Sozialalmanach - Caritas Luxembourg

ates were bad for consumer demand and therefore for the economy as a whole. In addition,
global demand contracted even further in the wake of Asian financial crisis, when Asian
emerging economies started to hoard reserves so as not to become dependent on IMF
loans in hard economic times.
Fitoussi 42 argues that the crisis is rooted in the problem of reverse income distribution,
both in the United States and Europe, fatally depressing global demand. Looking beyond
the aftermath of the crisis, he proposes new indicators of social and economic progress
and prosperity, considerably expanding the narrow focus on GDP as the foremost figure
of economic vitality.
6. The Contours of Embedded Globalization
The core lesson that has emerged from the crisis is that economic markets are not selfcreating,
self-regulating, self-stabilising, and self-legitimising. While this important lesson
is certainly not new, in the past decades of neo-liberalism policymakers do seem to have
forgotten the fundamental truth that the benefits of global economic interdependence rely
heavily on robust domestic and supranational, social and political institutions, reminiscent
of the era of embedded liberalism. Domestic and supranational institutions must be able to
bind, bond, and bridge advanced polities, economies, and societies. Unfortunately, however,
once the genie is out of the bottle, it is far more difficult to re-regulate an economy than to
deregulate it. And as deregulation brought concentrated wealth to sectors that benefited
from even further deregulation, accumulated wealth was efficiently translated into a strong
financial lobby in London, New York, and Washington. The financial sector effectively
bought political power. Therefore, the failure of politics lies in part in its inability to resist
being hijacked by financial interests.
The excesses of deregulation have hit society hard. Public institutions and authorities
matter, in fact, they have proven to be indispensable. Nobody expects the demise of the free
market system, but we do witness the passing of the neo-liberal ideology that went along
with it – at least insofar as that ideology can be defined as a system of beliefs that steers
towards a desired credible outcome. This ideology elevated the free market to the status of
an ultimate goal and an enlightened ideal, rather than one of many possible means by which
society can increase its prosperity and well-being. The crisis seems to have debunked this
ideology: the free market is now seen as a means rather than an end. Re-establishing the
rules of the game and the relationship between the market and the public authorities has
42 Fitoussi (2009).
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