After the big squeeze
Posted by John Malloy on 02/21/2009
This is not the New Depression, but we are on the way to discovering how the New Capitalism will operate argues economist Irwin Stelzer
Students at Harvard’s John F Kennedy School of Government succeed as policymakers if they take away only one message: “Ask the wrong question, and you get a useless answer.” That message is too often ignored in the debate about the future structure of the British and American economies as they plough through the economic downturn. Ask whether this is a recession or, as Ed Balls argues, a depression, and you waste hours comparing our situation with the often-misremembered 1930s (Britain did quite well without much government intervention, and America suffered 25 per cent unemployment in spite of huge government intervention). Since our definitions of “recession” and “depression” have all the precision of a Gordon Brown response at PMQs, there is little point to the exercise that led Balls to the erroneous conclusion that we are suffering the worst economic malady in a hundred years.
Next wrong question: Have we seen the last of unfettered capitalism? But that red-in-tooth-and-claw model never existed. Market capitalism has always been characterised by rules, or fetters. Securities can be peddled only after meeting disclosure rules; houses can be built only after satisfying planning regulations; construction workers are protected by myriad safety regulations; the quality of the air we breathe is determined by government rules. There’s more, but you get the idea.
The correct question is: will capitalism survive the downturn, and the increase in the reach of government that it has engendered, not only in Britain, where the Prime Minister has undertaken the task of saving the world, but in the United States, where President Barack Obama has accepted the more modest charge of reviving the national economy?
The answer to that question is an unequivocal “yes”. We are not, as Newsweekrecently argued, “all socialists now”. Angry British subjects and US citizens do enjoy seeing their bankers serve as piñatas to parliamentary and congressional inquisitors, the silliness of whose questions is matched only by the vacuity of the bankers’ responses. But Americans still vote for middle-of-the-road candidates, and there are no demonstrations in Britain demanding the restoration of Clause Four.
The alternatives are just too grim, and anyhow no more immune to the problems the capitalist economies face. Russia, despite or more likely because of the government grab of private property and confiscation of foreign investment, is in crisis as its rouble teeters on devaluation, unemployment rises, and the new commissars who studied economics while working in the security services prove no better managers than oligarchs who made off with a large portion of the nation’s wealth…
www.newstatesman.com
Posted by 
