The story in the Sydney Morning Herald begins as follows:
KEVIN RUDD has denounced the unfettered capitalism of the past three decades and called for a new era of "social capitalism" in which government intervention and regulation feature heavily.
In an essay to be published next week, the Prime Minister is scathing of the neo-liberals who began refashioning the market system in the 1970s, and ultimately brought about the global financial crisis.
I have to agree, at least in part. The economic experiments of the past 39 years have, indeed, brought us to this current crisis. There is no question of that. With currency tied to nothing more than the promise that the government won’t print too much of it, there are few, if any real limits on things. Rudd’s answer for that: Regulate! His notion is that heavy government regulation can curb the extremes while allowing a robust free market to exist. My question is this: How?
The Main Ingredient is Trust
Taking a look at the $700 billion bailout package and now the $825 billion stimulus package currently before the US Senate, one would think that Rudd’s ideas are well accepted here in the US as well. You would be right to think so. Among the leadership in Washington, these ideas have quite a bit of support.
The problem is that the government has repeatedly and profoundly violated the trust of the American people when it comes to these economic stimulus packages. This latest one is so pork-laden that it is not going to stimulate anything but liberal glee. The things in it that might actually stimulate something are very small compared to the social spending that is to go along with it. Had President Obama, Speaker Pelosi and company simply had the nerve and the courage of their convictions to call it a Democrat spending bill rather than a “stimulus package” then, at least, we would have had to respect their honesty. They could not bring themselves to do that, however, since that would have shed light on the only real purposes of this legislation—to grab more power and pay back political allies. This is a political bill, not an economic one and that, alone, disqualifies it from being called a “Stimulus Bill.”
McConnell and other Republicans suggested that the bill needed an overhaul because it doesn't pump enough into the private sector through tax cuts and allows Democrats to go on a spending spree unlikely to jolt the economy. – Associated Press Story
More than that, we have to understand that it was some of the very people in leadership positions in Congress that are directly to blame for precipitating the crisis we are in today. They created social mandates that directly led to the creation of sub-prime mortgages to fulfill those mandates. With real estate as the cornerstone, when the bubble burst it took the rest of the economy with it. One has to wonder how different things would be if the well-intentioned Community Reinvestment Act had never been passed.
Why is this important? Because if we as a people are to trust our livelihoods to the government, if we are to give the government such an unprecedented amount of power, we must be able to trust that government and as things stand, trust in Washington is more of an act of faith than a rational choice.
When More is Not Enough
Check out these headlines:
Bailed Out BANK OF AMERICA Sponsors Super Bowl Fun Fest
AP Investigation: Banks sought foreign workers
Obama slams Wall Street over bonuses
Americans receiving jobless benefits hits record
One can go on, and there are hundreds of such headlines detailing the acts and sundry irresponsibilities of the recently bailed-out Wall Street firms and their executives. Since last Fall, when early bailout adopter AIG sent executives on luxury junkets, we have had a veritable Macy’s Day parade of bad actors demonstrating just how little regard they have for the taxpayers who have kept them in business.
These guys are the reason that Rudd’s call for heavier government regulation resonates with so many people and I cannot blame them for the sentiment. In a time when Americans are out of work, these institutions are trying to hire foreign workers. Once they get federal funds, they pay bonuses to the very people who helped to put their firms in the red in the first place (or so is the perception). We hear about golden parachutes, lavish parties, millions for office decoration, vacations and private jets—lifestyles of the rich and famous all at taxpayer expense.
True, President Obama has plans to rein in some of these tax-funded excesses, which is good since unemployment for those without parachutes of any kind has reached record levels, but those excesses never had to happen in the first place.
The Bottom Line
I am calling for a New World Order (it seems to be the thing to do these days), and I am going to base my NWO on a single, unifying principal: Stick to what works at creating wealth. I call for moderate regulation of business to prevent problems from cropping up and to help stabilize commodities such as oil and natural gas, a free market approach among businesses, states and nations, a very strong small business sector that is actively encouraged by government, a focus on sustainable local economies and a low, but broadly-based flat tax for people and corporations.
Small business is especially important because that is where the majority of jobs are. Therefore, it makes sense to put effort there. Yes, you can measure prosperity in terms of dollars, but in societal terms the real measure must be in terms of employment. How many people are working, contributing as both producers and consumers? The higher the number, the more prosperous your society.
The key to my NWO is the idea that the pie that everyone wants a piece of can, indeed, get bigger if we concentrate on creating wealth rather than merely spreading it around. Democratic socialism does not work any more than straight socialism or its big brother, communism. All three need a strong, free-market economy to dip into to provide new wealth. This is one of the reasons that the European economies are in such trouble. The free-market economy that was the US collapsed under the weight of government-sponsored corporate greed. When that happened, European access to new wealth—their US investments—dried up to a great measure. When that happened, these social democracies could not easily sustain themselves. Iceland went bankrupt, now Great Britain is working furiously to avoid the same fate. Who is next?
What makes Rudd, or anyone else for that matter, think that a whole world where there is no real wealth creation is, in any way, sustainable? Where there is no growth, there is stagnation. Where there is stagnation, there is death. Small business represents growth and true sustainability. This is where the spotlight should be shining.