Tuesday, 23 September 2008

The enemy of my enemy is my enemy

Financial traders
Back in the 1980's I was such a zealous advocate of free market economics, even Adam Smith would have run for cover. Just as my socialist friends were convinced of an infinite number of rich people to tax, I was certain that an unencumbered market would lead us all to greater prosperity. I suppose to some extent we were both wrong. Even the Labour party no longer believes in the "infinite number of rich people" and the turmoil in the financial markets means I'd be brave, or perhaps off my head, to suggest that deregulation has been a total success.

Despite this I'm still a capitalist at heart though it's not always a particularly edifying sight. Greed is one of those unpleasant by-products that we all have to live with. I never particularly cared about fat cats on obscene salaries so long as the overall wealth of the country increased. Ultimately, I reasoned, if the fat cats got too greedy their business would fail and be replaced by something leaner and more able to contribute to the economy.

However in a bizarre twist, rather than letting the crap financial institutions go to the wall the U.S. government is preparing a rescue to the tune of $700 billion. This appears almost, dare I say it, socialist. True, there's no nationalisation of the industry but bailing out useless businesses use to be the preserve of British governments of the 60's and 70's. Has the world gone mad?

Actually, no; it's not madness… it's desperation. No matter how bad the business, how revolting the excesses (the head of the troubled Lehmann Brothers had a $10-$20 million bonus last year depending on which paper you read), to let a bank fail has the potential to collapse the financial markets. This isn't a case of the rich protecting the rich; if the financial market collapses then we're all screwed – businesses everywhere will fail, unemployment will be rampant.

Distasteful though it might seem; we can't afford to do nothing. But at a cost exceeding $2000 dollars per man, woman and child in the United States, it's one hell of a price to pay.


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