Monday, December 22, 2008

A new capitalism?

As the daily economic news gets ever grimmer, the BBC's economics correspondent Robert Peston is pushing the idea that there will be 'a new capitalism.'

The current crisis was caused by too much borrowing by both consumers and banks, he says, and the finance sector needed the taxpayer to bail them out.

In turn, this will lead to a kindler, gentler capitalism with governments playing a greater role in the economy.

An interesting argument, nonetheless, and one more convincing than the simpler bankers' greed getting the blame, which seems the narrative I have seen from TV1 and swallowed by our political leaders, John Key seemingly included.

But if we look back, wasn't government largely to blame for the mess in the first place?

Indeed, some months back, there was a good argument for political correctness getting the blame. Government in the US forced the banks to lower lending standards to people who really could not afford to take on loans. A regular theme of my US election commentary was the role of Jimmy Carter, Bill Clinton, the Community Reinvestment ACT and organisations like ACORN in promoting reckless lending leading to the sub-prime crisis, which then spread globally.

Indeed, if there is a failing in the 'old capitalism', the freemarket Blair/Thatcherite variety, perhaps it is its vulnerability to government induced failures like the above. Thus bailout by government and taxpayer is only the necessary recompense for failed ideology and regulation on the part of government.

But while often seen as saviour, how many problems is government storing up for the future? The bailouts debts will have to be repaid somehow someday. There is the issue of moral hazard too.

If government is to bail you out, you can them make the wrong and riskier choices whether you are a banker or indeed a car manufacturer. How much of those bad loands that caused the credit crunch made simply because government through Fannie and Freddie guaranteed them?

Well, a debate is starting to appear on the matter. Here's the leftist Compass, the LabourHome blog, the Daily Telegraph, and Irwin Stelzer.

Alas, it's a debate the left seem to be taking a lead so far in. Let us hope the freemarket right can launch a successful fightback! But it is a debate we all need to have.


Dave Mann said...

I don't think capitalism per se is to 'blame' at all for this.

The problem is basically that the Western World is not producing any more (relatively speaking of course) and has started to live on debt while Asia is producing like hell and saving too.

Chinese and Asian countries are not only producing the world's goods, but, by investing heavily in US and European corporations, they are effectively lending to us as well in addition to using capital to fund their own growth.

This cannot continue indefinitely. Our industries have been prevented from growing by eco-induced irrational fears, our people are no longer even able to read and write when they leave school, intellectual innovation has been throttled and we are mortgaging ourselves up to our eyeballs on the back of fake property values to fund our overseas holidays.

I travel a bit overseas (out of earnings, not debt hahahah), and I have seen this phenomenon time after time in Western countries; inflated property values taking the place of actual work, enterprise and production. In a hungry world, Ireland is even deliberately closing down its dairy industry in order to sell off 'lifestyle blocks'! Its actually fucking madness, but its all over, so everybody thinks life is carrying on as normal.

Unless the 'developed' economies - what an arrogant misnomer that is - start to focus on the underlying issues, then any anount of fiddling around the edges will only hasten their demise. 'Decaying economies' is a more apt description here.

Get real. Get working. Get saving. Stop pretending your house is worth ten years' gross income because if you don't produce anything you won't have ANY fucking income at all.

mawm said...

Crusader Rabbit has posted an excellent Chris Muir Cartoon.

Lou Taylor said...

Excellent summary Dave.

Clunking Fist said...

"Indeed, if there is a failing in the 'old capitalism', the freemarket Blair/Thatcherite variety"

Er, Blair? The path to rampant cronyism and patronage started under him. It has merely continued under the Snot Goblin.
Remind me, somebody, which former Liabore Minister is Lobbist-in-chief for one of the companies hoping to tender for UK's ID cards?

I think you may have meant Regan?

Wv: nonsa (fuck yeah)

Clunking Fist said...

PS how do the ma & pa feel about this aspect of the free-market, the sales of YooKay's nuclear facilities:


The counry's nuclear ambition privatise! By a socialist gummint! No wonder they kept it somewhat secret. I tell you: Hulun was many times less bad for NZ than Zanuliarbore are for the UK. Why are there no riots on the streets? I suggest "I'm alright, Jack" is the problem. One day, the ordinary guy will wake up and realise that his situation is as bad as Jack's. And then he'd wish that he'd given a Jackshit about Jack and his situation.

Clunking Fist said...

A warning to some right-leaning commentators in NZ: Gordon Brown is what you get when you have 5-year terms and first-past-the post.

Let's stick with 3-years and MMP. Oh, and a Royal Commission into the Police...

Ackers said...

What Dave Mann said.

Take note FFM. You might see yourself as a budding journalist but the craft unfortunately requires one to cast aside one's juvenile partisan passions.

I doubt you have it in you but take note of Dave.

It's not always 'someone elses fault'.....and ultimately we are all complicit when the 'system' fails.

Anonymous said...

freemarket Blair/Thatcherite variety,

What the FUCK?


Perhaps you mean capitalism of the "Reagan/Thatcher" variety?

or "socialism of the Blair/Marx variety"

(Blair is officially a Christian Socialist, remember?)

If the UK had not abandoned Thatcherism - and oh yes the UK did - and if NZ had not abandoned Rogernomics and Ruthanasia - and in spite of lies spun by the MSM NZ most certainly did! -

then the UK and especially NZ would not be in the fucking mess we are now!

Clunking Fist said...

"The problem is basically that the Western World is not producing any more (relatively speaking of course) and has started to live on debt while Asia is producing like hell and saving too."

There are two issues (con)fused together in this statement:
1. Producing: I cannot find back up on the interweb, but a couple of economists recently on radio stated that fully 50% of the worlds manufacturing occurs in the USA. This might seem hard to believe when everything appears to be made in China. But think about it: where are Boeings made? Bottling machinery? Robots? Bulldozers? None of this comes from China. China makes all of our toys and a lot of the less complex consumer electronics. The bulk of the worlds software comes from USA, too (Microfloppy, Apple) although psooibly not 50%. Manufacturing is not the ONLY form of production remember.
2. Debt: agree.

Anonymous said...

The bulk of the worlds software comes from USA, too (Microfloppy, Apple) although psooibly not 50%.

Vastly more software comes from the US. Europe and even the UK are second. It's hard to by a serious phone where the software wasn't done in either the US, the UK, or Finland and Sweden.

China makes all of our toys

only because you're a fucking bludger.
My kids toys are made in Germany, and Denmark.

Same as cars: the fact that most bludging Kiwis drive cars made in Japan, Korea, or Taiwan (with the odd Holden made in Aussie) doesn't mean most cars are made there.

The biggest car company in the world is fucking Volkswagen. My cars are made in Germany and the UK. My whitegoods in NZ, Australia, and Germany again. Ok my fucking big TV is made in Japan, but the DVD player and stereo are made in the UK.

I can't help it if you're a bludging scum.

That's your choice.

But don't come here looking for any fucking sympathy.


Dave, your comments were excellent.
As for Blair/Thatcher free market eco0nomics, I was quoting the guy from the BBC.
I can't say I associated Blair with freemarkets but he did not intervene in the way Gordon Brown has and is doing.
Last night, British tv showed two programmes on the state of the ecponomy.
The BBC's Robert peston gave his view in Panorama, which was repeated in mini-form in the 10pm news.
Channel 4 or 5 presented a show noting the relationship between China and the USA.
Before governments throw out the current or former capitalist system for something different, the world needs to have a debate on whether such a route will be better.
Recall how the sub-prime crisis led to the financial crisis we have today.
Shouldn't we have "new government.!"

Clunking Fist said...

"I can't say I associated Blair with freemarkets but he did not intervene in the way Gordon Brown has and is doing."

Blair sold honours for cash, so he's a freemarketer at heart. (Thatwas tongue in cheek: he is a big-statist, power crazed cunt really.)