Friday, October 24, 2008
We have now the spectacle of even Alan Greenspan going for more regulation of the market. O tempora o mores, I suppose. Perhaps this strange sight signals - whatever the level of destruction of this possibly very deep and exceptional downturn - that a return to some degree of sanity has finally begun. It is not that these collapses would not have been foreseen and forecast - they were, by many anxious and worried observers. It is just that reason went overboard with the long bull market, as it inevitably will in connection with any complex large scale human activity, and especially when it comes to the market place. It is self-evidently a feature, not a bug. That is why we desperately will always need balancing forces, safety nets, income transfers, progressive taxation and so on - not only do they keep the society open for fair competition and high social mobility but they also guarantee a certain, basic and crucial level of stability that is inherently missing from raw capitalism. In the last analysis these factors are the fundamental foundation of any effectively functioning and flourishing market economy. It is the very success of social democracy that I guess makes the market enthusiasts so blind to its salutary effects. History, our brutal human history, has a knack though of reminding us of the realities every now and then. Hopefully we will escape now with only a reminder - it seems quite possible that much worse things could be on offer. Interesting times certainly.
Friday, October 10, 2008
Periodically capitalism must be saved from itself - the invisible hand is very shaky when left unsupervised. And that's exactly what has been done in these last euphoric and hubristic decades that continued the party, hmm, the orgy that Reagan and Thatcher began. Well, it's hangover time now. Of course things would be fine and capitalism would work smoothly without supervision and regulation if only people would always behave rationally and longsightedly. So would have communism. But we are what we are and will always need checks and balances as long as we stay human. It would be natural in this crisis then to let these arrogant institutions and their once so all-knowing and self-righteous masters fail instead of making them protected state wards. But that would be a mistake - we should never forget that the welfare state and the social democratic compromize worked only because they provided a workable mechanism to harness capitalism for genuine overall good of the community. Without that engine, energy and dynamism it would not have been possible to create a more humane, a more equal society. We are only good in sharing abundance: scarcity will eventually lead to injustice and authoritarianism. So, under proper supervision capitalism can be made work and be made work well. Of course, no-one seems to know how bad things have now gone: it might be possible that even quite apocalyptic changes may happen. But hopefully the governments can once again save capitalism from itself and perhaps remember the lesson better and for much longer this time. This crisis was only too well foreseen and forecast - the hubris and folly was just too strong for reason to penetrate and disinflate.