♠ Posted by Emmanuel in Hegemony
at 10/23/2008 12:48:00 PM
Laissez-faire reached full flower in Anglo-Saxon nations as Margaret Thatcher and Ronald Reagan came into office, providing fertile ground for libertarians and rational choice theorists alike. Accordingly, thinktanks espousing a minimal role for government--the "nightwatchman state" they call it--and a maximal role for market mechanisms gained favor in the UK and the US. In time, such models of political economy became more prominent in other countries, whether through imitation or pressure (via IMF and World Bank lending conditionalities.)
Nowadays, the troika of "liberalization," "privatization," and "deregulation" are no longer the mantras for change they once were in the Thatcher/Reagan eras. Whereas they used to be the rallying cry for unleashing capitalism's dynamism, they now symbolize its excesses. Obama, for one, styles himself as the candidate for change by promising to reverse this ideology. So it is no surprise that thinktanks which espouse such beliefs are waging a largely unsuccessful effort in the battle of ideas. Models of governance come in and out of fashion. Who can say if today's aspiring leaders will one day be looked with the same disdain as "Sunny Jim" Callaghan and Jimmy Carter were prior to being turfed from office by Baroness Thatcher and Ronald Reagan?For now, however, let us inspect some conservative thinktank commentary in a world where Keynesian horses roam free once again. In some ways, it's like hawking leisure suits (or being John McCain)--not exactly in touch with today's fashions:
(1) Nigel Hawkins at the Adam Smith Institute believes that a wave of further British privatization is inevitable given the UK's strained finances. Auntie privatized? Heaven forbid:
Privatization - Reviving the Momentum calls for a new wave of privatizations, which could net the exchequer in excess of £20bn. Given the worsening state of the economy and the increasing tightness of the public finances, the report notes that such an inflow of funds would be very welcome. In addition to the revenues generated for the government, a new wave of privatizations would also deliver significant operational benefits. Previous privatizations have delivered a wide range of improvements, including increased investment, lower prices, greater choice and better service for customers – as well as underpinning billions of pounds worth of economic activity. The leading privatization candidates identified by the report include the Royal Mail, Channel 4, BBC Worldwide, Scottish Water, Northern Ireland Water, Glas Cymru, the National Air Traffic Control System, as well as government stakes in British Energy and the Nuclear industry.(2) Back in America, Peter Wallison of the American Enterprise Institute (AEI) raps government-sponsored enterprises Fannie Mae and Freddie Mac for past excesses, while predicting worse is to come from government conservatorship:
Perhaps worst of all, the takeover of Fannie and Freddie by a government conservator does not end the problem. In fact, it might open a new and more costly era. In a statement to the House Financial Services Committee on September 25, James B. Lockhart III, director of the agency that serves as both regulator and conservator of Fannie and Freddie, insisted on meeting the affordable-housing goals required by HUD regulations: "The market turmoil of this year resulted in a tightening of underwriting criteria . . . thereby reducing the availability of traditionally goal-rich, high loan-to-value home-purchase loans. . . . I will expect each enterprise to develop and implement ambitious plans to support the borrowers and markets targeted by the goals."(3) The Heritage Foundation's James Gattuso increases the polemic factor by suggesting that, if anything else, the Bush administration did not go far enough down the road of deregulation. Had it done so, the current situation would have been mitigated:
If this is what a Republican administration says about the use to which Fannie and Freddie will be put in conservatorship, one can only imagine what a Democratic administration might do.
In the wake of the financial crisis gripping the nation, it is tempting to blame "deregulation" for triggering the problem. After all, if the meltdown were caused by the ill-advised elimination of necessary rules, the answer would be easy: Restore those rules.(4) Finally, one of rational choice's architects, William Niskanen, offers libertarians words of comfort at the Cato Institute:
But that storyline is simply not true. Not only was there was little deregulation of financial services during the Bush years, but most of the regulatory reforms achieved in earlier years mitigated, rather than contributed to, the crisis.
This, of course, does not mean that no regulatory changes should be considered. In the wake of the current crisis, debate over the scope and method of regulation in financial markets is inevitable and, in fact, necessary. But this cannot be a debate over returning to a regulatory Nirvana that never existed. Any new regulatory system would be just that--complete with all the uncertainty and prospects for unintended consequences that define such a system. Policymakers must not pretend otherwise.
There are three precedents for blank-check authorizations on this scale, and none is reassuring. One is the Gulf of Tonkin Resolution that authorized the Vietnam War. The next allowed Richard Nixon to impose wage and price controls and a 10% surcharge on imports. The third authorized the Iraq War. Our political system cannot maintain a balance of power between the Administration and Congress on such important matters when the authorizing laws are so unbalanced.I certainly don't consider myself a libertarian, but I too cringe at some of the more extreme measures being pushed threatening centralization of unwarranted power in the hands of government, unfashionable as it is to say. Then again, the degree to which "market fundamentalism" has helped bring about the current mess is an open question.
My first piece of advice to Congress: Don't be rushed. Very few decisions of any importance need to be made within days, even in an election year. In any election year two-thirds of incumbent senators are not running for reelection. They could provide a valuable forum for reviewing any important proposal from the Administration, while their colleagues and all the members of the House run to keep their jobs.
My second: Ask a bipartisan group of respected former government officials who have faced similar problems before to review the conditions that led to an Administration's proposal, evaluate the proposal, and consider and evaluate feasible alternatives to it. For the recent financial crisis I would have recommended a panel that included Alan Greenspan, Paul Volcker, William Isaacs and Lawrence Summers.
And what do I tell fellow libertarians? Stand your ground. You do not win elections, but you influence them. Work across party lines if you want to have any effect. The number of voters who have generally libertarian political preferences is larger than the vote difference between the major parties. On important issues libertarians must be among the best informed and be willing to support the position of whichever major party is most consistent with their beliefs.
