On Capitalism

Some have said that the banking crisis is a failure of capitalism.

In one way that is correct: it is a failure to provide ever-growing, uncomplicated prosperity. You know, the sort our politicians like to promise, and the sort we like to think we get because we vote for it.

However, it also shows a terrifying confirmation of capitalism. The banks took risks which they just could not manage or offset: the day of reckoning could no longer be evaded with charming smiles or PR egoboosting.

Credit crunched.

Classical (and "neo-classical") economists tell us that markets will tend toward equilibrium. The last two weeks have shown this happening in dramatic terms, and it will affect millions of us.

So, will the resulting extreme state intervention provide a similarly emphatic confirmation of socialism?

Maybe. After all, the State, like the rich, is different from us: it has more money.

Accordingly, States have unique economic power; and multi-national State action supercharges this special power.

Such co-ordinated intervention may (at least for a while) calm a market draining (like a sink) towards equilibrium.

But there is nothing so far in our history to suggest that this central role for the State is sustainable outside of wartime.

If this new role of the State works, then some of us we will need to re-think our attitude to the State and the efficacy of its interventions into the economy. Like the collapse of communism in 1989-90, the 2008 Banking Crisis will perhaps force ideological partisans to think about things afresh.

It may not be the end of capitalism; but it may well be the end of capitalism being likeable for a while.

And it may mean that the State is back in political favour.