Monday, November 16, 2009

There is no jihad on neoliberalism

I recently had cause to find agreement with Henry Ergas. Thankfully after his latest column a more normal situation has returned.

He asserts that "this government has elevated its attacks on neo-liberalism into a jihad". Apart from the fact that that is potentially highly offensive - to muslims at least for mis-using the term jihad, and to government for suggesting that anyone needs to be actually killed - it is his defence of neo-liberalism that is disturbing.

Firstly he continues with his ongoing thought that the GFC just showed that markets are rational because irrationality eorrection. He continues to be dismissive of the stimulus plans globally, partly because the GFC has bottomed before the money as spent. In both of these assertions he ompletely underestimates the role of the human factor of confidence. Allowing the global economy to fully bottom out created the risk of a complete lack of confidence in all the institutions of the capitalist state. The last time that happened we saw great movement to fascist and communist states. At the same time the (credible) promise of stimulus konomic activity up because people as a whole were less fearful.

If I go back to my comment about Hooke there is much to be said in a complex dynamic system for dampening all the forces. Unrestrained markets do lurch i unpredictable ways. We are probably better to accept slightly lower rates of overall long run progress if the cost is avoiding savage short-term downturns that have an uneven distribution of effect.

There is no government campaign against capitalism or markets. There is a desire to adopt a more measured stance to how we understand the operation of markets and how we can better manage their own excesses. There is certainly no jihad.

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