It’s not a US presidential candidate unifying the world
It’s a global economic crisis.
European leaders agreed a plan that would inject billions of dollars into troubled banks in an attempt to restore confidence in the financial system, leading to a cautious rebound in Asian markets Monday.
Meeting in Paris, governments from the 15 nations that use the euro promised to tackle the crisis together, buying into banks by taking preference shares and guaranteeing inter-bank lending to help increase liquidity…
In Washington, the EU measures won swift praise from International Monetary Fund chief Dominique Strauss-Kahn, who said the IMF had been calling for months for coordinated international action to the brewing crisis.
“Nearly all advanced countries are now covered and the… eurozone provisions may be extended eventually to all of Europe,” he said.
“The eurozone plan is also comprehensive… Altogether we are going in a good direction.”
Okay. Now we have something around which world governments can unite. Is their increased role in the banking world a good thing for the free market?
Paradoxical as it may be, strong government actions to stabilize banking are necessary to preserve the free-market-economy system. No free-market economy can survive without stable banking and credit. Without readily available credit, entrepreneurs can’t put their new ideas into commercial practice. And without that vital innovation, economic growth suffers.
The trick now is to use government levers in smart and efficient ways.
And that will depend on who’s controlling the levers. We’ll hear from the two who want the job in this country in their last debate Wednesday night. But they’re both talking now in campaign speeches pitching their plans.
There’s a lot of context out there in which to frame this, as you listen to new plans. Here’s some. Note the bottom conclusion:
In the previous century, many European democracies experimented aggressively with centralized planning and wealth redistribution, and the results are in. Those with high taxes and heavy labor regulations generally experienced sluggish economic growth and high unemployment. Countries like Ireland and Estonia, who now have lower, flatter taxes and less regulation on their labor markets, are booming, with both workers and businesses moving ahead. Those in Washington who care about the poor, who care about workers, should take note.