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Roger Bootle throws capitalism a life preserver

September 30, 2009

Problems sparked by the financial crisis have not gone away, but have been transferred to the public sector, economist Roger Bootle posits in his new book.In “The Trouble With Markets: Saving Capitalism from Itself” Bootle argues that in large measure, the underlying cause of the financial crisis was the result of an idea that markets work, and that governments do not.”Despite the trillions of dollars lost, and despite the worries of millions of people, more than this — much, much more — is at stake,” Bootle writes. “For this crisis has delivered the killer blow to an idea that has underpinned the structure of society, framed the political debate, and moulded international relations for decades.”Bootle, director of Capital Economics and an economic advisor to business accountancy firm Deloitte, reflects on the pitfalls of the corporate system and puts forth his ideas on the future of capitalism.He discussed his book and his economic predictions with Reuters at his London office.

Comments

So now it has changed to ‘Private-Public Partnerships’, where the private sector spins off risks to the public sector while the public sector funds it. About time. Do I understand correctly that the private ‘markets’ are actually inefficient and governments efficient ? About time. To make predictions on interest rates is a joke. The base rate is ridiculous and (upward) movements will be marginal and slow in any event, Rolfe Winkler can attest to that. The underlying cause of the financial crisis was the result of fudged economic indicators and the killer blow was non-adaptability to globalisation and the added effects of unrecorded illicit trades, let’s call it the parallel shady global economy.

Posted by ANON | Report as abusive
 

Dear Sir,I like your writings on this subject.All your writings are very informative and it will be useful to students of economics and for state planners.As per my knowledge goes,we can accept that Capitalism way of economic actions are prevailing in major parts of the world.After reading,writing,discussions with real interested people on the existing economic systems,i came to know that !Old wine in a New Bottle! words are in our economic systems.Such a very big country,China had allowed private enterprises to compete ,to co-ordinate with her public sectors for more economic advantages by more foreign trade and commerce,cheap costs on account of cheap,more labors and coerced to accept modern capitalism in a previous communist countries.What you said is true on world economic fronts.In recession periods, signs of capitalism fading in major western nations and we knew the results.Because concerned governments had not checked, not followed and a strong positive brand images by world economists ,and believed on Feel Good factor.But over believing on !Feel Good Factor! had given distressing results to major capitalist countries.For general well being,general running of economic systems, There should be mixture of Capitalism and Socialism,that means some vital focus on Public sectors roles for giving favorable, encouraging results in economic fields,production,distribution,profits, and for nation capital mobilizations.If we have saved for rainy days,these recent recession could not have happened.Now, all world big nations had learned the mistakes and started correction.Capitalism with human touch will be good to all.

 

I was always quite amazed at the politicians claim that “markets work, and that governments do not”. It’s a bit like saying if you leave people alone they will behave themselves. I would have to agree with the “governments do not [work]” part of the statement, but would suggest that making the governments work is of vital importance, not just to the markets, but to democracy itself.Governments need to set the rules (having made sure they are fit for purpose) and enforce the rules, especially with regard to financial markets. They need to set these rules with as fair as possible balance between the banking industry, other industries and of course the public at large… NOT JUST THE BANKING INDUSTRY (or with the intention of headline grabbing political grand-standing e.g. the current distraction about bankers pay!).They have managed it before, it is only the post Blair/Clinton era that things have gone seriously off the rails, although the Nixon era and when the trade figures inverted probably marks the start of the decline… to a greater or lesser degree.Lets get back to basics.

Posted by Peter H | Report as abusive
 

When the consumer (formerly known as: individual citizens) and public sector are held to far more scrupulous account – as they are, obviously – than the private sector (formerly known as: corporations) then it seems the time has come to consider holding the corporations and individual citizens to one and the same set of rules.Until they are, the prevailing “we’re all in this together” line of ex post facto reasoning rings rather hollow. We’re not all in this together. The growth rate of the economy is at a standstill. The public is being told, in barely encoded fashion, we – the private sector – don’t know any better, can’t do any better, and that better living conditions are not to be expected anytime soon.After trillions of dollars of subsidization, manifestly, meantime, the public sector isn’t the one holding the other back.Of course there are notable exceptions but, as a whole, the private sector is at the point of admission that it hasn’t fared any better than if it were run by the most venal of corrupt public officials in times that would make the Dark Ages look like a Pink Floyd laser show. There is no incentive for the public to buy tickets to a dark theatre, neither a public nor a private one. Then again, at community level, at least you know where the money is going…While financial corporations have been subsisting on promises that would land citizens in debtors’ prison for failing to keep, the solvency and growth potential of the individual citizen and infrastructural commons is being first stifled, then – as we now see – pillaged. The public is being economically waterboarded by the private sector, and the public is unlikely to show any great appreciation for this in the long run.No matter how smooth and mellifluous the excuses being concocted for what is going on and is liable to happen next, not until they are held to one – and only one – set of solvency rules and regulation can any partnership between public victims and private perpetrators develop and sustain, much less end well.Unless economic growth has somehow become undesirable, it is high time the means of achieving it were placed in better hands than those in which those means currently reside.

Posted by The Bell | Report as abusive
 

Take a lesson from Quantum physics and realize that the economy is only a single brane in the world view. Until you can appreciate that not all the problems of the world can be summed up into some economic equation and that not all aspects of the day to day operation of a society are best suited to a capitalist model we’re only going to continue to see these mass imbalances that our dollar-lust has created because we have these economists pretending they know everything, acting in their own interest over the common interest and looking at the world in such a way that they’ll never have a full world view.

Posted by Orgizmo | Report as abusive
 

True that Orgizmo. Capitalism worked well when opportunity and resources were so abundant as to appear infinite. We now know the world we live in is quit finite in all aspects. Our quest for knowledge has also made us aware all that we do has consequences affecting our very existence on this planet.

Posted by Anubis | Report as abusive
 

On a more concrete and solution level, I suppose what I am saying is that the ‘basket/trolley’ used to determine inflation should be skewed towards, let’s say the 20% of the population that pays 80% of the taxes. So i.s.o. using a Walmart trolley, let’s use a Harrods trolley. That would be a small step to reality and adjust economic multipliers to realistic levels. I still maintain that we are not in deflation, but in stagflation: low/negative growth with high inflation.As far ‘non-adaptability to globalisation’ goes: I think we have learnt our lesson in a hard way.As far as ‘added effects of unrecorded illicit trades, let’s call it the parallel shady global economy’ goes: we are working with massive numbers, but let’s say we are missing 33% of the basic stats. That is fatal, it is like solving a maths problem with a third of the question missing. Here again, let’s get to these guys and work on a shift in mindset, maybe a non-provocative awareness campaign and face-to-face talks, almost like nuclear negotiations. As an example, lately there has been an article by Bernd Debusmann on drugs, let’s say the drug trade gets formally structured and managed as a start ?

Posted by ANON | Report as abusive
 

Capitalism, per se,is not bad, but the misuse of it is.(In fact the misuse of anything, will have an unpleasant consequence).Illogical instruments,like Derivatives Trading and unethical practices like Lobbying have to be banned.Wars are a drain on the economy.PPP is Oligarchy and ordinary people will be subjected to tyranny under the same and cannot be recommended.

 

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