20 October 2008

We are all socialists now

The British government is purchasing major stakes in Britain's banks at a of cost of four per cent of the annual economy, more than was spent nationalizing companies after World War II. Following Britain's example, George W. Bush's America, led by its most conservative president ever, is buying shares in American banks. The developed world as a whole is following Britain's lead. A Labour Party leader has become the guru of international finance.

This socialist surge is not into just any old industry; it goes to the heart of the economy -- the financial system. Actually it isn't so much socialism as it is a return to good sense, all too long neglected in favour of neo-con excess. For the past couple of years, U.S. Secretary of the Treasury Henry Paulson has been running around the world telling the leaders of China, Russia, and anybody else who would listen, that the path to prosperity lay in adopting the American model for their financial systems. A money marketplace liberated from government regulation would lead to economic nirvana. Now the American financial system lies in ruins and poor old Henry is advising his president to buy shares in banks. He has been brought up short by reality.

That reality is that capitalists are like children. Children can be a joy when they are well-behaved, but they don't get that way automatically. Parents must impose a modicum of discipline, they must set limits. If they don't, the kids will wreck the house. Well. the financial capitalists have wrecked the house. We have been bad parents. To get the house back in order, we will have to set limits, we will have to regulate these over-sized kiddies into responsible behaviour. The Europeans are suggesting that nothing less than a whole new financial house will do. Having agreed to follow British P.M. Gordon Brown's plan for buying major shares in banks, French President Nicolas Sarkozy and German Chancellor Angela Merkel have now concluded a new world financial system is required with an international watchdog to supervise the world's economies. A global parent, no less. Takes your breath away.

Canadian-born economist John Kenneth Galbraith spent a lifetime writing and lecturing about the dangers of capitalist excess and in recent times has been increasingly ignored. It turns out this common-sense Scot was right after all. As the world struggles to recover from the economic turmoil, we will hear more about yet another economist too often neglected of late, John Maynard Keynes. Close attention will be paid to his prescription for government behaviour in difficult economic times. Note for example that our own prime minister, Mr. Harper, is now hinting at deficits, supported by that sterling voice of business, The Globe and Mail. The Globe excoriated deficits for years but has now changed its tune and reluctantly admits they may be necessary.

There's really nothing here to have old Karl Marx chuckling in his grave; nonetheless, one suspects he might be smirking a little.

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