….the repercussions of crisis that began in the United States are global. In Britain, where Prime Minister Margaret Thatcher joined with President Ronald Reagan in the 1980s to herald capitalism’s promise, the government this week moved to partly nationalize the ailing banking system. Across the English Channel, European leaders who are no strangers to regulation are piling on Washington for gradually pulling the government watchdogs off the world’s largest financial sector. Led by French President Nicolas Sarkozy, they are calling for broad new international codes to impose scrutiny on global finance.
To some degree, those calls are even being echoed by the International Monetary Fund, an institution charged with the promotion of free markets overseas and that preached that less government was good government during the economic crises in Asia and Latin America in the 1990s. Now, it is talking about the need for regulation and oversight.
“Obviously the crisis comes from an important regulatory and supervisory failure in advanced countries . . . and a failure in market discipline mechanisms,” Dominique Strauss-Kahn, the IMF’s managing director, said yesterday before the fund’s annual meeting in Washington.
In a slideshow presentation, Strauss-Kahn illustrated the global impact of the financial crisis. Countries in Africa, including many of those with some of the lowest levels of market and financial integration and openness, are now set to weather the crisis with the least amount of turbulence.
Shortly afterward, World Bank President Robert Zoellick was questioned by reporters about the “confusion” in the developing world over whether to continue embracing the free-market model. He replied, “I think people have been confused not only in developing countries, but in developed countries, by these shocking events.”
“The End Of American Capitalism?”
Not at all. But a good time for some real reflection.
And a good time to let the market deal with those who made bad decisions. Alas, with the help of the overweening Central State, the wrong lessons will surely be learned here.
Perhaps, rather, the end of Kensyian Economics, which replaced American Capitalism under FDR.
Libraryjim,
From your mouth to God’s ear…as the saying goes. This socialism has got to stop.
Earth to LibraryJim: Keynes was a Capitalist. And the Keynesians haven’t had any political power since Reagan.
During the eighties, Milton Friedman was how we operated, except when it came to investing in the military (which is a form of Keynsianism). And then some supply-side kooks. Almost none of whom were professional economists of any school.
If anything, what’s happened is that Keynes has been proven right. As The Economist wrote (in an article listed here: “But history teaches an important lesson: that big banking crises are ultimately solved by throwing in large dollops of public money, and that early and decisive government action, whether to recapitalise banks or take on troubled debts, can minimise the cost to the taxpayer and the damage to the economy. For example, Sweden quickly took over its failed banks after a property bust in the early 1990s and recovered relatively fast. By contrast, Japan took a decade to recover from a financial bust that ultimately cost its taxpayers a sum equivalent to 24% of GDP.”)
But Keynes wasn’t a capitalist? “The engine which drives enterprise is not thrift, but profit.” But one thing is also true, he thought the love of money was pathology. Its purpose was to help us enjoy life.
I don’t usually respond to JW, since my blood pressure can’t take his gymnastics in “logic”, but on this issue, he is very much mistaken. Many Economic historians (certainly not all, but enough to call attention to the criticism) now treat John Maynard Keynes’ theories as socialistic in nature.
For example, Irl Gilliland writes:
[blockquote] Instructively, six-time Socialist candidate for President, Norman Thomas, wrote in A Socialist’s Faith, “…Keynes has had a great influence and his work is essentially important in any re-appraisal of socialist theory. He represents a decisive break with laissez-faire capitalism.” John Strachey, a former communist who entered the British Fabian Society in 1943 and became War Minister in the Labor Government of Great Britain, says, “The positive part of Keynes’ work was a demand that capitalism should now be regulated and controlled by a central authority…and that authority can be, in contemporary conditions, nothing else but the government of a nation state.” Economist, Henry Hazlitt, in his book The Failure of the “New Economics” wrote, “Keynes’s plan for ’the socialization of investment’ would inevitably entail socialism and state planning…Keynes, in brief, recommended de facto socialism under the guise of ’reforming’ and ’preserving’ capitalism.”
Logically, then, you can’t be a “Keynesian” and not be a socialist.
‘Keynesian economics’ asserts socialism’ [url=http://www.wickedlocal.com/ne-grandisland/opinions/x1806344334/COMMENTARY-Keynesian-economics-asserts-socialism]The Grand Island Independent[/url],
Aug 19, 2008[/blockquote]
However, Keynes DID advocate the Government having a large role in the control of economic policies and thus contrary to free market American capitalism. Herbert Hoover and FDR both accepted his ideas and FDR made them central to the “New Deal” policies, and so they remained as the keystone of American economic ideals, shifting us from American Capitalism to Keynesian economics.
One scary note is that he was also a big proponent of eugenics.
Wikipedia (used cautiously) says:
[blockquote]Keynes served on the board of directors of the British Eugenics Society in 1945, even as documented proof of the Nazi concentration camps were becoming more widely known in Great Britain during the final year of World War II as British and American troops liberated several concentration camps in Germany. Even so, in 1946 before his death, Keynes still declared eugenics “the most important, significant and, I would add, genuine branch of sociology which exists.”[/blockquote]
Good night.
Jim E.