Global Financial Crisis

While there is no denying that markets have failed, there is certainly no lack of government failure either. There is a danger, nevertheless, that governments, the media and special interest groups will seize on the opportunity to use the economic downturn for their own purposes. And that is the challenge of this economic downturn.

Markets have shown remarkable resilience and keep bouncing back. Despite their flaws, they have consistently turned out to be the best way to co-ordinate economic activity. They aren’t perfect, but what is? It was Belinda Carlisle who promised that Heaven is a Place on Earth, not free-market economists.

For policymakers, the lesson is clear. If they are concerned about housing boom and bust cycles, they have to quash the expectation that house prices will continue to rise. To do that, they need to examine property markets with long records of house price stability, and learn from them how to ensure that when more housing is needed, more can be built.

These are difficult times for liberals. The mood around the world is turning against them. Politicians find it easier to blame crazy economists and greedy managers for financial turmoil than to understand and fix their own mistakes. Free-marketers still have the evidence of economic history on their side, but they will have to make their case more forcefully from now on. They face a constant battle of ideas that can never be decisively won. But they can take consolation in the fact that today’s swing to the left will not spell the end of history, let alone of capitalism.

Constrained public finances should not be an excuse to surrender to the seemingly unavoidable. It is times like these that ask for the boldest, most courageous solutions. And it is times like these that Parliament should play a greater role in developing ideas for a better economic future. After all, that is what Parliament is all about.

Angesichts der Dimensionen der aktuellen Krise nimmt es nicht wunder, dass das Vertrauen in Marktwirtschaft und Globalisierung erschüttert ist. Ob es jemals besonders verbreitet war, ist eine andere Frage. Aber selbst entschiedene Anhänger freier Märkte sind irritiert.

Insgesamt sind die Briten heute nach 15 Jahren Wirtschaftswachstum so hoch verschuldet wie nie zuvor. Das werden sie spätestens dann schmerzlich merken, wenn sich der Wohnungsmarkt abkühlt. Denn dass auf den langen Immobilienboom eine Korrektur folgen wird, gilt als sicher. Dann wird sich auch zeigen, was der Aufschwung der vergangenen anderthalb Jahrzehnte wirklich wert war.

All this presents UK economic policy with a challenge: to improve our infrastructure while reducing tax and regulatory burdens. This would increase the UK’s still disappointing productivity. In the long run, this is the key to economic growth. An economy built on lower taxes, lighter regulation and better infrastructure will be more sustainable than one built partly on rising house prices and extra debt.