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'Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainity and agitation distinquish the bourgeois epoch from all earlier ones ... All that is solid melts into air, all that is holy is profaned.' Marx

returning to social democracy? « Previous | |Next »
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.

| Posted by Gary Sauer-Thompson at 11:15 PM | | Comments (5)
Comments

Comments

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.

Greg,
I disagree; Wall Streeters form the vast majority of people who do not blame deregulation, and they usually blame Greenspan or the uninformed consumer. I have no idea what you're referring to when you say "the gov't forced banks to make loans to those who cannot afford them": no such legislation exists and banks made subprime loans at their own discretion, which is why the banks who did so less (JPMorgan, Wells Fargo) faired better than others. The mere fact that both presidential nominees, including ex-deregulation champion McCain, now support regulation is indicative of popular opinion on this subject.

Social Democracy? Consider what Zizek writes about the crisis, "If the bailout plan really is a ‘socialist’ measure, it is a very peculiar one: a ‘socialist’ measure whose aim is to help not the poor but the rich, not those who borrow but those who lend. ‘Socialism’ is OK, it seems, when it serves to save capitalism. But what if ‘moral hazard’ is inscribed in the fundamental structure of capitalism? The problem is that there is no way to separate the welfare of Main Street from that of Wall Street. Their relationship is non-transitive: what is good for Wall Street isn’t necessarily good for Main Street, but Main Street can’t thrive if Wall Street isn’t doing well – and this asymmetry gives an a priori advantage to Wall Street."
http://www.lrb.co.uk/v00/n03/zize01_.html

Nebuchadnezzar,
The Community Reinvestment Act forced the banks to give loans to those who could not afford them. I suppose you could say because the government did not regulate the regulations enough caused the problem, but that seems rather ridiculous to me. Without the initial regulation the banks, more than likely, do not make those loans. I will agree that that Wall Street and uninformed consumers added fuel to the fire, but I do not agree that it was the major cause.

Seriously, the word "forced" is irrelevant to the Community Reinvestment Act. It incentivizes, not forces, and there's little to no evidence that it increased lending as opposed to low Fed rates/poorly structured mortgage commissions that encouraged quantity over quality loans/the housing bubble. The government did not force lenders and those lenders deserve to fail for their poor execution; whether or not teaching them a lesson is worth letting larger financial structures collapse is another question entirely.
I'm sorry if I sound blunt, but I'm truly sick of "free market" ideology. It's an irrational religion that supplants god with an "invisible hand" and to say the government is the source of all evil and the market all good is massive oversimplification.