October 15, 2008
Bryan Gould in The Guardian makes the following comment on the way the financial crisis seen the unwilling slaughter of sacred cows of economics. Gone is the view that:
that governments have very limited capacity to manage the economy. Any pretension to extend that power will not only be self-defeating but also – because of the distorting effect on the proper and unfettered operation of the free market – positively damaging. Governments, according to this view, should limit themselves to those aims – such as the defence of the realm and maintaining the value of the currency – that are their proper concern.
What has returned is the view that:
government is a major player in the economy, both as an actor in its own right and as a coordinator of other actors and a maker of policy. It should accept, and perhaps seek and welcome, a responsibility for the performance of the economy – a performance to be measured not just according to monetary criteria but according to real phenomena such as output, employment and investment. The economy will perform better if the power of government is harnessed to the needs and interests of industry, and if government undertakes those functions – such as the provision of major infrastructure – that cannot easily be carried out by private industry.
There is near-universal acceptance that deregulated financial markets have got the world into this mess and only governments, acting co-operatively to "pump-prime" the economy and — in some cases — effectively nationalise the banks can get us out of the mess.
What we have here is neo-liberalism and social democracy. From the perspective of governmentality both forms of the relationship between state and economy are sets of liberal political techniques which are saturated with forms of reasoning and knowledge that aim to shape the conduct of a population. Both are forms of political rationality of government.
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I do not know about other countries but to say in the United States there is a near-universal acceptance that deregulation has caused this crisis is just not true. It is only accepted among the more liberal of society. When in fact the housing/bank crisis has been caused in large part by the government getting involved and basically forcing banks to make housing loans to those who can not afford them. The banking industry in the U.S. is one of the most regulated industries in our country. To say that deregulation is the problem is a joke.