it crashed. The boasts or bombs of Bush did not help to conceal the smell of the reeking dogma under the carpet. The American dream became a nightmare within a few weeks.


The dogma is dead – now under the debris of the famed investment banks. There is no more consensus in Washington. Karl Marx must be laughing in his grave in London.