The Looming Danger

Ambrose Evans-Pritchard outlines the looming danger if the results of this election are as expected:

It is not just that the Democrats will win a crushing victory in both houses of Congress, perhaps reaching the 60-seat Senate threshold that lets them steam-roll legislation. It is also that the incoming class of 2008 is of a new creed. Many no longer believe – or actively reject – the free trade and free market catechisms.

We’ve already heard the spin – it was deregulation, it was Wall Street, it was the market which caused the financial problems we now suffer. And the probable incoming crew is all about letting government solve all of these problems.

Of course the fact that the government now owns many financial institutions via this absurd bailout seems to bolster their argument. But in fact, and as usual, it is a government solution to a government manufactured problem. However, it seems that’s not the favored “truth” at this particular political moment in time.

No matter that statist policies were responsible for this global crisis in the first place. It was Western governments that set interest rates too low for too long, encouraging us all to abuse credit.

It was Eastern governments that held down their currencies to pursue mercantilist trade advantage, thereby accumulating vast foreign reserves that had to be recycled. Hence the bond bubble. This is the deformed creature known as Bretton Woods II. Protectionist Democrats are right to complain that the game is rigged. Free trade? Laugh on.

But at this point I have given up hoping that we will draw the right conclusions from this crisis. The universal verdict is that capitalism has run amok.

That of course means what? Much more intrusion by government is inevitable – a assertion that is bolstered by the conventional wisdom Evans-Pritchard outlines above and aided by a press which, for the most part, has been unquestionably supportive of the Democrat’s framing of the argument and a public which simply doesn’t seem to understand the politics or economics of this melt down.

For those who missed it, I recommend Edward Stourton’s BBC interview with Eric Hobsbawm, the doyen of Marxist history.

“This is the dramatic equivalent of the collapse of the Soviet Union: we now know that an era has ended,” said Mr Hobsbawm, still lucid at 91.

“It is certainly greatest crisis of capitalism since the 1930s. As Marx and Schumpeter foresaw, globalization not only destroys heritage, but is incredibly unstable. It operates through a series of crises.

“There’ll be a much greater role for the state, one way or another. We’ve already got the state as lender of last resort, we might well return to idea of the state as employer of last resort, which is what it was under FDR. It’ll be something which orients, and even directs the private economy,” he said.

Does anyone doubt, given the promises made, that there is certainly a “much greater role for the state” planned for in an Obama administration? Anyone?

And does it stretch credulity at all, given the probable make up of Congress, that such a role will have little resistance as it is proposed and passed?

Evans-Pritchard goes on to point out how Europe is in much worse shape than the US although it doesn’t seem to understand that or why that’s the case. He’s of the opinion they’ll try to again lean on more government to solve the problem of too much government to begin with.

With that he concludes that Obama’s “socialism” is much preferable to the “Hegelian broth nearing the boil in Europe.”

I’d hasten to point out that his preference is a relative thing. Obama’s “socialism” is the first step down the same path that Europe has already traveled. In a sense, Evans-Pritchard is saying that at this time, he’d prefer the lesser of two evils because relatively speaking he knows it won’t be worse than what Europe is about to put itself through. And he hopes we’ll figure it out before we’re too far down that path.

On the other hand, it appears we plan on repeating that history despite it’s obvious outcome. What’s infuriating is that for those who will take the time to study Europe’s problems, they are recent, they are obviously created by government and they have proven economically debilitating for those who’ve lived through them.

[Crossposted at QandO]

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