Wednesday, 17 September 2008

Neither brave nor free

We're used to thinking of the United States as the home of libertarianism and small government, at least compared to the rest of the world, and within America, of the Republican Party as being particularly concerned with this restriction of government interference.

Yet, in the last week we have seen the Bush Administration effectively nationalising Fannie Mae and Freddie Mac (much more interesting names than Halifax or Nationwide), to the potential tune of $200 billion. Combined, they guarantee mortgages of $5.3 trillion. Can any of us possibly comprehend these sums of money?

And yesterday, the government announced they would take an 80% stake in the major insurers, AIG, in return for an $85 billion loan.

Now, $285 billion is a lot of taxpayers' money. In fact, assuming we're talking American billions (9 0s), and assuming the US tax-paying population to be 170 million (which is probably on the large side), that's $1675 per person.

Yes, the collapse of Fannie and Freddie would have been horrendous, particularly for Americans, but also for the global economy, but why AIG and not Lehman Brothers.

Further, many people have observed the absurdity of the following argument: governments shouldn't punish financiers for massive bonuses because they're in a risky business where they can make massive losses as well. It seems that, provided you ensure your losses are really really massive, then there is no risk because the government will bail you out.

We're now seeing calls from Democrats for more regulatory intervention. And of course, if the government's going to bail companies out, then why shouldn't it poke its nose in the rest of the time.

Giles Fraser (don't worry, I shall never quote him approvingly again) pointed out the inconsistency of all this in the Church Times, noting that even the most ardent capitalists become state-loving socialists when their own jobs are at risk!

It just goes to show that, for all the talk of small government from Republicans, and from Tories and Lib Dems in the UK recently, no politicians really have the courage of their convictions. Ultimately, the problem is that all politicians really do believe that the State is the Saviour. And it isn't.

No comments: