NYT: Where Politics Don’t Belong
Tyler Cowen has an interesting piece in today’s NYT titled “Where Politics Don’t Belong“:
FOR years now, many businesses and individuals in the United States have been relying on the power of government, rather than competition in the marketplace, to increase their wealth. This is politicization of the economy. It made the financial crisis much worse, and the trend is accelerating.
Well before the financial crisis erupted, policy makers treated homeowners as a protected political class and gave mortgage-backed securities privileged regulatory treatment. Furthermore, they allowed and encouraged high leverage and the expectation of bailouts for creditors, which had been practiced numerous times, including the precedent of Long-Term Capital Management in 1998. Without these mistakes, the economy would not have been so invested in leverage and real estate and the financial crisis would have been much milder.
But we are now injecting politics ever more deeply into the American economy, whether it be in finance or in sectors like health care. Not only have we failed to learn from our mistakes, but also we’re repeating them on an ever-larger scale.
I’ve made the point to my friends before that we do not (and have not for quite some time) live in a capitalistic society. We live in a mixed economy: one part capitalism and one part government owned. Mr. Cowen’s article brings back memories of Enron. Enron was totally government supported. Both Democrats and Republicans had their hands in the cookie jar. Enron would not have become what it did without the government’s support. If a business uses the government to gain power, cronyism runs rampant. Do you believe a truly free market would allow this? Let me know.
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Along The Margin » Simon Johnson: Economic Donkeys — Sunday, September 13, 2009 @ 11:27 am
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