The Nobel committee can stop looking for next year winner of the Nobel prize in economics and hand the thing right now to Harold Myerson. The WaPo columnist's effort of today, Gods That Failed, is Krugmanesque, reading like an extended gloat at the expense of believers in free markets. Ha-ha, mocks Myerson, your god of unregulated capitalism is dead. Just like Communism failed, so has your system. You half expect Myerson to end with a self-satisfied "nah nah nah nah nah!"
From Myerson's opening paras [emphasis added]:
In 1949, a number of famous writers, among them Arthur Koestler, André Gide, Richard Wright, Stephen Spender and Ignazio Silone, wrote essays explaining why they were no longer communists. The essays were collected in a volume entitled "The God That Failed."
Today, conservative intellectuals might want to consider writing a tome on the failure of their own beloved deity, unregulated capitalism.
There's just one small problem with Harold's hypothesis: it's based on an entirely false premise, one that I'm sure NB readers will quickly spot. The current mess was caused not by too little government regulation, but too much.
Surely not even Myerson can deny that it was government meddling with Freddie and Fannie--by far the biggest players in the mortgage markets--that is a root cause of the financial crisis. It was the implicit federal guarantee of Freddie/Fannie's obligations that permitted them to borrow at lower rates. And it was government pressure on them to lend to non-creditworthy borrowers that largely underlies the sub-prime mess. Similarly, it was the mandate of the Community Reinvestment Act, as well as more informal government pressures, that distorted the private credit sector and led to more sub-prime lending.
Asks Myerson, a sneer in his cyber-pen:
What exactly do economic conservatives believe now that their god is dead? What's become of the glories of privatized Social Security?
Myerson might think he's making a brilliant rhetorical point. But which would you rather have: a government-guaranteed 1% return on your Social Security contributions, or the right--with attendant risk--to make your own decisions in the market over a lifetime of work?
So what does Myerson propose as an alternative to the dead god of capitalism? A good inkling comes from this proposal he floats [emphasis added]:
Now liberals must turn their attention to the kind of financial nationalization on which we're about to embark. Paulson wants to shore up the banks with public funds but also to continue entrusting our banking system to the same bankers who got us into this fix, albeit with more regulation. But why shouldn't banks that take public money be compelled to seat a public member or two on their boards, as a check against their repeating old follies or committing new ones? Economic Policy Institute founder Jeff Faux says the government should control one major bank to use as a yardstick in the financial sector, just as public utilities constrain the misconduct of private ones.
Sounds like a giant step down the slope to socialism. With a President Obama, strong Dem congressional majorities, and the Myersons of the media to cheer them on, could it become an avalanche?
Note: Was Myerson getting his talking points from the Ayatollah and Ahmadinejad, or vice versa? See AFP story, Iran hails world financial crisis as 'end of capitalism'"
"The school of Marxism has collapsed and the sound of the West's cracking liberal democracy is now being heard," supreme leader Ayatollah Ali Khamenei said on Monday, recalling the fate of the Soviet Union.
Hardline President Mahmoud Ahmadinejad, who is backed by Khamenei, said on Tuesday that "it is the end of capitalism."
