Nicole Gelinas's article in City Journal is an absolute must-read. The gist of this long but well-argued article is this:
"Over the two decades leading up to 2008, financial markets were anything but free. The nuts-and-bolts government infrastructure that free markets require to thrive—healthy fear of failure, respect for the rule of law, and fair rules for everyone—was crumbling. The crisis books make clear, too, that Washington’s extraordinary rescues of Wall Street have eroded much of what’s left of free-market infrastructure in finance. Worse, Congress’s efforts to reform the industry will do yet more damage. The next time the financial world implodes, it will hurt the economy even more severely."
This article entirely confirms my views published in Freedom First in January 2009. It is obvious that the USA is no longer the kind of society that the world can look up to. The freedoms of its citizens are on the back foot. It has aped the worst of Europe (welfare state) and the Keynesians have destroyed all semblance of economic sense. Their simplistic arguments (that display ZERO understanding of human incentives and human nature) have created massive amounts of moral hazard in the American monetary and financial systems, education and welfare systems, and soon its health system. People like Greenspan, whom Ayn Rand at one time regarded highly as a votary of freedom, have bent over backwards to destroy freedom. The free market is almost dead. The heavy hand of the stupid gorilla – the state – now controls the levers of the American economy.
What are the lessons from this for India? – That socialism is a dangerously attractive but guaranteed to be fatal mental disease. Even America, the great bastion of freedom, could not avoid this mental disease. It is therefore hurtling downwards into ignominy: and in the next 50 years if India and China become genuinely free, the power of the USA would be history. It is not Osama who has destroyed USA. It is Keynes; it is Rawls; it is the soft-touch American 'liberals' (not classical liberals like Hayek who no one listens to in America).
Each bout of 'saving' those who are too big to fail – by stealing from the tax payer – creates a guaranteed Ponzi game where even greater risks are taken. Finally, when the day of reckoning comes (and it always does come), the Emperor is found to have no clothes.
India was denuded by Nehru. The Keynesians and Rawlsians have denuded the once great USA. A hollow shell remains. Images from Detroit reflect the end of America as the once great nation of the past 200 years. Socialist ideal are ruinous beyond imagination. The most dangerous poison the human mind can create. If India has been a C-rated economy for most of the past 60 years (on a sovereign risk scale of the S&P variety), USA has now clearly fallen from A to B. If India manages to follow some of the advice in BFN and gets its house in order in the next 10 years, and USA continues its downhill journey, then expect the tables to be easily reversed in the next 30 years.
There is only ONE LESSON in economics: that there is no free lunch. Period. If you have understood this lesson (and the subsidiary lesson of accountability – that I talk about at length in BFN and DOF) then you are done. Then you can govern and never fail.
GELINAS, NICOLE, "Surveying the Wreckage: What can we learn from the top books on the financial crisis?", City Journal, Summer 2010, Vol. 20. No. 3.
ADDENDUM. The social security debacle in USA
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