It cannot be stated too strongly or too often but it is the ideology of the Right â€“ of American Republicans and British Conservatives which has been proved to be defective by the current international financial turmoil.
In mixed economies the key debating area in respect of public policy action are the decisions as to where Government should act or intervene, and where they should not. The statist model alternative (the central planning of the Communist world) failed and when Russia and China put the final nail in the coffin of their previous preference for centralised economic planning and national ownership of productive assets, laissez-faire had won.
The rhetoric was sometimes otherwise when nominally left of centre administrations, such as those of Clinton or Blair, were in power – the specious â€œThe Third wayâ€for example. But the reality, certainly in the Anglo-Saxon world, is that to be elected political Parties, whatever their nominal colour, had to be seen to embrace low taxes and low regulation. The Big Bang in the City of London was a Thatcherite initiative but when Labour came to power in 1997 they did little to unravel any of the extreme financial freedoms that the Big Bang delivered. And whilst there was some finessing of the tax system (the so-called stealth taxes) in reality there was no attempt to introduce anything like a redistributive personal tax structure. No socialism here, then, from a nominally socialist Party â€“ one that still sings the â€œRed Flagâ€ at the end of its Party conferences. The wealth generated by the markets did trickle down to some extent and public services have benefited â€“ indeed the â€œsharing the proceeds of growthâ€ that the Conservatives once claimed as being their property is actually a Labour invention.
The events of the last year should have shaken anyoneâ€™s faith in the markets and in self-regulation to do Governments work for it. The signs were already there a year ago when David Cameron gave a passionate speech in which he extolled the virtues of the market. It is worth repeating again some of the messages in this speech. He said:
Â â€œI don’t believe in an ever larger state doing more and more â€¦this new world of freedom is having huge effects on business and our economy. â€¦not least because of the changes we made 15 or 20 years agoâ€¦And I know that business wants to hear from the Conservative Party how we will reduce regulation and reduce taxation to give them more freedom in this new worldâ€¦ we will introduce regulatory budgets to cut that regulation… We will get tax and regulation down for the long term good of our economy and that is the modern Conservative change for this new world of freedom.â€
The trouble with Cameron, (and John McCain says much the same – â€œI think the deregulation was probably helpful to the growth of our economyâ€ he said recently) is that they are simply spouting weasel words that they think their audiences will lap up like Pavlovian dogs. The evidence of the problems with the current levels of regulation are all around us â€“ to suggest that there should be less regulation in these circumstances is just perverse.
The events of the last few months have shown indisputably that what the corporate world needs is not, as McCain and Cameron and their lieutenants tried to lead us to believe, less regulation but more. The state has had to intervene in both America and Britain to bail out the incompetent and the greedy. Does anyone seriously believe that it makes sense that this mob and their like deserve greater freedoms in the future?