The Financial Crisis – A Gigantic Failure of Politics

“The Financial Crisis – A Gigantic Failure of Politics” de Johnny Munkhammar e Nima Sanandaji, uma publicação do European Enterprise Institute) (pdf)

A recurrent assertion in the analyses of the crisis, its origins and impact has been that the time has come to discuss what type of capitalism we need. This is a reasonable demand. A central conclusion is that we should have more freedom for capitalism, and less government intervention. The current global crisis is a result of government interference and heavily regulated markets. Once again: free markets lead to the disappearence of old companies and jobs, downturns do occur. But comprehensive government intervention often leads to major crises. Markets obviously need rules to function, but that is not the same as semi-public corporations, tax subsidies and excessiveregulations. We need capitalism, not what in the 1970s was termed the mixed economy.

There is sometimes talk of market failures, which politicians supposedly must correct with various means. We may object to the concept, as failure must be related to a specific objective, something which a free market doesn’t have by definition. More importantly however, we should realize that the financial crisis is not a market failure – if indeed there is such a thing – but a very serious failure of politics. Public Choice theory explains how politicians implement policies which seriously harm the general interest, and this is a case in point. The crisis occurred despite repeated warnings from experts. Hopefully the debate will in due time focus more on the origins of this failure, in order to avoid similar crises in the future.

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