Quick rant: Not to be taken too seriously
I love the phrase "failure of market capitalism." It's such a brilliant phrase. Because, of course, as it currently seems to be being used, it's actually wrong. Market capitalism has spectacular failings in its theories at times, but human crisis and catastrophe aren't among them. Crisis and catastrophe are supposed to be part of market capitalism
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Absolutely not. Where blame can be assigned to groups, it should be assigned to those parasites of the financial system who ignored clear market signals in search of one more quarterly pay incentive; those who presided over the mis-rating of vast quantities of debt securities; those who simply pirated off with vast sums of cash, or built illusory investment schemes like Madoff; and that vast cohort of borrowers, commercial and private, who took on dubious debt without consideration, without sense, and without the ultimate means to repay it in good order.
Recent events do seem to prove that advocates of laissez-faire capitalism were wrong, and that greater scrutiny of all of "this crap" would be preferable. Government initiatives to hand vast wadges of cash to the same louts without adequate scrutiny therefore lead one to feelings of concern ... the crux is perhaps more the scrutiny, and not the ideology. Are we looking at a socialism-flavoured repeat of the same set of errors? "Alas, regardless of their doom, the little victims play."
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I somehow don't think I would be quite annoyed at the essay itself. But I suppose I am, in general, irate at the way what is essentially a highly technical debate involving obscure positions in relation to information that is often not very available (or, in the case of important groups like the banks, downright secret), has become this incredible staw-man debate where everyone (including me) goes out of their way to demolish their opponents in sound-bytes without offering that much that's genuinely never been tried before. Regulation is a good example of that, because it's not like there aren't regulatory frameworks that already exist and were awaiting implementation. So do we want to keep going with those? Do we scrap them and start over? Do we need regulation as soon as possible, or can we wait for a bit? Given that some of the regulation problems are not directly the fault of (i.e. they rely on measurements and standards that are collected by other bodies, but may themselves be problematic (e.g. credit ratings)), does regulation need to be tightened, or should we actually work on those other areas? Should people themselves actually be more interested in how things work, rather than consigning vast sums of their money over to mysterious money-machines and their safety officers?
I actually haven't seen a treatment of current market conditions that I actually found interesting and not overly-simplistic since the FSF released their report last April, and I suppose that this is a lesson as to why I should read more professional reports and journals and fewer blogs/newpapers.
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If you haven't read the Rudd essay, you probably should. It's an interesting collage. The first 50% is a fairly convincing Tale of the Crisis, a narrative that works us around to our present position painting neo-liberalism as the bad guy, because of its obsession with deregulation*. Post-Depression economic history is broken up into two halves, Keynes-Thatcher and Thatcher-Now.
The latter part of the essay tries to stick it to the Liberal Party, rather less convincingly -- about the worst that Rudd can manage is that Costello and Howard were ideological fellow travellers of US low-regulation fanatics, not that they did much evil themselves (beyond the well-documented failure to spend on health, education and infrastructure, which suck for us economically but don't tie directly to the current situation).
There's also practically direct quotation from PJK's Lateline spiel of the other night, leading me to believe that Keating must have either participated in drafting the document (unlikely?) or cherry-picked a bit of it so as to be "on message".
As far as ideas for regulation are concerned, I wouldn't mind someone coming up with something that deals directly with the moral hazard problem. We have a situation where asset bubbles are somewhat bad for nearly everyone, but actually extremely good for certain people (due to short-term incentive payments in the finance industry etc.). Perhaps those incentives should be paid over the longer term, concordant with the frequency of the economic cycle and conditional on stable value. Again, however, I don't remotely have the expertise to judge how to implement such an idea.
* more vagueness
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