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4. Soothing the Market
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4 Soothing the Market The most important thing, war or no war, is for the economy to grow. —White House press secretary Ari Fleischer, March 20031 THE U.S. GOVERNMENT wrestled with at least three challenges in governance in the aftermath of 9/11: first, how to manage the tension between extension of law-enforcement powers and sensitivity on civil liberties; second, how to put its bureaucracy in order, through reorganization and improvement of the capabilities of federal agencies; and third, how to manage the market in a moment of crisis. The Bush administration’s record on this third challenge was clear. It served the market; it did not govern it. In the immediate aftermath of the attacks, the federal government moved swiftly to ensure that the market’s tempo was not interrupted. After the first few months of crisis, when it was clear that the market had regained its footing, the federal government still moved cautiously, avoiding firm assertions of regulatory power. We might say that deference to the market is precisely what should be expected from a Republican administration and Republican Congress. In saying this, however, we would concede that in at least one area the administration’s policy was not distinguished by the forceful assertion of authority. In any case, it is too easy to attribute the behavior of the Bush administration simply to its ideological predispositions . There are strong continuities between many Bush policies and those of the Clinton administration. Democratic or Republican, federal policymakers now confront a range of political, technical, and legal considerations that largely prevent a forceful extension of federal power over the market. The result, instead, is careful attention to the needs of the market, as well as cautious and sometimes incomplete regulation, even in a moment of crisis. 84 The New Realities of Market Governance Three critical realities tempered the exercise of federal authority over the market in the new millennium. The first is that the market is broader, more complex, and more vulnerable to disruption than ever before. This is sometimes treated as a result of economic globalization, which has linked national markets so tightly that unexpected events in one corner of the world can quickly reverberate in another. Indeed, a former senior official of the International Monetary Fund defines economic globalization as “a phenomenon by which economic agents in any given part of the world are much more affected by events elsewhere in the world.”2 Throughout the 1990s the world was given repeated demonstrations of this interdependence, as financial crises in Mexico, Thailand, and Russia rippled around the globe. Interdependence is not limited to financial markets. As Barry Lynn says, production systems are also “more interactively complex and tightly coupled .”3 The 9/11 attacks showed how easily globalized production systems could be upset by restrictions on air travel and controls on the traffic of goods and people through U.S. borders. However, this growing interdependence is not strictly a result of globalization. It is symptomatic of a much longer process of market expansion, of which globalization is only the most recent phase. Globalization was preceded by a period in which new modes of communication and transportation led to the growth of interregional commerce within the United States and the emergence of a truly national economy .4 This process continues today—for example, through the integration of regional power grids. Integration within national borders also creates interdependencies—evidenced by the 2003 blackout, in which an errant tree branch in Ohio triggered a series of events that caused $6 billion in damage throughout the northeastern U.S. and Canada; recurrent crises over contamination of pharmaceuticals and food products; and Hurricane Katrina, which interrupted oil and gas production in the Gulf of Mexico and caused a nationwide energy shock.5 Market expansion generates wealth. At the same time, however, it generates interdependencies that can be exploited by terrorists. It is increasingly difficult to protect against these vulnerabilities for technical , legal, and political reasons. This is the second critical reality of postmillennial market governance. From a technical point of view, it Soothing the Market 85 [54.152.77.92] Project MUSE (2024-03-29 03:14 GMT) may be difficult to anticipate the many ways in which a highly complex system might be prone to attack. Indeed, there may be no single organization that has a coherent overall view of the operation of the market in which it works.6 Government agencies, standing outside the market...