I often think Nigel Lawson lives on a different planet to the rest of us. He wrote this in the FT this morning:
Capitalism works — and works far better than any other system — because the discipline of the marketplace keeps greed, folly and incompetence in check. When this is lacking, when businesses are considered too big, too important, or too interconnected to fail, this crucial discipline disappears, and disaster is almost inevitable.
Maybe he hasn't noticed that what happens on the theoretical black board of capitalism, which is what he describes, is not the same as the capitalism we inevitably get in practice, which is a very different beast altogether. But to argue for the blackboard version of capitalism as if it would solve the problem it inevitably creates is indicative of one of two things and they're either wanton inability to understand the real world or wanton deception to support the abuse that happens in the real world of capitalism. It's one or the other and since I'll assume Lawson is honourable it's inability I have to go for.
Either way, lawson is a long way past his usefulness, if he ever had any.
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It’s similar to Greenspan’s philosophy of non-interference and one could argue in both cases that they’re right as right now it’s political interference and non-observance of the law that’s keeping the obviously insolvent banks alive. Also, of course, it was political interference, largely from Clinton, that got the sub-prime market off the ground in the first place when he used political leverage to start banks lending to the black community even though many were clearly unable to pay back their loans,people who left to normal market forces would never have been granted loans in the first place. So there’s indeed some truth, albeit unpalatable, in what Lawson and Greenspan say.
I do not agree
The political interference came from lobbying from those same banks
If you ignore that you are part of the problem
Are you saying that the banks lobbied Clinton to suggest the banks started making loans to low-income members of the black community that couldn’t realistically afford them? If so do you have a reference please? I ask as this is the first suggestion I’ve heard that that could be the case. I know the CRA came in with Carter and Acorn pushed for equaity in lending and that later Clinton beefed it all up – more here The Credit Crunch Millstone but never that bank lobbying was behind it. Am I understanding you correctly?
Heavens above -isn’t it now well known that the banks wanted to expand their sales base – and lobbied to do so? It seems to me to have been widely reported
I think you’re being a bit unfair, probably to wind people up.
The free market is a necessary ingredient of liberal democracy. However, no one, not even Nigel Lawson is saying it’s a sufficient condition. Market imperfections of every sort need to be properly regulated.
Don’t wind me up, John!
I support markets
But not Lawson’s absurd view of capitalism
They’re nothing like the same
I think the market economy and capitalism need to be distinguished. The FT has been running a long series on Capitalism in Crisis without once defining what they mean by capitalism. Is not capitalism simply the ownership of the means of production by a separate class to those who use them? It’s the capital and land markets which are screwed because of the perverse ownership model.
Bill has a point here but it is likely that the decision to “help” the Hispanic and Afro-Caribbean population was decided in collusion with the international bankers. The lenders were set targets to lend fairly to to people of all backgrounds and the normal financial criteria were ignored.
This posed no problems for the lending banks because, as we know, they created new money for the loans at no cost to themseves and later sold them on to third parties as bundled up and chopped up mortgage backed securites – AAA rated. In other words a well thought out devious scheme.
Ah so the financial mess we are in can all be blamed on a misguided desire to help the Hispanic and Afro-Caribbean population own their own homes. How very convenient. Sheeesh!
Maybe the neo libertarian philosophy of Nigel Lawson et al is just intellectually bankrupt. Maybe reality has a liberal, left wing bias i.e things don’t work out according to the expectations of libertarian dogma so people like Nigel Lawson just have to make stuff up to avoid cognitive dissonance and the risk of going totally going bonkers.
No Colin. It was just one of the tools used to sell the scam.
Living on another planet might at least explain his climate change denial.
He is right in one respect. Healthy capitalism is a good thing for the economy until ” discipline disappears.”
However he is utterly wrong about where that discipline should come from. Self discipline of the market has shown itself to be a complete failure, and we should not trust the banks again.
The discipline imposed by government is what is required – the Glas Steagal act and various others.
With laws and competition from the mixed economy in the post war period we had the golden age of capitalism, and few crises.
Michael Meacher gives a very interesting lecture to positive money about deregulation, neoliberalism, and banking.
http://www.youtube.com/watch?v=TsPnuXWQnXk