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March 1, 2012 3:05 am
From Mr Bruce Onsager.
Sir, Tony Jackson posits in his “On Monday” column (February 27) that the “old thinking”, which says markets need only be left alone to flourish, needs changing. He hopes a “new thinking” can emerge, characterised by a more clever role for government. Along the way, he admits to a bit of pessimism.
He might be more optimistic if he recognised the “old thinking” of the past 50 years for the government-policy-directed approach it has been. He could be more hopeful for a “new thinking” to emerge if his hope were in people’s ability to understand and avail themselves of market opportunity, ie free-enterprise capitalism, which has not actually been left alone to flourish in the most recent generation.
Mr Jackson reviews the past 50 years of manufacturing in developed countries, and the key actors he cites in that sad story are the “old thinking” of failed government policy initiatives to prop up local manufacturing. That alone should suggest that government policy initiatives are not likely to be a source of “new thinking” for a more optimistic future.
Mr Jackson’s pessimism about market behaviour in the banking bubble is also more accurately attributable to the “old thinking” of government policy. The Bush administration’s “ownership society” initiative put that bubble in motion. Freddie Mac and Fannie Mae, two government-policy-directed entities, lowered their standards for conforming loans so that more borrowers could qualify. The vast majority of toxic securitised mortgage debts were fully conforming to government mortgage policy.
Mr Jackson might be more optimistic if he considered the adjustments already occurring in the US economy, without the mandate of government policy. US companies are “on-shoring” production as emerging market wages rise and supply chain demands make local production more advantageous. One of the biggest drivers of consumers’ recent debt spike is student loans. Americans appear to be going back, on their own initiative, for training which years of government-funded programmes could not convince them was worth their time or effort. These may be the “new thinking” he is hoping for.
Free-enterprise-based capitalism is far from perfect. However, it channels individuals’ best efforts and intentions collectively better than any policy-directed economic model put forward.
The “new thinking” Mr Jackson is looking for could be an approach that quits trying to fix capitalism’s shortcomings with government policy solutions and instead invests us again in the principles of free enterprise which have been eroded by well-meaning, but counter-productive, government policy over the past 50 years.
Bruce Onsager, President, StratCap Partnership, Naperville, IL, US
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