But the choice is not between changing human nature and accepting unregulated free markets. Also, the choice is not between total socialism and unfettered capitalism. Given the vast complexities of our global economic system, we need to make room for more nuanced alternatives. Free enterprise principles can govern most of our markets for goods and services, while we also tightly control finance. We need to square up to reality. The financial sector, when measured by its overall impact on our economic world, produces systemic instability and runs inefficiently when structured as a small set of for-profit enterprises that are too big to fail. At the very least we need some sort of way to protect ourselves from the crises that even Alan Greenspan has “no doubt” will occur again, such as the proposal for financial disaster insurance in Chapter 10. But our children and grandchildren deserve better than the very least we can do.
Let’s hope we won’t throw away much of our children’s inheritance because we did not have the courage to do the obvious: Take over the failing major banks, drastically trim their astronomical salaries, control their hazardous financial engineering, and run the damn things for the good of us all.
Once again, events may be passing me by. Each day we hear more and more references to nationalization. Economists, both from the left and right, are advocating temporary government ownership of failed banks (euphemistically called “pre-privatization”). A consensus is building rapidly, not because of ideology, but out of desperation. Obama’s toxic asset public-private partnership plan released in March 2009 is the last effort to avoid that strategy. If it fails, he might be forced to reach for the only option left on the table. But even among the strident critics, few, if any, seem willing to let the government run key financial institutions for the long haul. It seems that we’d rather gamble yet again on unstable private markets.
If, by the time you read these words, we have avoided a full-scale depression, we should consider ourselves more fortunate than wise. Or as Bob Dylan lamented,
An’ here I sit so patiently Waiting to find out what price You have to pay to get out of
Going through all these things twice.